Being independent and starting your own business––it’s a great and exciting way to earn a living. You get to realize ideas yourself, design your products or services and basically determine which direction you want to evolve.
And the best thing is that by being self-employed, you can say goodbye to irritating bosses and slaving away for a salary without full ownership of the company where you work.
All of the above sounds marvelous, right?
However, running your own company also has a different side. It’s a lot of work for one. Moreover, there is always a shadow of uncertainty hanging over you, especially at the beginning when you are starting out.
If you have a family, you might be reliant on your next paycheck and running your own business is all about sacrifice. In some cases, you won’t even get paid for years in the beginning.
A lot of questions will crop up, questions that more often than not frighten away even the most ardent entrepreneurs at heart. Is self-employment the right thing? You might be thinking about how to finance your new venture? Or how to get a hold of all of the information you will need?
A lot of that knowledge for starting your own business you will be able to glean right here in this article. Read on for some great tips and tricks on how to start your own business.
Also, included are some testimonials from great business people who made their dream of owning and running their own firm a reality. Stick around and learn of the freedom to fulfill your passion and how self-employment can really pay off.
You need the perfect business idea
Setting up your own business first involves developing a great idea. Aspiring entrepreneurs have to recognize market gaps and think beyond brainstorming.
The key to success lies in the analysis of the target group and creating a product or service that group needs even if they do not know it yet.
Furthermore, you need to be aware that anything you plan on selling can only make a profit if there is a sufficiently large target segment––niche products only work if you have something truly unique for which people are willing to pay a hefty premium.
If your product or service is more mainstream, however, you need to identify key competitors in your market and develop a unique selling point. Individuality is the start of your marketing strategy.
Before you base your new business on a good idea or invention, you should have a thorough understanding of trademark and patent rights. Of course, you also have the right to protect your ideas and developments in this context once you have something worth protecting.
Someone who had a great idea
Take Herb Kelleher who died recently on January 3, 2019. He was the charismatic and unstoppable founder of Southwest Airlines.
In the 1960s when the American sky was dominated by large incumbent airlines with very deep pockets, Kelleher created a segment that was unheard of before his time. The young lawyer from Texas revolutionized commercial aviation by founding the first budget airline the world had ever seen.
A business plan is not some tedious chore but a must if you want to succeed in business.
The business plan is the first significant hurdle. Unless you stumble upon an instant grail to riches formula, you will have to spend many days, weeks and months in front of the computer, battling with Excel templates and Word documents.
You will need to describe your venture in business language so that any bank, investor, and family member can understand it. Or if it is a company-internal project, you want your boss to get it if you want any hope of raising finance.
The main purpose of a business plan is to define the very essence of your venture in clear and precise language––it is important to you and the future success of your fledgling enterprise.
The business plan will help identify vital cornerstones in the development of your company. This document, if done correctly, will tell you, investors, family members, banks and any other potential stakeholder what it is that you are all about. You start off this manifesto by:
- Introducing yourself
- Identifying your goals?
- Stating your financial requirements––list of capital needed, financing plan, preview of the yield, liquidity plan?
- Pinpointing the market situation for your business project – and how you want to position yourself on the market?
- Clarify your strengths and weaknesses?
- Determine possible business partners – and who are the customers?
- Asking what sales and marketing should look like?
- Developing a clear idea and concept of the new company
- Illuminating the market and target group
The business plan should be easy to understand for non-experts. When writing, it can help to take the viewpoint of the client or lender or to present the plan to outsiders after completion.
In the course of setting up a business, the business plan serves as a support and orientation aid. However, it is not uncommon that initial statements and ideas are later changed and adapted to new approaches.
Know yourself––Clarify funding and financing
Financing is an essential factor for a successful start-up. Keep in mind that even without investors, costs of your own livelihood will not go away just because you are striking out on your own.
Bills like the rent, your kid’s school, the groceries and more still need to be paid and will most likely put a strain on you when you are putting all of your money into your baby.
