Jumping into the world of the business startup can feel a little like stepping onto a roller coaster for the first time. There’s the excitement of the unknown, a mix of nerves and anticipation. You hope you are tall enough to go on the ride. That said, if you dream of turning your passion into a paycheck and venturing into a business startup but don’t know where to start, this article will hold your hand. We’ll navigate the thrilling (sometimes a bit scary) turns of starting a new business. By the end, you’ll be armed with knowledge and a bit of insider advice and know exactly what it takes to survive the ride and enjoy it.
But before we dive into the steps of turning your dream into reality, let’s acknowledge that nearly half of all new business startups don’t make it past the first five years, according to Investopedia. With those sobering odds, you might wonder – how can you defy the odds and build a successful, profitable, and – dare we say – *enjoyable* business? The first step is to learn why most startups fail. Then, make a plan to avoid those common pitfalls.
Table of Contents:
- Why Business Startups Fail
- Creating a Winning Startup: Your Step-By-Step Playbook
- Business Startup Financing Strategies
- Business Startup Ideas for Inspiration
- Conclusion
Why Business Startups Fail
Before you risk your hard-earned time and money, read up on why startups fail. You may just be surprised at what you find. While there’s no singular recipe for business success, addressing these common pitfalls head-on increases your odds of thriving. So, before you even think about applying for a business credit card, make sure you understand these reasons for failure.
1. There’s no market need
In other words, nobody wants what you are selling. It’s easy to fall in love with your idea and neglect thorough market research. Before investing, test if there is sufficient demand for your small business idea. Please take a good look at what competitors offer and how they perform. Talk to your potential customers.
Even look at what types of ads are popping up online. This can often signal current demand and potential customers’ wants. If you can’t validate that there’s an audience for your product or service, your venture might be dead before it even begins.
2. Your team isn’t the right fit
Don’t underestimate the importance of your team. Not every brilliant small business idea can translate into success without a stellar group working behind the scenes. Find team members who are not only skilled and experienced but also share your vision and values. In the excitement of getting things started, bringing on board the first talented person you find can be easy.
However, make sure there is more to it than a rock star resume. Your business will thrive best if you ensure trust, shared values, and alignment within your team. This may even mean being extremely picky when adding team members.
3. Get Real With Your Budget
It happens more often than you think – a new business burns through cash before its venture takes off. Plan, plan, and then plan some more when creating your budget. Know your startup costs by having enough capital to carry you through the early days and lean months. You’ll likely have plenty of them.
Create realistic revenue goals and consider consulting with an accountant or financial advisor to help with setting budgets, taxes, and all that “icky” financial stuff most creative entrepreneurs hate dealing with. This is also a great time to think about what type of business bank account you want to open, such as a business checking account. Remember—knowledge is power.
Creating a Winning Startup: Your Step-By-Step Playbook
With all those warnings and doomsday stats in mind, how can you feel confident launching into the world of business startups? Don’t fret; we’ve got you covered. Follow these actionable steps, learn from the successes and pitfalls of others, and increase your odds of creating a business venture in which you not only survive but LOVE. Now, let’s transform that apprehension into action.
Step #1: Do Your Homework (AKA – Market Research)
Think of market research like dating. It’s wise to understand someone before you commit to a long-term commitment, right? Before quitting your job or even starting that DIY website, research your market and ideal customers. Check out your competition by knowing what they’re doing right (and even what they are not).
Consider conducting surveys or sending questionnaires to better understand your ideal customer. While providing an incentive can get responses, offering things of value, such as discounts, can be much more powerful for conversions. Ask yourself and others tough questions, such as, “What problems does my idea solve? Why is my approach different (or better)? Am I the only one doing this? And how are others making money?”
By really analyzing (not just thinking about) answers to these tough questions, you can create a winning roadmap for your startup business. You can even use this time to look into different business models, such as a sole proprietorship, and if that would be the right fit for you. Then – buckle up and enjoy the journey.
Step #2: Business Plan: Build a Blueprint For Your Dream
A solid business plan can mean the difference between success and struggle. Think of it as a GPS that steers you toward your ultimate goals. No matter how small or big your startup might be, having a good plan can help clarify your objectives, define how you’ll operate, and even measure success.
By the way – this can be critical if you seek outside funding. You probably won’t get a meeting without a business plan to hand investors. According to NerdWallet, here’s what a well-structured business plan should include:
- Executive Summary: You will write this section LAST, but it will be the FIRST page of your business plan. Think of this like a Hollywood movie trailer – you want to provide enough details to entice and encourage readers to want to know more. In your summary, give a quick overview of your proposed new business, outlining its key objectives and the methods you’ll use to get to them.
- Company Description: Tell the reader about you (and your team.), your company, and how your startup tackles a challenge, issue, or gap. Use this to set yourself apart.
- Market Analysis: Explain to potential investors or stakeholders who you will target with your business. Include facts like how fast that particular market is growing and where it will be in a year, 3 years, and even 5 years (nobody expects you to get it exactly right – show that you know the bigger picture). Explain how you are different and any risks you will encounter (because EVERY new venture will have unforeseen issues or bumps).
