There are thousands of viable business ideas out there, and while identifying the idea right for you is a critical first step – that’s all it is – a first step. Once you have your idea, that is when the real work begins. The fact is, most businesses fail before they even start. A great idea is only good if the right person brings the idea into reality. That said, here is some good news: According to the Bureau of Labor Statistics,
“About half of all new establishments survive five years or more..”
There is a commonly held belief that less than 1 in 10 businesses survive their first five years in business. This simply isn’t true. If you are willing to invest the time and energy into researching, planning, and investing in your idea, you can maximize your chances of success and build your road to financial independence. Here are the high level steps you will need to follow in order to turn your idea into a viable business -
Phase 1 – Initiation
In this phase, you will identify if your idea really has merit in the business world. You will invest more time here than money, and the key is to determine if your idea will be profitable before you invest too much money in it. The ultimate goal of the initiation phase is to reduce your personal risk as much as possible.
- Conduct Market Research: You can do this yourself or hire a company to do it for you. Essentially, you want to know if people will be willing to pay you for your idea / service / product. The only way to know that, frankly, is to ask. I’ve found that one of the best online resources available for market research is GreenBook.org, but there are many other resources available.
- Identify Your Target Demographic: Know who you’re selling to and target your market research to that audience. If you have a talent for developing mobile apps and you want to know if people would be willing to pay you for that service, you will need to target your research to businesses who are offering services or products that would benefit from the use of a mobile app.
- Conduct a Cost Analysis: Businesses require money to launch. There is no way around it. How much money depends on the business itself. You need to determine how much money you need to open your business and whether or not you will be willing to invest that money. The fact is, few people have the personal funds available to startup their own company, but that does not mean that they should let that get in their way. There are plenty of companies and resources available that are willing to help you get the funding you need to open your doors. You simply need to have a solid business plan, good credit, and in most cases, collateral. The Small Business Association (SBA) is a great place to start exploring your options.
Phase 2 – Plan
In order to ensure that your business has the greatest chance at success, you need to create a solid business plan and follow it. The vast majority of businesses that fail in their first year, probably do not have a solid business plan. Operating a business without a plan is a lot like driving a car with a blind fold on. You will not be able to see where you’re going or how to get there.
A solid business plan consists of the following basic components:
- Executive Summary: A summary of your business objectives, mission statement, and the components necessary for success.
- Operational Plan: This section will describe company type, ownership, hours of operation, service or product description, a list of suppliers, management descriptions, and locations.
- Marketing Plan: Here you will include the results of your market research and describe your strategy for obtaining customers. Marketing plans should include both online marketing and standard advertising strategies, a defined budget, a competitive analysis, and a results analysis. Your marketing strategy will be a work in progress and will become more effective over time as you determine what the most successful avenues for marketing are in your niche. Don’t let poor results in the beginning discourage you.
- Financial Plan: In your financial plan you will include a profit and loss statement as well as financial forecasts based on your best educated guess. Completing this section of your business plan will often give you insight you haven’t had before. The key is – be realistic.
The SBA provides a great deal of information on how to write and prepare an effective business plan.
Phase 3 – Execute
You’ve done the market research and created a plan that you feel will yield long term success. Now it’s time to bring the plan to life. Here’s some of the initial steps that should be done prior to opening your doors -
- Obtain your Federal Tax ID number. It is free to obtain one and does not take very long to apply. Do some research ahead of time and know what type of business you plan to register. Each business type has its advantages and disadvantages, and it’s really up to you to understand what type of business will be most beneficial for you. Wikipedia has a great article on the different business types available in the United States.
- Register your business in the state you will be operating in. The best way to find out how to do this online is to visit the SBA website. They have a large amount of information on how to start this process within your own state. Fees vary by state.
- Obtain a business license. There are a variety of licenses and/or permits that you may be required to obtain depending on what type of business you plan to run. Fees vary depending on a number of factors including the city you plan to register in or the type of permit you are looking to obtain.
- Register with the Better Business Bureau (BBB). This is a great resource to get yourself involved in your local community and to start networking with other business owners. It also adds credibility to your brand.