Tuesday, May 24, 2022

How to Start a Business - The Ultimate Guide

If you have ever wanted to start a business, home business, startup or online business you can follow these steps.

My name is Ben Waldeck. I have owned and managed successful businesses and helped others to start their own businesses.  I have also provided legal advice to many business owners.

This article summarises the lessons that I have learned over the last 15 years.

The goal of this article is to explain the critical elements of what is required to start a business. So please take the time to read this article, as it will greatly increase your chances of starting a business that will succeed.

So You Want to Know How to Start a Business?

The failure rate for starting a business is relatively high.  However, I believe these statistics can be significantly reduced if the steps (covered below) are taken by budding entrepreneurs.

The Most Important Business Advice Ever

If you have an idea and want to start a business, you will need to pay close attention because you are at the stage where most people get it wrong.

WARNING:

One of the biggest areas where businesses fail, especially with unique business ideas, is that they create a product or service that nobody wants. In other words, there’s no market need for their product or service.

Entrepreneurs at the ‘idea stage’ usually believe that everyone will love their future product or service, as much as they do. Unfortunately, the truth is that friends and family often support these ideas to the detriment of the budding business owner.

If people who wish to start a business spent more time performing marketing research, their chances of success would dramatically increase.

Vitamins vs Painkillers

Time to go deep.

The big lesson in business is that the bigger the problem you solve the more you will get paid to solve it.

This is what most people miss and it’s so crucial and so simple that it simply must not be overlooked before starting a business. I recommend going to business and providing product service that people not only want but need.

Ideally, you should make sure that your target audience has an urgent need to fix a problem, that they are willing to pay good money to fix it. People often create products that are ‘nice to have’ products. These are the types of products that their target customer may put off purchasing, as there is no immediate need.

You should ask yourself or whether you are selling vitamins or painkillers. You see, vitamins are products or solutions that help maintain health, however, most people put off buying them because there’s no immediate need (health concern) to purchase them.

On the other hand, people will need to buy painkillers immediately. For example, if you have a migraine, how quickly will you hand over the cash for those pain relief tablets? If you are anything like me, probably right away! And you will be far less concerned of the price – because the immediate need is far greater.

If are you are considering selling a product or service I highly recommend selling painkillers over vitamins.

Market Research

Before performing market research, you can think of yourself as a ‘problem seeker’. That is; you look for an opportunity (problem to be solved) in the market. Being a problem seeker is often the best way to find new business ideas.

Being a Problem Seeker

How do you find a problem in the market?

There is no easy way.  You must speak with people in the industry and ask them. You can do this by connecting with them through LinkedIn and asking them if you they could spare 15 minutes for a phone chat.  On the call, you can ask your target market questions like “what is the biggest frustration in your business?” “How much would you pay to fix it?”. Ask numerous “why” questions to uncover their emotions that are connected to the problem.  For example, “Why is that a big frustration for you?”.

What if You Already Have a Business Idea?

On the other hand, if you have a business idea, you must define your hypothesis.  For example, if you want to start a food delivery business your hypothesis would be that people in your area will pay you to have food delivered, instead of Menulog.

You should analyse your hypothesis by determining what people would like home delivery of food? what type of food do they want? why will they pay for your service (over a competitor)? and how much will they pay you?

To answer the above questions and many others, you will need to perform market research to see if the business is viable.

Additionally, once you establish a market need exists you should also make sure that audience has the money to pay for the solution. It may seem harsh but you should ensure that you’re not selling to an audience of broke people.

The initial steps to avoid your business from early failure is to perform Market research to find out whether there is a demand for your product, whether people are willing and able to pay and importantly, who your target audience is.

Demographics

To understand your audience better, you will need to research their demographics and psychographics. Demographics are people’s attributes such as their age, where they live and their income.

Psychographics

Psychographics refer to people’s beliefs, thoughts and stance on particular issues. For example, if your target market is yoga enthusiasts, you may learn that audience’s belief balance is the key to life. Perhaps your target audience is teachers. In that case, they may hold strong beliefs about gaining a traditional education.

Customer Avatar

Once you understand the deographics and psychographics, you should create a customer Avatar that is an actual image of your ideal client. Your customer avatar will be a product of your market research. Don’t worry too much, it is easy to change your customer avatar at any stage of your business.

However, creating one before you start a business can be very helpful.  You can then search stock photography websites to find an image of what your customer avatar looks like (based on your research) and then print that image and pin it on your office wall, or save it to your computer’s desktop.

All marketing, business material and other communication should be written as if you are writing to this person. This makes it easier to engage with your ideal clients and help you to understand exactly who served in your business.

