How to Start a Business

Every entrepreneur or small business owner will tell you that starting a business requires a lot of work, dedication and effort. An great idea will not automatically transform into a successful business - there's a lot that can go wrong and the more you know about launching a business venture, the less risk you'll be taking.

While most of you might understand the effort necessary to create a business, you may not be familiar with the many steps required to launch a business venture, which is why we wrote this article to assist you in building a business, if you're willing to put in the effort, 

While tasks like naming the business and creating a logo are obvious, there are the less-heralded, equally important steps like determining your business structure or crafting a detailed marketing strategy and the workload can quickly pile up. So - rather than spinning your wheels and guessing at where to start, we have compiled this 10-step checklist to transform your business from a lightbulb idea above your head to a real entity.

1. Refine your idea.

If you're thinking about starting a business, you likely already have an idea of the service you want to provide, or what you want to sell, or at least the market you want to enter. No need to re-invent the wheel - do a quick search for existing companies in your chosen industry and list the 5 most successful ones accordingly. Now as thoroughly as possible research and analise these companies in order to establish what they are doing as the current brand leaders with regards to the services they provide or the products they sell in order to figure out how you can do it better or cheaper. If you think your business can deliver offer something the other companies don't (a better service or product, or only faster or cheaper), you've got a solid idea and are ready to create a business plan. 

The first question now, is to start with why you are launching your business? Is it because your business will serve a personal "why" or a marketplace "why". When your "why" is focused on meeting a need in the marketplace, the scope of your business will always be much larger than a business that is designed to serve a personal need.

Another option is to open a franchise of an established company. The concept, brand following and business model are already in place; all you need is a good location and the means to fund your operation. 

Regardless of which option you choose, it's vital to understand the reasoning behind your idea and its value before writing a business plan, picking a name or designing a logo.   

Unfortunately a lot of entrepreneurs think they have a great idea and jump into launching their business without thinking through who their customers will be, or why these people should want to do business with them. Secondly, you need to clarify why you want to work with these customers - it will serves no purpose but to fail if you're not passionate or don't derive a certain enjoyment from tending to your customers' needs and identifying these answers will help clarify your mission. Thirdly,  define how you will provide this value to your customers and how to communicate that value in a way that they will be willing to pay for. 

During the idealisation phase, you need to iron out the major details. If the idea isn't something you're passionate about or if there's not a market for your creation, it might be time to brainstorm other ideas.

2. Write a business plan.

Once you have your idea in place, it's time to give attention and focus to a well-written business plan, it order to address questions such as:

• What is the purpose of your business? 
• Who are you selling to? 
• Why would they prefer you company?
• How will you finance your startup costs?
• What will be your marketing strategy?
• What are your end goals?
• ....and much more.

Most businesses fail within the first few months because their owners rushed into the world of business without pondering these aspects and ended up loosing their investment funds along with their business venture. You need to identify your target customer base and determine who is going to buy your product or service. Remember that business is all about supply and demand - if you can't find evidence that there's a demand for your idea, then what would be the point? 

Conduct market research.

Conducting thorough market research on your field and demographics of potential customers is an important part of crafting a business plan. This could involve conducting surveys, holding focus groups, and researching SEO and public data. 

Market research helps you understand your target customer – their needs, preferences and behaviour – as well as your industry and competitors. The best small businesses have products or services that are differentiated from their competition. This has a significant impact on your competitive landscape and allows you to convey unique value to potential customers. 

Consider an exit strategy.

It's also a good idea to consider an exit strategy as you compile your business plan in order to ensure you accumulate value in the company as oppose to yourself. The biggest problem with sole proprietors (one-man-businesses) is that they tend to build a business based on their own person, i.e. they become the business, the band and the reason customers return, but in doing so, although they might have a reasonable turnover, their business might have little value, if any at all.

Generating some idea of how you'll eventually exit the business forces you to look to the future and ensures that you build a sellable venture with value. Too often, new entrepreneurs are so excited about their business and so sure everyone everywhere will be a customer that they give very little, if any, time to show the plan on leaving the business. 

A business plan helps you figure out where your company is going, how it will overcome any potential difficulties and what you need to sustain it. 

