No matter what kind of business you want to create, the first thing you need is a good idea. Even if your idea and product or service sounds great, it’s important to make sure that people will still think so when they see it for themselves. It might take some time and effort to work out all the details. However, refining your ideas will make it more likely that people will want to support you.
Whether it’s a new product or service, the first thing you’ll need to do before starting your small business is come up with an idea. Although this might seem pretty straightforward at first, there are certain things you should consider in order for your venture to have a fighting chance of success. In other words, you want to avoid the two most common pitfalls of business startups: poorly planned ideas and too many ideas. So, how can you make sure your idea is a good one? Here are four things to keep in mind before starting your own small business.
1. Your Potential Market
When it comes down to it, a business needs customers to survive. If you have a poorly thought-out marketing plan that just doesn’t seem to get traction, it could be because your marketing efforts are being wasted on the wrong market. In other words, who exactly do you intend to sell this product or service to?
Successful marketing strategies include identifying your target market, so they can easily locate and buy your products. In the same way, marketing that is not targeted to the right market leads to poor results. According to a marketing agency in Orange County, to fully understand the potential of a business idea or marketing campaign. You will need to know exactly who your target market is and how they behave as consumers. To do this, you may need to hire a marketing agency.
2. Create a Business Plan
Before starting your business you should already have an idea of what this business is about. Who will be the target audience and how much does it cost? You can, later on, present that plan to potential investors in order to get their trust and maybe invest some money into your new company. Also, creating a business plan prior to starting your business will save you a lot of time as it is already planned, as opposed to creating one after starting your business. There are many ways on how you can create a business plan, depending on what suits you best.
3. Choose Your Business Structure
The first thing you should do before starting your own business is to choose your business structure. Before you start a new business, you will need to determine what type of organization you want. You have two basic choices: a limited liability company or a sole proprietorship. Let’s assume you are planning on starting a small business that only has one location and does not plan on hiring employees or has never had an employee. Then you would likely be eligible to go with a sole proprietorship. If your business is large enough that it will have multiple locations and/or employees, then you should choose the LLC structure.
The key difference between these two structures is how they are taxed by the government. For example, a sole proprietorship will be taxed as part of your personal income. An LLC, on the other hand, is an entirely separate tax entity and can choose to be treated in one of three ways:
-As a “disregarded entity,” in which case the LLC business structure is not taxed separately. However, all its income or losses are included on the personal tax returns of its owner(s).
-As a partnership, in which case the LLC business structure is not taxed separately. However, all its income or losses are passed through to the members who report their share on their personal tax returns.
-As a corporation, in which case the business becomes subject to double taxation (the LLC itself is taxed on its income. Owners are taxed again when the LLC distributes profits to them).
4. Determine Your Revenue Model
The next thing you should do before starting your own business is to determine your revenue model. Your revenue model should be something you are familiar with and believe in. It is important to remember here that not all products or services can be sold at a higher price point. You must first determine the target market for which you will offer your product or service, then set a price-point accordingly.
Your revenue model could be one of the following:
- One time fee (i.e. for a consultation)
- Monthly/yearly subscription (i.e. for web hosting)
- Per-transaction fee (i.e. per ticket at an event, or per book sold on Amazon Kindle Direct Publishing )
You should also define your payment terms. For example, if you are selling an information product (ebook), can your customer download it right away? Or do they need to pay first? If so, how much time do they have to pay?
In this article, we described what you should do before starting your own business. It is crucial to define a target market and determine a revenue model so that you can set up pricing points for your product/service accordingly. When it comes to the type of structure your company will have and whether or not you want to get investors, it is best to seek professional advice from a financial advisor or attorney.