The Secret Market Research Step!

Almost nobody talks about this. My mind boggles that people skip this step. If you want to start a business, then you must talk to people before you start. You need to confirm your hypothesis and that your target market will purchase your product or service.

Even if you are selling something that’s already in the market and others are selling you still must take this step it’s that crucial because you must understand why it is selling and why it is important to the customer. Believe me, you must do this part. If you’re not willing to do this part then don’t continue any further in business. I don’t feel like I can’t stress this enough.

Now that you have your hypothesis and have researched your target market you need to call them up to arrange to speak with them. You need to ask the right questions about what their thoughts are about the product or service you want to sell. You should also ask them what problems have had in the past or other things that may prevent them from buying your product or service.

Remember this stage you’re not selling them anything – you’re merely asking questions to find out who they are, what they want, their fears, and to otherwise validate your hypothesis.

This will be the best market research step of all.

Creating Your Offer

Once you have spoken to people in your target audiences and understand exactly what they want you may move to the next stage which is creating your offer. Your offer should be compelling and should address the concerns.

Validating Your Business Idea

Once you complete your offer, you should return to the people who said they would pay for the solution to their problem and tell them you have solved the problem and ask them for an order.

You must have a proof of concept, meaning that you should be able to demonstrate that you have solved the problem.  You can do this by preparing a slide show demonstration.

Creating a Business Plan

Business plans are boring long-winded documents no one really cares about when starting a business. So should you do one? Well yes and no. I’ve got a great way to do a simple business plan that you will actually use and it gets to the point. You don’t really need a long business plan unless you are raising capital or you require a loan to start your business.

Instead, you should use the Lean Canvas, which is a business plan that you can put on one page. To read how the Lean Canvas works read our article: The Ultimate Guide of How to Write a Business Plan Fast!

Branding

Before you get started with the visual branding components such as logo stationery business cards etc, it is important to first understand and clarify your message and who your brand is targeted towards. A brand is how people view your business. A brand is more than just a logo.

A brand should also communicate the values, beliefs and goals of your business. In other words, a brand should represent and evoke an identity. Jeff Bezos, the founder of Amazon, advises “Your brand is what other people say about you when you’re not in the room”.

A brand is important because people look for brand values and identities similar traits that they have themselves for example a brand is trustworthy and family-focused, and who communicates that in the brand Communications will not only be able to sell it to that target market more easily but they also want to attract employees who also want to join their cause.

When you are developing your brand for your new business but you want to start, consider how you would like to be perceived in the market and also consider how your branding will separate you from your competition. Ultimately, it’s necessary to develop a brand that connects with the audience and build trust with them.

Your Unique Value Proposition

A unique value proposition is an important component of branding. Your UVP should be a short sentence that describes what your business does, for whom, and the value that your business provides.  This should be followed by a small statement that describes how your business is different from the competition.

A great unique value proposition could be something like this: “We provide Thermal clothing for campers so they can stay warm. Unlike our competition, we guarantee our product for 5 years.” Remember unique value proposition doesn’t have to be public can be public if you wish.  Dominos made their UVP public when they released the “Pizza in 30 Minutes or it’s Free”.

Yes, I know that it was arguable that was just a promotion, however, even if it was, there is a lesson that you can even use unique value propositions in your promotions. The important part is to identify what makes you unique, how you provide value and who you provide that value to. Remember, just like the business model canvas, simplicity is the key. We will be bringing you the rest of this article soon.

Creating a Free Business Website

I highly recommend using WordPress.  There is not much you cannot do with WordPress. That is why it is the world’s most popular website platform. According to research by W3Techs, WordPress is used by 65.1% of all the websites whose content management system we know. This is 43.0% of all websites. The great thing about WordPress is that it is extendable. Oh yeh, it’s also free, which also makes it very attractive.

Choose Your WordPress Theme

What makes WordPress even better is the professional themes that you can buy for next to nothing.  We purchased this them, Newspaper by Tagdiv for around USD $60.  We really like it because it is really fast to load and the way that the theme is structured, makes it uniform in its appearance, which I think it makes the website look very professional.

Honestly though, I don’t think this would be a good theme for beginners who don’t want to pay web designers to update their site.  I mean you’ll get used to using it, but there is a bit of a learning curve in my opinion. If you are getting started you could check out Astra.

The reason why I have recommended these is because they are well known to have nice themes that are ready to go and they load super-fast.  Page speed loading is something that you should take very seriously because it helps with user experience. There was a statistic that was reverberating around the internet a few years ago, that about 80% of visitors will leave a website fi it doesn’t load withing 3 or 5 seconds.

