An Ultimate Guide to Business Startup
Starting a company is a major decision in your life. It you don’t consider it as one of the major life changing decisions, the chance of failure is high. Several factors should be considered and analyses when deciding whether to form a business. We have outlined here some of the major considerations for a startup.
Is the Business idea Feasible?
- What product or service the start-up will offer
- Whether the product or service satisfies a need for people
- The price a customer will be willing to pay for the product or service.
- The market size and profitability
No matter how innovative a business idea is if it does not address an actual need at a price which. customers are willing to pay, it has no market. If your start-up’s technology does not solve an actual problem at a competitive price, then the start-up is more likely to fail. The decision to form a start-up. should be made only after understanding the market and how your product or service would fit into that market.
Do you have what it takes to be a businessman/woman?
A high degree of commitment and willingness from your person side is required to start a business.
Do you have enough:
- time
- Personal resources.
- Willingness to take risk.
- Resilient and flexible attitude.
- Managerial qualities.
Starting a business requires a big commitment in terms of time. You should consider your personal resources and whether you are comfortable committing those resources to the business., although it is not always necessary to do so. Furthermore, starting a business is a risk when you consider a job, a risk of failure which you should be willing to accept this factor.
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Developing a Business Plan
A business plan is a blueprint which describes how your start-up will materialize and achieve profitability and success. When you prepare a business plan, you will automatically analyse the pros and cons so that a groundwork is done on your startup and because of this a business plan is extremely important. Many businesses fail to succeed because of a lack of a business plan.
Writing up a business plan helps you systematically consider all aspects of the business. Moreover, a business plan is often required for a start-up that is trying to secure external funding or bank loans. The business plan demonstrates to banks and investors investors that you have thoroughly explored both the market and how your product or service fits in that market.
A good business plan should include:
- Executive Summary: A summary of the business. It should include:
- Purpose of your Company
- How will the company make money?
- How will the company develop its products?
- What experience do the founder and management team have?
- How much money is necessary?
- What level of return can be expected?
- In how many years a break even can be attained.
- Business Description
The business description provides detailed information about your company’s purpose. The business description should include:
- The nature of the business and its feasibility.
- An explanation of how the start-up’s products or services are going to address the requirement in the market.
- The competitive advantages of your start-up. How you plan to survive the competition.
- Market Analysis
Market research showing the current state of your start-up’s industry segment, as well as the target market for your product or service:
• A specific description of the target market
• The revenues and growth rates of the market
• A demonstration of a strong market needs for your product or service
• A competitive analysis on how to create a niche for yourself among the competitors.
- Marketing Plan
Your plan on how to sell your product or service. It is important to show how your product or service will be positioned in the minds of customers versus the competition:
- Why would someone choose your product/services versus competitors?
- Customer perception of good and bad about the competitors
- What your start-up can offer which will attract customers
- Market share goals and how they will be achieved.
- Management Team
A brief description of who manages your startup and their qualifications and expertise in the field of this business. A good management can make a business successful.
Which legal entity is suitable for my Startup?
We have summarized the basic characteristics of the different type of legal entities for businesses to register.
| LLC | C Corp | S Corp | |
| Liability | Members are not typically. responsible for the debts of the LLC. | Shareholders are not typically responsible for the debts of the corporation. | Shareholders are not typically responsible for the debts of the corporation. |
| Taxation | No tax at the entity level. Income or loss is passed through to the members. | Taxed at the entity level. No pass through of income or loss. | Can be setup with no tax at the entity level and Income or loss is passed through to owners. |
| Management | Members have an operating agreement describing responsibilities. Foreigners can be owner members. | Managed by board of directors who are elected by shareholders. Can have more than 100 shareholders. Foreigners may hold shares. | Managed by board of directors who are elected by shareholders. Limited to 100 shareholders with only one share class. Only U.S. citizens and residents may hold shares. |
Marketing
Marketing by itself is a major topic which needs a lot of research and analysis. There are many good resources to assist you in the marketing process. This section is a just an introduction to marketing.
A preliminary market analysis focuses on five main areas of consideration: customers, company,
competitors, collaborators, and context.
Customer – Study the customers. What needs does the business do to satisfy the potential customers.
Company – What is special about your company or startup.
Competition – Who are the current and future competitors in the field and how they fare/might fare.
Collaborators – Who should your company connect to associate or even partner with.
Context – Are there cultural, technical, and/or legal factors that limit your Company’s options.
Funding your startup.
Types of Funding
Funding can be divided into three categories, each of which has different implications for the investor,
investee, and business:
Self financing: Using your own funds and methods.
Grants: No obligation to repay provided that the terms of the grant are met.
Debt: Borrowed funds, repayable on a fixed schedule with interest.
Equity: Ownership through either stock or membership. Equity funding can have profound effects on
by-laws, voting rights, operational control, and future rights.
Funding Sources
Lack of sufficient funds during the startup and early days of business is a number one reason for failures.
Small business funding comes from several places, each one having advantages and disadvantages:
Self-financing: a business funded by the personal savings of the founders. This allows the entrepreneurs to maintain complete control of the business.
Government Grants: There are many Government grants programs available for small businesses and startups. The purpose of these programs is to help fund early-stage of establishing a business and support R&D for startups.
Loans: Provided by banks or bodies like Small Business Administration (SBA). In most cases, collateral security should be provided to banks to banks to avail loans.
Payroll, Taxes, and Direct Deposit
Hiring a CPA or using professional accounting software to set up a payroll system should be considered. This will ensure that employee tax withholdings are properly accounted for and will also allow easy documentation of issues related to direct deposit.