- Organization and Structure: Outline the structure of your new venture. Include how your team operates – and share the resumes (aka the qualifications) of anyone who is (or will be) involved. Include your tax plans – will it be an LLC or a Corporation? You will likely want to seek guidance from an accountant or legal expert. Sometimes, the fees can be worth the peace of mind.
- Mission and Goals: Keep it brief. Use this space to share your overarching vision and really boil it down to your startup’s core values. Think through your desired impact and break those hopes into concrete goals. Most businesses use SMART goals because they are Specific, Measurable, Action-Oriented, Realistic, and Time-bound.
- Products or Services: Give all the details about the core offerings of your new business. Show how these offerings will bring value to the market, how they are better than existing solutions, and why customers will absolutely *LOVE* what you’ve created. Be super clear about your price strategy and how this aligns with your overall plan.
- Background Summary: If you like researching, you’ll love putting this section together. This is the part of your plan where you really roll up your sleeves and get granular. Look at statistics, reports, articles, studies – anything to show how trends and various factors (both positive and negative) might shape your journey.
- Marketing Plan: Highlight your brand’s unique elements (aka your Content Differentiation Factor.), summarize your SWOT Analysis, look at who you’re up against in the marketplace, and show off your plans to bring customers to your venture. This section often reads like a roadmap, a well-timed strategy with defined budgets and campaigns. Be sure to include your strategy for social media.
- Financial Plan: This is where most investors will go first – so show the “money folks” your magic. This will need detailed budgets, income statement projections (include a Balance Sheet if you want to impress your readers.), and, ideally, a 5-year Cash Flow forecast. Don’t fret if this feels like speaking a different language, many professionals can help. Don’t shy away from asking for funding in this section, explain your investment needs clearly – be confident. You got this.
Step #3: Making It Legal
Starting a new business can be thrilling. Often, there are overlooked legalities that are absolutely necessary. By covering all the proper steps, you’ll be sure to run a smooth (and more importantly – ethical.) business. Let’s dive in.
1. Officially Register Your Business
Decide on the perfect name. Not only should it be unforgettable, but double-check to make sure nobody else has that name. Start with a Google search. Sometimes, just seeing who else shows up can trigger creative, innovative new ideas. Remember to also check what is available as a website domain name.
Next, look up how to choose a registered agent, someone who will accept any important legal docs on behalf of your business. Remember – every state is different, so make sure you research exactly what needs to be done for your particular location. Finally, the best news is if your dream venture is taking shape as a one-person show, a Sole Proprietorship, then you’re good to go without officially filing. However, most seasoned experts recommend going the LLC route. Keep reading to learn why.
2. LLCs: Protect Your Assets
While not overly complicated to set up (we know legal docs can be stressful, trust us.), there’s a good reason most people choose an LLC business structure (which stands for Limited Liability Company). This structure helps to protect all those valuable personal assets you’ve been working hard to build. Your personal car, bank accounts, even that dream house you are finally renovating – all these are protected if something goes sideways in the future.
That said, make sure to keep your business finances totally separate from your personal accounts (an accountant or tax professional can give you the best steps). By choosing to create an LLC, you create a safety barrier most new business owners can relax with. It just might be the peace of mind you need to thrive and have the freedom to do what you love – run your dream business.
3. EIN – Don’t Forget About It
It’s so simple to apply for that most entrepreneurs neglect to take this step. Don’t be like them. An Employer Identification Number, or EIN, is essentially your social security number, but for your business. You can think of it as getting a social security number for your business. This nine-digit number allows your startup to work with vendors, open bank accounts, handle taxes, apply for credit, or even hire workers (if and when that happens).
It can feel so bureaucratic, but this step is simple to apply for and – even better – it’s completely free. Now that you have an official, validated, legal startup – how will you make sure to protect your financial interests, even as you encounter setbacks along the way? Don’t skip the next section. It might save you years of heartache, legal hassles, or even prevent your new business from failing.
Business Startup Financing Strategies
Let’s get real. It’s a universal truth – getting the money flowing is what turns business dreams into reality. So let’s get granular – together. Here’s a sneak peek of financing strategies savvy entrepreneurs swear by. You can also ask mentors to walk you through the various methods. While every venture (and investor.) is different, by understanding the various choices – you’ll confidently navigate financial conversations – and watch those profits grow.
Bootstrap It
As an entrepreneur, this method just might be your favorite. That said, not every business can start using your savings and whatever is leftover after all those bills are paid. If your new startup doesn’t need a physical storefront, an expensive office space, or a ton of overhead, this can be your solution.
There are a surprising number of new ventures launching successfully in the digital realm that rarely ever need “brick and mortar”. This approach not only gives you complete ownership, but many new businesses love that the risks (and often any major debt) are lower.