3. Assess your finances.

Starting any business has a price, so you need to determine how you're going to cover those costs. Do you have the means to fund your startup, or will you need to borrow money? If you're planning to leave your current job to focus on your business, do you have money put away to support yourself until you make a profit? It's best to find out how much your startup costs will be. 

Many startups fail because they run out of money before turning a profit. It's never a bad idea to overestimate the amount of startup capital you need, as it can be a while before the business begins to bring in sustainable revenue. 

Perform a break-even analysis.

One way you can determine how much money you need is to perform a break-even analysis. This is an essential element of financial planning that helps business owners determine when their company, product or service will be profitable. 

The formula is simple.

• Fixed Costs / (Average Price – Variable Costs) = Break-Even Point 

Every entrepreneur should use this formula as a tool because it informs you about the minimum performance your business must achieve to avoid losing money. Furthermore, it helps you understand exactly where your profits come from, so you can set production goals accordingly. 

Here are the three most common reasons to conduct a break-even analysis: 

1. Determine profitability. This is generally every business owner's highest interest. Ask yourself: How much revenue do I need to generate to cover all my expenses? Which products or services turn a profit and which ones are sold at a loss?
   
   
2. Price a product or service. When most people think about pricing, they consider how much their product costs to create and how competitors are pricing their products. Ask yourself: What are the fixed rates, what are the variable costs, and what is the total cost? What is the cost of any physical goods and what is the cost of labour?
   
   
3. Analyze the data. What volumes of goods or services do you have to sell to be profitable? Ask yourself: How can I reduce my overall fixed costs? How can I reduce the variable costs per unit? How can I improve sales? 

Watch your expenses.

Don't overspend when starting a business. Understand the types of purchases that make sense for your business and avoid overspending on fancy new equipment that won't help you reach your business goals. 

A lot of startups tend to spend money on unnecessary things, usually to impress the wrong people. The key is to spend as little as possible when you start and only on the things that are essential for the business to grow and be a success. Luxuries can come when you're established.   

If you need financial assistance, a commercial loan through a bank is a good starting point, although these are often difficult to secure. If you are unable to take out a bank loan, you will have to seek alternative finance from a private investor or organisation such as the Small Enterprise Finance Agency (SEFA).

Startups requiring significant funding upfront may want to bring on investors. Investors can provide millions of Rands or more to a fledgling company, with the expectation that the backers will have a hands-on role in running your business. 

Alternatively, you could launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers. Crowdfunding has helped numerous companies in recent years, and there are dozens of reliable crowdfunding platforms designed for different types of businesses. 

Choose the right bank.

When choosing the right bank, Ultimately, choosing the right bank for your business comes down to the needs of your business. Writing down your banking needs can help narrow your focus to what you should be looking for. Schedule meetings with various banks and ask questions about how they work with small businesses to find the best bank for your business.

4. Determine your legal business structure.

Before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong. 

If you own the business entirely by yourself and plan to be responsible for all debts and obligations, you can register for a sole proprietorship. Be warned that this route can directly affect your personal credit. 

Alternatively, a partnership, as its name implies, means that two or more people are held personally liable as business owners. You don't have to go it alone if you can find a business partner with complementary skills to your own. It's usually a good idea to add someone into the mix to help your business flourish. 

If you want to separate your personal liability from your company's liability, you may want to consider erecting a private company with limited liability. This makes a business a separate entity apart from its owners, and, therefore, companies can own property, assume liability, pay taxes, enter contracts, sue and be sued like any other individual. 

Ultimately, it is up to you to determine which type of entity is best for your current needs and future business goals. It's important to learn about the various legal business structures that are available.  If you're struggling to make up your mind, it's not a bad idea to discuss the decision with a business or legal adviser.

5. Register with the Government and SARS.

To become an officially recognized business entity, you must register with the Government. Companies will need an "articles of incorporation" document, which includes your business name, business purpose, corporate structure, stock details and other information about your company. 

Otherwise, you will need to register your business name, which can be your legal name, a fictitious "trading as" (T/A) name (if you are the sole proprietor), or the name you've come up with for your company. You may also want to take steps to trademark your business name for extra legal protection. 

