How To Start A Business
Even though these days I often deal with entrepreneurs and senior-level managers who are much further along in their entrepreneurial careers, I still frequently get asked how to start a business. Amazingly it’s often these further along and usually successful entrepreneurs or larger corporations who are asking me how to start a business correctly! How can this be?! Didn’t I just get done saying that they’re experienced and usually quite successful already?
As it turns out, many folks who have been in entrepreneurship their whole lives and have attained some significant success have never really thought through how to start a business. Instead, they have subscribed to the “just do it” mentality. In my experience, while this approach can frequently lead to success, it a can much more often lead to failure. Granted, in any large group of people just “throwing it against the wall and seeing if it sticks,” there will be successes, some of them notable. That said, just because there some successes with that approach doesn’t mean it is the way to go.
In my experience and observation, the best answer to “how to start a business” is carefully and deliberately, but with a great deal of confidence and belief. Just because you take a meticulous, well-thought-out approach does not mean that you’re not an entrepreneur! In fact, the best entrepreneurs do just that. They take a measured, deliberate approach to assessing and starting up each business they get into. They are willing to take risks, but they greatly prefer to take calculated risks and they are willing to constantly update their approach based on the ongoing feedback they receive from their target market(s).
These days, when I’m asked how to start a business, I provide the following steps. While it is not intended to be an exhaustive list of what needs to be done, and the order of the steps may change slightly depending on the particular situation, I have used and seen this approach used successfully many times. As one of my mentors told me early in my career, “you want have a powerful plan that can change”. You must be willing to adapt to changing circumstances and feedback. You must not be rigid in your behavior. You must believe that you can succeed, but you must be flexible.
Here are the “how to start a business” steps. Posts elsewhere on this blog go into greater detail on most, if not all of the steps.
1.) Understand profitability and break-even analysis — too many people go into business not understanding these basic concepts.
2.) Understand upside goals and potential — what kind of business are you trying to create? Does the business you are starting right now match your objectives?
3.) Screen and sort your ideas/opportunities using criteria that make sense.
4.) Understand the psychology of markets and niches.
5.) Develop products and/or services that meet a true market need.
6.) Understand and select appropriate marketing strategies.
7.) Deploy appropriate marketing tactics.
8.) Create a full, formal business plan.
9.) Strive for operational excellence.
10.) Replace yourself/sell your “baby”.
It should also be noted that you may choose to raise capital at any point along this process. However, I would suggest that you should not seek to raise capital from angel investors or venture capitalists until you’ve at least reached Step 5, where you are developing products or services based on a true market need. Depending on how well you know the angel investors and/or venture capitalists, and depending on how much capital you are seeking to raise, you will also likely need to have a formal business plan completed before it makes sense to approach them. As discussed elsewhere, angel investment and venture capital don’t make sense for a large percentage of start-ups, so before investing a great deal of time in approaching them, be sure you have a business with characteristics that make sense for that type of equity investor.
I look forward to your questions and comments.
Paul Morin
Thanks for the great tips!!!
Our pleasure. We’re happy you found the post helpful!
I only wish I had followed your advice when starting my first business …
Hi Laur, thanks. Yes, me too. 🙂 If I only I had known then what I know now…
Great post – I may be using these steps in the near future. I will have to dig more into the detailed posts behind each step. I absolutely agree with the tactical, planned approach as opposed to just seeing what happens. I think more people would use a planned approach if they had a roadmap such as the one outlined above.
In many cases, I would bet that it is easier to proceed without a plan or any kind of analysis because it allows for blissful ignorance. Doing a break-even analysis or considering the market-need for an idea is the most surefire way to convince yourself that it is time to go back to the drawing board.
I look forward to continuing to read up on your material – thanks for a great post!
Thanks for your comments, Barrett. I think you’re 100% correct that it’s typically a lot easier to take the “blissful ignorance” approach. Also, for many, the results of a break-even analysis or market research are the last thing that they want — it is a kind of truth serum that causes one to have to re-think one’s assumptions. If there’s no thinking to begin with, the re-thinking part is quite difficult. 🙂 Paul
Great review! You actually touched some valuable things here. I came across it by using Bing and I’ve got to admit that I already subscribed to the RSS, will be following you on my iphone 🙂
Awesome article, thanks. Are you using twitter to provide updates on your site? Just wondering as I don’t use feeds and always forget to re-visit.
Thanks. Yes, blog posts are also distributed via Twitter.
I totally agree, successful business leaders in corporations don’t automatically have what it takes to be an entrepreneur. Thanks Paul for the tips. Your blog is very educational, down to earth and pleasant to read.
Hi Anne,
Thanks for your kind comments.
I haven’t really delved into it in detail yet on the CF blog, but I agree with you 100% that being a successful big company executive is not necessarily sufficient preparation to be a successful entrepreneur. There are many differences between corporate and entrepreneurial life, and some of them have major implications regarding likelihood of success (and happiness). Ability and willingness to tolerate risk and uncertainty is one of the key differences, depending on the relevant corporate environment(s) the person has experienced and the type of entrepreneurial venture they are considering.
Paul
Great post very detail steps. Easy to follow to start a business
Starting a business is a task full of risks. No one knows the future of business world,so going into this world requires quite consideration. By not giving it time to think before starting a business, you may regret later. So just think about it, do a good research and then move forward. Personally I prefer buying an existing business over starting a new one.
Agreed, Jack. There are pros/cons of buying/starting a business. Those pros/cons have to be weighed in the context of the particular market(s) one is looking to enter, among other factors. Thanks for your comments. Paul