Editor’s note: This article was first published in August 2021. The advertising channels it mentions, such as Facebook and YouTube, reflect the situation in 2021, and the guide was originally framed for entrepreneurs starting out that year.
Over the years we’ve written a great many articles on how to start a business and the steps to follow, and I think it’s time to sum up that “medley” of advice in a very basic, unconventional guide that will lead on to a second, much more complete one.
The thing is, once we’re clear that we need to start a business (for whatever reason), we run into the obvious questions: “What business can I set up? What business would be profitable? How do I come up with a business idea?” and so on.
The truth is that it’s as easy, or as hard, as following the steps below, although first we need to be aware of the absolute truth about success in business.
What do you need to succeed in business?
- You need a product.
- You need a market.
- You need the ability to get the product into the market.
- And once the product is in the market, you need it to generate enough money for you to keep selling.
Remember that although these days the business world is dressed up with lines like “the most important thing is helping people” or “the most important thing is the employees”, in the end 99% of businesses fail for one simple reason: they run out of money.
And without money there are no customers, no employees and no help to offer anyone. A business’s survival depends on revenue and profit.
A guide to starting a business
1. Find a problem to solve
There are two ways to build a successful business:
- Meet an existing demand in the market.
- Create a product or service and then awaken demand for it in the market.
Although some successful entrepreneurs have used number 2, first creating a product and then creating the need, as a rule it’s more expensive and more likely to fail than number 1.
If you’ve never started a business before, play it safe.
Look for a need in an industry or, failing that, a problem in an existing industry. The latter is Richard Branson’s speciality.
2. Think about how to solve the problem
This is where we shape the idea for the product or service we can offer.
3. Turn the solution into a product or service
Without forgetting the previous points. We need the ability, or the means, to get that product into the market. This would be a good moment to start writing a real business plan, that is, not a business plan with inflated figures for raising money, but one in which you don’t fool yourself.
In fact, it’s a good idea to lower your expected profits and raise your expected costs, because believe me, as a rule, that’s what will happen once your business is up and running. There will be more costs than you calculated, and you’ll make less profit than you first thought.
4. Sell that solution
At this point we’re clear on the service or product we’re going to sell, and we give it shape.
But don’t dive in all at once. There’s no better business plan than the one Tim Ferriss recommended: offer a few units of your product to people (potential customers). If you have a business idea, five units to sell and you get rid of them in a day, you can probably start investing in making more.
If it takes you weeks to sell those few units, tread very carefully with your investment in the business, or look for other channels or strategies to sell.
If the business you’re thinking of starting involves selling online, it’s very easy to test. You don’t even need to have made the product.
Just act as if you already had it: run an ad campaign on Facebook or YouTube and analyse the purchase intent of the users you reach. In other words, how many people got as far as filling in all the details needed to buy and clicked the “Complete purchase” button.
Obviously, you have to stop the purchase from going through, with a message such as “Out of stock. You will not be charged and we will let you know when it’s available.”
This is where you know for sure that users have a real interest in your product, which means you’re able to get it into the market.
Expanding on these points
5. Your business idea doesn’t have to be innovative or original
In fact, the simpler and easier to explain it is, the better its chances of success.
6. It doesn’t have to be in a sector you’re passionate about
That is, as long as you’re passionate about doing business. Many people only see the money and the success of big entrepreneurs. Few see the whole obstacle course, the problems and the sleepless nights the entrepreneur had to go through before succeeding.
Still, passion for what you do will give you strength along the entrepreneurial journey.
7. How do you know what kind of business would suit you best?
When we’re choosing a profession or a business, above all we need to be clear that we’re doing what we want to do, what we enjoy. Otherwise it makes no sense. In the same way, when thinking about a business:
A) It’s not enough to be passionate about it. You also need to be good at what you do.
B) What you offer must have a broad market.
C) And people must be willing to pay the price of whatever it is you sell.
8. Although you can always turn to brainstorming
9. Validate your business idea
Do this simple exercise to validate your business idea in under five minutes. You’ll get a sense of how easy or hard the start of your company will be, and all you need to find out is a pen and paper.
Money when starting a new business
Once we’re clear on the problem, the solution and even the strategy, we reach the “Oh, crap!” moment: you don’t have the money to start the business.
10. Start the business now
Do it now, straight away, or excuses will keep pushing back the start. Begin taking the steps you can take without investing. Here we explain how to start a business with no money.
11. Looking for funding?
Don’t waste too much time looking for funding when you don’t have a company yet, especially if all you have is an idea or a project you don’t know will work. Remember that raising money is much easier when you go to investors with something already built, rather than just a project in your head.
That on its own is worth zero.
These are some of the companies now valued in the millions that started with no money at all and managed to grow solidly. Altucher explains how they did it. For some people, a lack of money to start a business is more an excuse than a problem. You don’t need it.
12. As a rule, you don’t need a partner to start a business
Think about whether you really need a partner, but remember that entrepreneurs often look for a partner to share their fears rather than because they need one. In other words, they feel less alone on the journey if someone else is taking the risk alongside them.
Although partners usually aren’t needed at the start, in some cases they are essential. We look for a partner to create synergies and complement us. Here are ten tips to avoid some mistakes when choosing your business partner.
13. Starting out probably won’t be fun
Remember that starting a new business probably won’t be fun at first, so you need to be mentally and emotionally prepared for difficulties and stress you can’t even imagine right now. Always keep in mind the secret price of starting your own business.
14. What mistakes did other entrepreneurs make?
Others have chosen this path before you, and they made mistakes you can learn from and avoid.
Avoid the mistakes other entrepreneurs made at the start, which you’ll probably make even knowing about them. Likewise, always bear in mind the main reasons small businesses fail.
15. Use the customer
Focus on the customer from day one. A happy customer will be your greatest source of motivation, while an unhappy customer will be your greatest source of learning.
16. Focus on being profitable
Forget the previous point. Focus on being profitable. If you have to lose money to keep a customer happy, that’s bad business. Make sure you have the right profit margins.
Products are often sold below the profit threshold a business needs to survive.
Obviously, companies like that don’t usually stay open for long, and it’s a more common mistake than people think.
But don’t be too greedy in trying to squeeze the maximum profit out of your products or services.
17. Read this article
Recommended: The 32 rules for being a successful entrepreneur.
Featured image: Julia de Boer / The Next Web, CC BY-SA 2.0, via Wikimedia Commons.
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