After you register your business, you may need to get a employer identification number from the SARS. While this is not required for sole proprietorships with no employees, you may want to apply for one anyway to keep your personal and business taxes separate, or simply to save yourself the trouble later if you decide to hire someone. 

You might be tempted to wing it with a personal savings account and social media platform, but if you start with a proper foundation, your business will have fewer hiccups to worry about in the long run.

Obtain all required licenses and permits.

Some businesses may also require municipal licenses and permits to operate. The best place to obtain a business license is at your local city hall. 

Businesses and independent contractors in certain trades are required to carry professional licenses. You should also check with your city  to find out if you need any permits for your business. 

6. Purchase an insurance policy.

It might slip your mind as something you'll "get around to" eventually, but purchasing the right insurance for your business is an important step that should happen before you officially launch. Dealing with incidents such as property damage, theft or even a customer lawsuit can be costly, and you need to be sure that you're properly protected. 

If your business will have employees, you will have to register for UIF and workers' compensation. You may also need to purchase general liability insurance that covers property damage, bodily injury and personal injury to yourself or a third party. 

If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business. 

7. Build your team.

Unless you're planning to be your only employee, you're going to need to hire a great team to get your company off the ground. As an Entrepreneurs you need to give the "people" element of your businesses the same attention you give to your products. 

Your product or service delivery is built by people, and identifying your founding team, understanding what gaps exist, and determining how and when you will address them, should be top priority. Figuring out how the team will work together  is equally important. Defining roles and responsibility, division of labor, how to give feedback or how to work together when not everyone is in the same room will save you a lot of headaches down the line.

8. Choose your vendors.

Running a business can be overwhelming, and you and your team probably aren't going to be able to do it all on your own. That's where third-party vendors come in. Companies in every industry from HR to business phone systems exist to partner with you and help you run your business better. 

You'll have to choose carefully - these companies will have access to vital and potentially sensitive business data, so it's critical to find someone you can trust. Ask potential vendors about their experience in your industry, their track record with existing clients and what kind of growth they've helped other clients achieve. 

9. Brand yourself and advertise.

Before you start selling your product or service, you need to build up your brand and get a following of people ready to jump when you open your literal or figurative doors for business.

Create a logo that can help people easily identify your brand, and be consistent in using it across all of your platforms, including your all-important company website. Use social media to spread the word about your new business, perhaps as a promotional tool to offer coupons and discounts to followers once you launch.

Be sure to also keep these digital assets up to date with relevant, interesting content about your business and industry. Too many startups have the wrong mindset about their websites, the issue is they see their website as a cost, not an investment,. In today's digital age that's a huge mistake, the small business owners who understand how critical it is to have a great online presence will have a leg up on starting out strong.

Creating a marketing plan that goes beyond your launch is essential to building a clientele by continually getting the word out about your business. This process, especially in the beginning, is just as important as providing a quality product or service. 

Ask customers to opt-in to your marketing communications.  

As you build your brand, ask your customers and potential customers for permission to communicate with them. The easiest way to do this is by using opt-in forms. These are "forms of consent" given by web users, authorizing you to contact them with further information about your business.

These types of forms usually pertain to email communication and are often used in e-commerce to request permission to send newsletters, marketing material, product sales, etc. to customers. People get so many throwaway emails and other messages these days, that by getting them to opt-in to your services in a transparent way, you begin to build trust with your customers. 

Opt-in forms are a great starting point for building trust and respect with potential customers.

10. Grow your business.

Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. It's going to take time and effort, but you'll get out of your business what you put into it. 

Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies  and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer some of your time or products to get your name out there. 

You want to make sure you prepare thoroughly for starting a business, but things will almost certainly go awry. To run a successful business, you must adapt to changing situations. 

Be prepared to adjust - there's a saying in the military that 'no plan survives the first contact,' meaning that you can have the best plan in the world, but as soon as it's in action, things change, and you have to be ready and willing to adapt and problem-solve quickly. As an entrepreneur, your value lies in solving problems whether that is your product or service solving problems for other people or you solving problems within your organization."