Seeking Funding
We know asking for money can make the bravest entrepreneur sweat, but to accelerate your business growth, you will need financing, investors, or other funding options, such as a traditional small business loan, business credit, or even venture capital. But before you take the leap, carefully weigh your pros and cons.
Let’s look at some ways you can confidently approach funding:
- Friends & Family: While sometimes uncomfortable, a loan from trusted sources who truly want your startup to thrive can make the beginning steps much easier to take. Have everything written down officially with all the legal necessities in place to make sure the relationship can survive any potential tensions (nobody wants that Sunday night family dinner to turn awkward, right?).
- Small Business Loans: Check out those banking websites. Many of the financial institutions are competing for new business by making it surprisingly straightforward for startups (especially with established ventures or those with a high credit score). As part of the SBA’s 10-step guide to starting your own business, there’s a whole section that outlines how small business owners can access various funding options which are usually short-term loans with interest rates that won’t break the bank (no pun intended.) You will likely need that stellar Business Plan to hand the loan officer, though. So go make a plan before submitting an application to ensure your odds of success.
- Venture Capital: This can be exciting and potentially frustrating if you get rejected, so make sure you’ve researched how this type of business funding works and find a VC who shares your overall vision. The potential payoff can be incredible because this typically involves equity stakes, which means you are selling partial ownership for immediate capital. There’s one crucial catch though. You will likely need that detailed Business Plan you were too overwhelmed to create. Don’t procrastinate.
Step #4: Manage Those Legal Nuts & Bolts.
This isn’t the “sexy” part of launching a startup, but there are still must-do tasks you cannot afford to miss (unless you want endless legal bills, stress, and hassles – not exactly fun, is it?) Here’s how to breeze through the administrative details so you can do what you love (remember why you started your own venture?).
Taxes – Make Friends With Them (We’re serious.)
No matter what you are selling or even where you live, all business ventures are required to have a Tax Identification Number (also known as an EIN – and you probably got that taken care of, right?). You will also have to know if and when sales taxes need to be collected. Not only are state regulations different (yep – that again.), but your county or even municipality could have its own set of tax forms you need to handle properly. The IRS has everything you need for handling your business taxes, but they are a bit boring, so find a trusted and skilled accountant to walk you through the steps – your time (and your financial sanity.) will thank you.
Employees & Forms – Fun stuff.
This part might not come up immediately (especially if your dream business is still in startup mode), but once you bring on that stellar first (or fifth) employee – there are certain forms you must provide. The IRS offers downloadable PDFs to help ensure everyone stays compliant – it’s all free. When you welcome aboard anyone, make sure to provide a Form I-9 (Employment Eligibility Verification) so they can complete all those boring legalities before that first paycheck is cut. Don’t forget those taxes, though. Have everyone complete the trusty Form W-4 (that’s Employee’s Withholding Certificate) – don’t neglect those details. You got this.
Business Startup Ideas for Inspiration
Are you ready to jump in, but can’t quite narrow down your “perfect” new business? Fear not; there are a plethora of incredible, inspiring ventures out there with new startups happening each and every day. We’ve curated a list of successful examples to trigger fresh ideas and perhaps spark your inner “AHA” moment. Whether you’re venturing into the physical, digital, or even the virtual realm, let’s explore these thriving startups. As you read, remember that these ideas might work well in your locale, while similar offerings could struggle in a different marketplace. Do your homework before going all in.
Embrace The Growing Demand For Podcasting
Remember those doomsday figures of startup failures? Well – you’ve likely listened to one or two – podcasting. In the last couple of years, there has been a massive growth in listeners with well over 100 Million active listeners just in the US, and those numbers are only projected to increase.
It makes sense. Who wants to deal with ads or endless music when you are jogging, commuting, cleaning, gardening – you get the idea, right? Why not jump in? There are more than 5 Million podcasts currently running in 2024, so research which topics and themes seem to have staying power.
Vending Machines Are Still Viable
Have you noticed most offices have gotten rid of their break rooms or, even more commonly, cut those sugary soda offerings (because – healthier snacks)? If so – there’s an opportunity to step into a quiet but stable marketplace. According to IBISWorld, vending machines are increasing in growth (since 2015.), making them surprisingly low-maintenance, highly automated, high-profit-margin businesses to own (they essentially make money as you sleep.). Do a survey and talk to business owners – who doesn’t crave a crunchy, salty snack or, let’s be honest – those sugary temptations that bring back the feeling of being 8 again, when that bag of Skittles made recess absolutely perfect.
For those looking for small business ideas that can be run from a home office, you may want to consider dropshipping, becoming a virtual assistant, or even teaching online courses. As you can see there is a multitude of startup business ideas for you to explore.
Conclusion
Launching a business startup isn’t easy. But if you can acknowledge, manage, and even embrace all those inevitable setbacks and frustrations (while asking experts along the way), creating a business can not only change your life but also provide that income, security, and even status you are craving. No matter where you live or what products or services you create, starting a business comes with uncertainty. Don’t give up. Trust us—we’ve been there.
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