First, get a notebook or open a file on your computer, and answer these foundational questions. We’re getting an overall idea of what skills and resources you have now, and where you might want to seek out some education. There are no right or wrong answers here, only the answer that works best for you.
Will you be taking on debt? Investing savings or retirement funds? Write down all the risk factors you can think of. If you get stuck, try an online search for “risks of starting a [type of business].”Is your family ready?Sit down with your family for an honest conversation. Do they understand the financial risks you’re about to take on? Are they ready to support you through the effort of getting this business off the ground? Are there ways they’d be willing to help in running the business day to day?Have you thought about funding sources?Do you have a ballpark idea of how much financing your business idea might need? If not, that’s okay—that will become clearer in future steps. But for the moment, let’s assume you’ll need a fairly substantial amount of starting funds. Where might you go for these—a bank or SBA loan? Investment from friends and family? Outside investors? Or, can you bootstrap? Make a list of potential sources now, and we’ll come back to it later.
What are your personal weaknesses or skill gaps that might make it difficult to start a business?
One great way to consider these questions is to perform a SWOT analysis on yourself, focusing on your role as an entrepreneur in your industry. “SWOT” stands for Strengths, Weaknesses, Opportunities, and Threats. You can do a SWOT for your business, but at this stage, try a personal one and see what you learn. We have a free PDF template to help you.
These last questions are important. It probably goes without saying that starting a company requires a strong commitment. You’ll find the hard work and sacrifices much easier if you’re passionate about your business idea, or about being a business owner.
It can be helpful to contact your local SCORE or SBDC office and look into business mentorship programs and startup incubators in your area. Chatting through your questions and ideas with someone who’s been there before and wants to support you can be invaluable, especially if you’ve never started a business before.
Every business needs to solve a problem. Don’t overthink this—the “problem” is simply the reason a customer buys your product or service. What need do they have that your company fulfills? That need is the problem, and your product or service is the solutioAs an example, think about a hair salon. Customers go there with a variety of needs: maybe their hair has grown out and requires a trim. Maybe they need a special hairstyle for a big event. Maybe they need an affordable color treatment. All of these are problems that the right hair salon can solve.
If you understand the problem your business solves, then you’re well on your way to being able to answer this question. When you think about the customers who will buy your product or service, what do they have in common? Their income level? Their geographic location? Their particular type of need? That’s your target market. Once you’ve identified your target market, think about how the current state of the economy is affecting them.
Can you estimate how many customers your business might be able to reach, either locally or online? And, do you have an idea of how much they typically spend on your product or service each year? A little market research will help you understand whether there’s enough of a market—or people who will pay—for what you want to offer.
Find the companies you’ll soon be competing with, and become a customer. Make purchases, spend time in their stores or on their websites, look for their marketing, and communicate with them as a customer. Learn what they do well, and what you can do better. Every business has competition—putting together a simple comparison table (competitive matrix) can help you see how your business stacks up against the others.
What is your competition charging? Are there reasons you’d charge more or less? Here’s a quick guide to how to think strategically about pricing.
Here’s where talking with some potential customers can really be helpful. You may have a friend or family member who matches your target market. If not, put the word out that you’re looking for people to interview. Use your social media networks, if you have them.
You don’t have to get deeply personal here; just ask them about how often they buy something like what you plan to sell, and whether their spending has changed in the past few years. Talk to several people, and take their thoughts into account as you consider your target market and how much potential income they represent.
When you’ve pulled all this information together, be sure to congratulate yourself. You’ve set a strong foundation for planning your new business!