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Starting a new business is not an easy task. It involves planning, organizing, assessment of resources, considering various business related factors and many other things. You may have an outstanding business idea, but without a proper start, you would not be able to execute it. How to start a business? What would be the first step? How much funds are required? What kind of entity should be started? What should be the team size? What licenses and registrations are required? Would the business idea work? – are some of the questions entrepreneurs have in their minds before actually starting a business. This article shall provide you a step wise guide to start a business and help in addressing your various concerns related to your startup.
Step 1: Analyzing business idea and market research
If you are reading this article, probably you have decided to start you own business. A business must start in your brains before you actually start it in real life. A lot of thinking is needed before starting a business venture. Success of a business depends upon the accuracy of thinking. So before actually laying the first stone, you must first analyse your business idea. There are three types of business ideas a) Conventional business idea; (i.e. Business idea based on exiting business); b) Innovative business idea; and c) Conventional business idea with some innovativeness.
Analysis of conventional business idea is comparatively easy since all the market data is available. Comparison with competitors, SWOT analysis, and product analysis must be done before entering into the business. Market size and consumer preferences and needs must all also be analysed in order to assess the viability of your business idea.
Although analysis of innovative business idea is a little difficult, you should try to analyse it properly. An innovative business idea must provide solution for a problem. Assessment tools such as observation, primary research, assessing consumer preferences and needs, brain storming, discussions with experts and friends must be done to analyse an innovative idea.
In case of conventional business idea with some innovativeness, analysis of business idea must be done along with assessment of the industry to which the idea is closely related.
Step 2: Making a business plan
Anything done without a plan has higher chance of failure. Business plan must be prepared before starting a business. It should be prepared for at least two years. It shall provide you a road map for carrying out your business in future. A business plan must contain estimated revenues, expenditure (both operating and capital expenditure), requirement of funds and market scenario etc. We shall discuss about making a detailed business plan in a separate article.
Step 3: Availability of Funds
After analyzing your idea and preparing a business plan, you now know the amount of funds required for your business. Funds are the lifeline of any business. Without funds, no business activity can be carried out. Before starting your business, identify various sources of funds and see if you have sufficient funds with you. Funds must be enough not only for starting a business but also to run your business. You must have some amount as back-up funds. Suppose if the business fails to generate revenue for some months, you must have back-up funds to carry on the activities of the business. You may use your own funds or borrow funds from others to do your business. Thus, assess your funds position before starting any business. Like I said, funds are the life line of any business, you must always ensure continuity of funds in order to run your business. Any obstruction in fund flow shall have adverse impact on your business.
Step 4: Registration of an Entity or a Business organisation
For starting any business, existence of an entity or a business structure is required. There are various forms of entities under which a business can be operated. Entities such as Proprietorship firm, Partnership firm, Limited liability partnership and Private limited company etc. While choosing a form of entity, which should be suitable for your business, you should consider factors such as number of persons, investment required, applicable laws and compliance / statutory cost etc. Selection of an entity must be done on the basis of your current and future requirements. For instance, if you are seeking private investment in present, you should register a Private limited company. You may defer registration of a Private Limited company if you expect private investment in future.It is always advisable to initially start with a form which can be easily formed and have least compliance cost. Once your business starts growing, you may get your existing form of business structure converted into another form.
Step 5: Licenses and Registrations
While arriving at this step, you have completed all the basic requirements for starting a business. But, just before starting your business, you should have all the required licenses and registrations in place. Various Licenses and registrations are required under various laws and regulations. You should obtain all the registrations and licenses applicable on your business. For instance, if you are in food business, license from food authority is required, likewise, for establishing a factory, registration under factory laws are required. Registration under various tax laws is applicable to all kinds of businesses unless exempted by the law.
Step 6: Start your business
Now your ship is ready to sail. You can now start your business without any second thought. While running your business, you must refer your business plan and business idea analysis from time to time. It shall help you in making comparisons and better control of your business.
Step 7: Hire passionate employees and consultants
Success of your business depends on you and your team. You and your team should be passionate enough to take any business challenge. Therefore, it is always advisable to work with passionate people who can share your vision. You should hire good financial consultants, legal advisors and professionals. They will help you in reaching your goals and make your journey comfortable by providing expert solutions. A good consultant will help you in making good business decisions. Take one step at a time and learn from mistakes that others make. Think and consult before taking any business decision.
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