What if I told you that you could start your business within a week before ever writing up a business plan, building a website, or sketching up a logo design? Think it's too good to be true? Let me explain. One of the important prerequisites of new business success is a fair understanding of future costs. Some people get so overwhelmed with what is needed to start a business that they never end up starting and it stays in their “one day I will” folder. Just thinking of a business plan is enough to scare them from ever starting. I am here to tell you what you actually need to start a business before you jump to writing up your business plan.
Step 1: Determine If Your Offer is Needed
The very first thing you must do is determine if you have a viable business. To answer this question, you must first answer these questions:
Is there a need in the market for my product or service I am offering? In other words, is what I have a solution for making someone’s life easier, better, etc.? This can be in terms of easing someone’s day to day life, saving someone time and/or money, or even helping someone do their job in a more effective way.
Can you monetize it? In other words, would people actually buy what you are selling? And lastly
Is there anyone else offering the same thing you are selling? If there is nothing else like it on the market, chances are you won’t have much luck (but of course this isn't always the case). Companies like Lyft and Uber were thought to be a crazy idea. Getting in a car with a stranger and trusting that they will get you to your destination safely, is now considered a common practice for travel.
Step 2: List Materials, Equipment, and Workspace
If you checked off all of the questions in Step #1 above, you will need to set up your space to get going. Whether you are offering a tangible product, or a service, you will need to get some things in place before you make your first sale. For example, if you are selling a tangible item, something like muffins, do you have all of the ingredients, kitchen supplies, and equipment needed to put it together? Eggs, flour, sugar, mixing bowls, a baker (or yourself if you are doing the baking), an oven, bakery box, cupcake liners, etc. Take into account all of the raw materials you will need as if you were fulfilling a customer's order right now. Write out a list of all the things you'll need. Write down everything you can think of even if you think it's too small to consider - it could be a measuring spoon and/or a ribbon you might use to tie your box of muffins. Your workspace is also important. A muffin maker may need a home or commercial kitchen.
Step 3: Determine How Much Capital You'll Need
To get all of these things, you'll most likely need some capital. Whether it is in the form of savings or a loan, start-up capital is money that will be used to invest into setting up the business to get ready to set up business to start selling. Depending on what your business is, you may not need much money to start creating your product and start making sales.
Step 4: Register DBA & Business License
A DBA (stands for Doing Business As) lets the public know who the real owner of a business is. Filing a DBA, also called a fictitious business name or assumed business name, can make it easier for you to create a brand, market your company, and even gain credibility. A DBA is any registered name that a business operates under. It doesn’t provide any personal asset protection like an LLC or a corporation, but it does let you hold a unique name as a business that you may register as your business. No one else will be able to use this specific name for their business as long as you have it. A business license is also another good thing to secure while filing your DBA. Oftentimes, other businesses you work with will ask for your business license to allow you to shop at their wholesale stores or to get wholesale pricing. This is another way to somewhat legitimize your business, depending on what type of business you are getting into.
Step 5: Know Your Numbers
Setting a sale price for your product can be challenging. Knowing your numbers in and out makes this process simple. Do you know how much your finished product costs to produce? I mean, from start to finish, how much do the materials cost? Once the finished product is assembled, do you know what that cost you? How many minutes or hours does it take you to make one unit? Will you be renting out space to create this product and if so, how much time do you spend producing it? Will you package your product? And how much does that cost? Once you have figured in your raw materials, facility and/or labor costs you have your break even number. Only after you have identified that number, can you start to think about choosing your product's price point, in order to predetermine your profit. This may be the MOST IMPORTANT step of all because your margin of profit will determine if you'll be spinning your wheels, operating an expensive hobby/non profit organization, or if you'll be generating business that adds funds to your bank account. The tools we offer at Prophit will give you a head start by helping you easily manage your numbers. Make sure you know your numbers before getting in too deep.
There are many paths to starting a business. These 5 steps can help you keep your starting costs down, and help you jump right into selling your product (or service). Business plans are great, but it may be a bit too soon if you have no experience creating/selling your product or service. If you start with this check-off list, you will be able to see what you need to get started, or discover that your business idea or product isn't right for you!