Starting a successful business, as most conventional wisdom would tell you, is not easy. That said, many people repeat varying incorrect statistics such as “90 percent of businesses fail within their first year.” The reality isn’t quite as dire. According to the Bureau of Labor Statistics (BLS), nearly 51 percent of new businesses established in 2014 are still operating as of March 2019.
Thus, starting a successful business is not as impossible as so many make it out to be. But it will require countless hours of work along with high levels of stress and exhaustion, mixed with excitement, enthusiasm and, hopefully, satisfaction.
Becoming an entrepreneur requires you to take some essential steps before your dream company is up and running. Read on to find out how to become an entrepreneur and embark on the road to business success.
Here’s how you can become an entrepreneur:
1. Come Up With an Idea
Every successful business should begin with a sound business idea and a plan for future growth. Just because you have a clever idea does not mean it translates well into a successful enterprise. From the start, you should zero-in on a viable startup concept. Here are some basic strategies for coming up with profitable business ideas:
- Find out what frustrates friends and family: A great place to get inspiration for a successful startup is from frustrations people encounter daily. A good place to start is by asking your family and friends to keep track of frustrations that arise from every day, repetitive yet necessary tasks. Once they’ve done this, review their lists and identify problems you could potentially solve.
- Stay ahead of the curve: Customers are not static in their wants and needs. As a result, businesses need to be able to adapt to customers’ ever-changing expectations and tastes with new products. This is where researching trend forecasts for your industry or market is essential.
- Search online for new products: You can keep abreast of developing trends by seeing what products people have come up with and integrating them into your business plan.
- Improve on an existing product: Not every successful startup is built upon a totally new product. Plenty of businesses find success by offering an existing product at a lower cost, with higher quality or both. A good method for this is to make a list of everything you use, then review the list for products or services that you could improve.
- Focus on a growing category: When conjuring your business idea, choose a category that you find interesting yet isn’t overly competitive or saturated. Upon picking a category, you should survey all products and services in that category. Identify each product’s benefits, marketing strategy, customer reviews, among other things, to home in on areas of improvement.
- Identify underserved demand: It’s great to get into an industry or market with high pre-existing demand. However, another viable route is to target areas with underserved demand. Many entrepreneurs start successful businesses after they notice a gap in the market.
There are other methods to come up with viable business ideas. Networking with other entrepreneurs is important when starting a business in general, but especially so to find out which areas have a better chance at success than others. You can gather your network of fellow entrepreneurs together for a group brainstorming session. Another simple route is to research patent applications. Naturally, you shouldn’t search patents with the intent to copy. Instead, researching patent applications can give you a better idea of current trends in innovation.
2. Draw Up a Business Plan
One of the first steps in creating your business is drawing up a business plan. A business plan lays out any objectives you have as well as your strategy for achieving those business goals, and potential business risk. Your business plan is critical for getting investors on board or other forms of funding.
Although business plans vary from business to business, there are some basic features that people expect when reading a business plan. Some fundamental parts of a business plan can include an executive summary, company description, organization and management, key partnerships, cost structure and much more. You should lay out your business goals and business risk as well. Learn more about all the essentials you need to create your business plan.
3. Choose a Location and Target Audience
Figuring out a location for your business and your business’s target audience can be closely intertwined. If you’re starting a restaurant or retail store, foot traffic will be a crucial factor in choosing a location. If you’re starting a tech company, being in close proximity to other tech firms and their infrastructure is important. If you’re starting an online business, location matters less, but you may want to take state taxes and regulations into consideration.
In terms of audience and customers, do research on the age, gender, income, race and culture of your target group. Doing both geographic and demographic research will help you clarify the best location and customers for your business.
4. Choose Your Business Structure
Deciding on the structure of your new business is important because of the many organizational and tax implications it carries. For instance, if you choose to incorporate and establish a C corporation, your business will get taxed very differently than if you were to form an LLC. Your business structure also designates who are owners and their stake in the company.
Here are the most common business structures you can choose for your startup:
- Sole proprietorships
- C Corporations
- S Corporations
- Limited Liability Companies (LLCs)
- Non-profit businesses
Each one of these business structures has its pros and cons. Deciding which business structure is the best fit requires self-evaluation of your business objectives and where you see your company going.
5. Figure Out If You Want a Co-Founder
Unsurprisingly, entrepreneurs often view their startup idea as their baby. However, bringing in outside help in founding your startup can provide major benefits, even if it means sacrificing total control and financial compensation. Consider the pros and cons of having a co-founder to decide if it’s right for you.
Pros of Having a Co-Founder
While total control over your business might be appealing, there are definite advantages to having a co-founder, including:
- Funding: Many venture capitalists are hesitant about investing in startups with a sole founder. To venture capitalists, a company with multiple founders is often seen as having a better chance of success, therefore investors might be more willing to back you financially.