Many famous people starting on their path to successful business ownership raised capital among investors in ingenious ways.
The late Steve Jobs and Steve Wozniak started Apple computer in Job’s parent’s garage in California. They raised the first round of start-up money by selling Wozniak’s HP calculator and Job’s Volkswagen for $500 and $1,500 respectively.
Later on, to really get things going, the two men brought in a co-signer for a bank loan for $250,000 in return for a third stake in the company. The rest is history––Apple briefly surpassed the one trillion dollar valuation mark in 2018, seven years after Steve Job’s death.
Raising money for your new business
- Involves a lot of restrictions in terms of what you are allowed to do with the money
- The advantage is that there are no interest payments, return of principle or the handing over of precious company shares in return for cash
- Credit opportunities at your house bank
- Repayment of interest must be taken into account
- Often, more expensive business accounts are needed
Sell everything you own
- No external ownership––you are one hundred percent the boss
- Requires discipline
- Strict budget and invariably very little money on the side
- No equity required for large investments
- Low monthly rates
- Leasing through the manufacturer or a financial institution
- Capital goods are not owned by the company
- Venture capital companies provide capital without further collateral
- Shareholdings are parceled off to investing firms
- Mediation of important contacts
- Increased value of the company can be expected
Raise money privately among friends and family
- Cheap and often risk-free way of financing
- Often only small amounts can be covered
- Trust and concrete contracts are important, even within the family
Determining the type of firm
The legal form defines the structure of your enterprise. Moreover, the legal framework of your company determines the conditions for accounting, liability risk and share capital participation.
Unlimited partnerships and unlimited sole-traders are often easier to set up but have far higher liability risk in that you are liable for all you own should you run into trouble in your company.
Most people set-up a corporation where personal liability is limited with regard to the invested capital like, for example, a limited company. A start-up is worthwhile only if the sales will reach a certain height and enough start-up capital is available.
In addition, more stringent accounting and tax payment rules must be observed.
The registration of trade takes place at the responsible municipality or city administration. For this purpose, invariably a simple form must be completed, which must be supplemented with various documents depending on the desired activity.
Proper preparation saves a lot of time. A standard business registration will not cost the world, but you need to take account of it nonetheless. Furthermore, you must also apply for the necessary tax numbers and other things involving the eventual hiring of employees.
A few last tips for aspiring business owners
Don’t ever neglect marketing
A simple internet presence and a printed flyer are no longer sufficient as marketing tools. The desired target group must be made aware of the new product or service. A plan with a budget is paramount when you start up.
There are so many ways to make people aware of your new company depending on what you do.
Think targeted Facebook ads, using Google search to your advantage with SEO optimized texts, create awareness among potential customers by involving them in the business and more.
Make sure you have enough cash on the side
The founding of a company does not immediately mean the immediate generation of tons of money. Especially for the first months, financial support is needed. This should be included in the financial planning and calculated with the business plan. Always remember that the beginning will invariably involve a lot of cutting corners to save cash.
Become the ultimate organizer
As an aspiring entrepreneur, numerous tasks will land on your desk, which can only be calculated in advance to a certain extent. Being organized and ready with the necessary contingencies are what make or break any new business.
Remember to plan ahead with the budget, workload, team, marketing, sales and future planning while at the same time always being flexible and willing to step out of the comfort zone.
Being flexible is key
Quite a few steps that initially seemed so logical during the initial planning stages will fail or simply not be feasible. In this context, you must not be discouraged, but you must instead show flexibility. Ignore discouraging criticism from jealous friends and family.
Instead, listen to your customers––they know what they want. Improvements are in most cases achieved far faster than expected. Be willing to adapt to new situations and make them work to your advantage.
Remember that you also have friends and family
Being your own boss will become the central role in your life. Rest breaks and time with family and friends must not be neglected as a cause of your business.
Being with the ones you love and doing fun stuff is the perfect way to recharge your batteries, get a different perspective on things, or even find new ideas for your business.