Don’t quote me on that, visitors may leave in less time than that these days.  I know I am impatient with slow loading websites.  Page loading speed is also critical on both mobile and desktop browsers. If you want to check out how fast your website loads, Google’s Page Speed Insights allows you to test the speed of your website on both desktop and mobile.

Business Website Hosting

Hosting is critical and is often understood.  It is really tempting to settle for cheap hosting as there is plenty of it.  Quite frankly, cheap hosting’s sales tactics remind me of used car salesmen in the 1980’s. Also, when you look closely, their offers are at the cheap prices if you take them over 3 or 5 years.  By that time, you realise that they are probably not the best choice.

The point is that cheap hosting can cost you in the long run. Often this type of hosting can be shared, which means the servers are often overloaded with low quality (and sometimes offensive) websites.  The worst thing is that these poor sites are often sharing the same IP address as your business!  No thank you.

That significantly reduces your chances of ranking in the Google search engine results.  Cheap hosting also often results in a slow website, which can also indicate to Google that your site is a pile of junk (even though it may not be!).

But it’s not just Google who hates cheap web hosting – your website visitors will not wait for a frustratingly slow website.  In fact, approximately 70% of website visitors will leave a website if it does not load within 5 seconds.  That is an old statistic too.  I would imagine that would be far less in 2022. So, there are many reasons why you should have a quality web hosting.

They have sufficient resources which means your site will load quickly, keeping your customers and Google very happy! For the best premium WordPress Hosting, I recommend Kinsta.  I have written a long review here about why you should consider this host.  If you are starting out or in growth phase, I recommend WPX Hosting as it is the best WordPress hosting at the mid-level range.  We use and love WPX Hosting on this site and it has been great.

Choosing a Business Structure

Sole Trader

The easiest and most inexpensive way to get started is as a sole trader.  However, it does come with risks.  For example, as a sole trader, the liability of the business rests with you.  The debts of the business are also your personal debts.  Therefore, if your business goes broke, so can you.

Company

A company has extra set-up and ongoing costs, however, there are many benefits of running a business as a company.  Firstly, it provides your personal protection.  If someone sues your business, oftentimes, it won’t mean that you are being sued personally.

Additionally, there are tax benefits for operating as a company, that you would not be entitled to. Further, if you are seeking investors, now or in the future, companies are ideal because companies are comprised of shares, which can be sold to investors.  Getting an investment as a sole trader will never happen.

As companies are separate legal entities, if your company goes broke and owes a lot of money, then generally you will not be liable.  That is subject to any personal guarantees that you give, for leases and equipment, for example.

Accounting & Tax

I recommend engaging a bookkeeper and accountant as soon as possible.  The bookkeeper will do the weekly figures and pay taxes that are required from time to time.  For example, GST (in Australia) or VAT (in UK and Europe).  An accountant will help you with structure in respect of your current personal financial situation.

They will also do tax statements at the end of the financial year and help you to plan for business growth.  You should ask your accountant to take care of registering for tax. The earlier you engage these professionals, the better.  They will help you set up your financial accounting systems so you can get into good habits early in your business, when the business will be less busy.

Legal Documents When Starting a Business

There are a number of legal agreements that you require when starting a business.  Avoid using templates that you can find on the internet.  I have seen people use these and have lost control of their business as a result, literally.

Shareholders’ Agreement

Shareholders’ Agreement is a contract between shareholders that sets out how the company must operate.  This agreement will provide who has the voting power, who has rights in respect of running the company and other things such as the process if one shareholder wants to sell their shares.  The shareholders’ agreement will also describe the dispute resolution process of there is a dispute between shareholders.

Employment Agreement

Employment agreements are fairly self-explanatory.  They set out the terms under which the employees agree to be employed.  Employment contracts often include employers’ workplace policies.  For example, technology device policies, the social media policies,  work from home policies, and cyber security policies, etcetera.  Policies are not as fixed as the terms of a contract because they can be amended from time to time.  Policies are generally for setting standards.

Services Agreement

If you are selling services, you will need to have a services agreement that sets out the terms and conditions upon which you are providing the services.  This agreement will also specify payment terms, and the rights of the parties. Businesses should also add the warranties that they provide with services and how the agreement may be terminated.

The services agreement will vary, depending on which services you provide.  For example, a services agreement for a public relations firm will be different to a services agreement for a cleaning company.

Website Terms & Conditions Agreement

Websites terms and conditions are similar to the services agreement.  However, they may be different where you are selling products (and not providing services).

The terms and conditions can refer to, and import policies such as the shipping policy and the refund policy. When making the website agreements, business owners must ensure that they are compliant with the consumer laws of their country if they are selling to the consumer market.

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