- Emotional support: Starting and operating your own company is very stressful. Even if your company is successful, the day-to-day tasks and responsibilities of running a business are exhausting. If you’re a sole founder, you’ll be going through all these stressful ups and downs by yourself. Having a co-founder on board, going through exactly what you’re going through, can really mitigate the stress of being an entrepreneur.
- Complementary skills: Brining on a co-founder with different skills, knowledge and connections of their own can be a huge plus. You might be the ultimate salesman but are wanting in terms of process or technical details. This is where finding a co-founder with complementary skills and networks to your own can pay big dividends.
An analysis of thousands of new businesses revealed that businesses with one founder accounted for a minority of successful startups. A slight majority had at least one co-founder.
Cons of Having a Co-Founder
Here are some of the most notable drawbacks of having a co-founder:
- Conflicts: Disagreements between business partners almost always emerge. Differences of opinion can be productive, but outright conflict can consume time and energy, hurt morale or even escalate to legal action.
- Dividing up finances: Bringing in a co-founder can help with funding your startup, but it also means they have a claim to your company’s equity. If you get a co-founder, you pretty much automatically go from having a 100-percent stake down to usually between 40 percent and 60 percent of your company right from the get-go.
- Finding a co-founder: On a basic level, it can be very tough to find a co-founder with similar or complementary business ethics, work habits, skills and personality. Even if you’ve found such a co-founder, they also need to buy into your vision of the company.
Even though a majority of successful startups have co-founders, you should make a decision based on your situation and not necessarily traditional advice. Each entrepreneur is unique, complete with their own objectives and goals, so seeking a co-founder should fit in with your overriding vision for your company.
6. Secure Funding
The traditional route for securing funding for a business is through investors, big banks and other financial institutions. Finding angel investors is a difficult prospect. And, although banks tend to offer the best terms and rates, they’re also more difficult than other, less traditional methods of funding. One of the main stumbling blocks from the get-go is that banks and institutional lenders tend to have criteria, such as multiple years of business history and revenue, which necessitates your having an existing business, not a startup.
If you’re an entrepreneur starting a new business, you might need to pursue alternative means of funding. Here are five creative ways to fund your startup without investors or traditional bank loans:
- Ask your family and friends to invest in your business
- Apply for a small business grant
- Use a crowdfunding platform
- SBA loans
- Alternative lending options
7. Open a Business Bank Account
Closely tied to securing funding, opening a business bank account is an important step that keeps your business finances separate from your personal accounts. Opening a business savings account is also a smart money move, especially an account designated for taxes.
Opening a business credit card is another financial move you should consider for your business. You’re going to have ongoing and unexpected expenses when running a business. A business credit card — especially one that earns reward points — is great for such day-to-day expenses. Using your business credit card responsibly will build your business credit history, allowing you to access a wider variety of funding options in the future.
8. Line Up Clients and Customers
The final step, and really a never-ending one, is lining up clients or customers for your business. Both networking and marketing are key for this step, as you’ll need to find customers and make your business appeal to them. The Small Business Administration (SBA) has some solid strategies for acquiring new customers:
- Participate in community events
- Offer discounts and incentives
- Promote and publicize your expertise in your industry
- Set up a system for referrals for customers
- Use online reviews to your advantage
- Team up with complementary businesses
The last tip can be taken further. Rather than just one-off events and deals, forming a long-term strategic alliance with a complementary business can be a major advantage. Allying with a company that shares your customer base, but fulfills different needs, can help attract more customers, increase profits and keep costs related to customer acquisition down.
The Bottom Line
These steps cover the most essential aspects of becoming a successful entrepreneur. Of course, there are always more steps and moves you’ll have to make once your business is up and running.
For more practical help, below are some useful entrepreneurial resources and entrepreneur associations that can assist you in starting your successful business:
- Small Business Administration (SBA): The SBA is a government organization and website, which provides guides, programs, resources and other information, as well as SBA loans.
- United States Patent and Trademark Office (USPTO): Use this website to search for existing patents and trademarks or use it to get a trademark for your original product or idea.
- International Franchise Association: This association helps you explore opportunities in opening a franchise business, as opposed to starting a brand-new, original business.
- SCORE: This is the nation’s largest network of volunteer, expert business mentors specifically tailored for entrepreneurs.
- Entrepreneurs’ Organization (EO): EO is a global network of thousands of entrepreneurs that hosts events and programs for entrepreneurs to network and mentor.
- Startup Grind: It is both a startup and a global community of entrepreneurs that holds conferences and seminars teaching new approaches to business.
- The Association of Private Enterprise Education (APEE): APEE is an association of university teachers and scholars who focus on instructing entrepreneurs and business leaders on how to succeed in private business.
- The International Council for Small Business (ICSB): This global non-profit organization educates entrepreneurs in growing and running a profitable, successful small-to-medium-sized business.