So you want to learn how to start a new business?
Like any task that requires serious effort, to start a new business will take some hard work, money, and time. Yet, don’t be too discouraged. You are living in the information age with plenty of “how-to” articles on this subject. Anyone with the right amount of hunger and hustle will succeed as an entrepreneur.
If you are wondering if you have what it takes to start your own business, you shouldn’t worry.
I am going to tackle the subject from my own personal perspective. It’s actually a pretty common one for new entrepreneurs who are starting from scratch.
My start-up experience is recent (as of 2018) so everything here should still apply to you. This perspective is for starting a new for-profit business in the United States.
Coming Up With a Business Idea
Whether you want to earn extra income to supplement your day job (side hustle), or you have a business idea floating around in your head, you need a plan.
This part of starting a new business is one of the most important because it will help you lock in and decide on one specific business and not flip-flop between many ideas.
A formal business plan document isn’t needed. You can write your plan down on a napkin or virtual notepad. The main point of this exercise is for you to weigh the pros and cons of one or more business ideas. Then make an educated decision on whether it’s something you want to pursue.
It is very important you do not skip this step if you’re someone like me who suffers from “shiny-object syndrome.”
It’s Easier to Fill a Niche
Niche is another word for a small group or segment of a market. If your idea is broad like “starting an online electronics e-commerce site,” then you’re going to do better at the start if you laser-focus on a niche. For example, “starting a custom headphones e-commerce site,” specializes within a specific niche. This makes it a little easier to innovate and outperform others in the smaller group.
To Start A New Business, You Need To Do Your Research
Sometimes jumping right into an idea without proper research can lead to unforeseen consequences. Extra expenses, delays, or stifling government regulations are a few of the possible issues that can materialize. It’s important to do your due diligence at this stage and research the business or product idea. A good example of a great idea with many unforeseen consequences are wooden children’s toys imported from China. These could be CPC tested, scrutinized by customs, and need a serious general liability insurance policy for potential lawsuits.
Know Your Target Market
You need to make sure that you’ve vetted the market to which you will sell your product or service. What are their needs and how are they served or being under-served? How can you put a twist on your product or idea to stand out from others in that market?
When you do your research, you may come across a lot of competitors in that market. They may look professional. To be honest, if your closest competition “owns” the market, it won’t be easy to share the space. But, with enough effort, it’s not impossible to disrupt those more established competitors. Don’t be discouraged! There are many successful small businesses who compete with larger companies.
Once you lock in on the one idea, it’s time to start estimating your profits and losses. This will give you a general idea if the business idea is worth your time and effort.
Estimating Business Start-up Costs
There’s a difference between start-up costs and operating costs.
Operating costs are those that are necessary to keep the business running. However, start-up costs are the total amount of money it will take to get your business legally structured and ready to start running.
This estimation step is crucial and to make sure you have the necessary capital to start your new business idea.
I am a firm believer in researching and understanding the different business structures within your state and filing your own company formation paperwork. You absolutely do not need a lawyer or online service to do this basic filing for you. There will however be some initial costs in the registration fees involved with forming your business. I cover this in my article, How to form a LLC in Your State.
I’ll focus on common start-up expenses but you should think about all the necessary expenditures for your new business.
If you are bootstrapping your business as a single owner like I did, you don’t really need to spend a lot of money on equipment or computers.
Common business start-up expenses might be:
- Legal and Business Structuring fees
- Equipment (hardware, tools, packaging scale)
- Supplies (mailing supplies, business cards, etc.)
- Insurance, license and permit fees
- Technology and Software (Web Hosting, JungleScout)
Below is a quick table of my personal start-up expenses for my online retail business:
[table id=3 /]
As you can see, it’s relatively inexpensive to get your business up and running.
Your expenses may be less or more than mine. My expenses show my first business of doing wholesale retail via Amazon.
I signed up for what I thought would be good sources for wholesalers. I would suggest not spending any money on Worldwide Brands. The website is dated and their leads and database are a bit suspect as well. I’ll continue to check them from time to time since I am now for better or worse a lifetime member, but I haven’t been inspired by what I’ve seen. If you want a list of wholesalers you can use a pay service like SaleHoo or better, just simply search for suppliers in the genre you’re looking to sell.
Funding Your Startup
I’m not a fan of using credit or debt for starting a business, but if you know you have a sure-thing and have already made some sales, it might make sense to use available credit/debt to fund your initial startup costs.
I chose to bootstrap my business using funds I sold on E-bay. All told, I sold close to $1900 dollars selling “junk” in my basement, and that helped cover my first startup costs detailed above. Check out my article on arbitrage your basement, garage, life for more detail.
If you’re lacking cash to invest into the business I think this is the best way to get some fast funding for those early business expenses.
In the next article, I’ll describe the basics of running your new business and go over the general expectations needed to make sure you are successful.