First Steps in Starting a Business
Many people find themselves intimidated by the most basic, foundational business things. And by “most basic, foundational things,” I mean things like, “where do you even start?”, “ what do you need to begin?”.
Ready to dive right into one of my favorite subjects? How to start a business!
Let’s take a look at those important first steps
Many people find themselves intimidated by the most basic, foundational business things. And by “most basic, foundational things,” I mean things like, “where do you even start?” or“ what do you need to begin?”.
When you're thinking of starting a business and trying to figure these things out on your own, it's often tempting to just go ahead and start by establishing an entity of some sort; whether it's filing an LLC, or corporation, or whatever. Oftentimes, folks think that's the first step. In reality, it's like the 10th step.
Before you actually create an entity
Before you ever file an LLC, there are many different things that should be done that are much more important. These things are often overlooked because they were not done in the proper order. So today, I want to go over some of those steps.
Determining your direction
There are actually a couple of options that you've got, the reason being; oftentimes, depending on your situation, that first step can be slightly different.
For example, if you're just starting a business from scratch and are just looking to test the waters and see how it goes, because of current demand for your product or service; then you wouldn't necessarily hire an attorney, for example, or hire an accountant, before you even begin your business. However, if you're starting a franchise opportunity, for example, you decide to open a fast-food chain, in that case, you’ll have a few steps you would need to do first.
In that situation, the first thing you would need to do is collect your startup funds to purchase the right to operate, under this business model, under this brand. Often, franchisees have to purchase supplies from the franchisor, as well.
Franchises are certainly an option when looking to start a business. And we're not only talking about fast food. We're also talking about service businesses, like for example, a dance studio. A good friend of mine actually opened a franchised dance studio in my town, about 12 years ago. So, it really is an avenue to consider. It is not always the easiest route, but it's possible to do.
The first steps in a franchise agreement or a franchise setup would be to figure out what the initial costs of the franchise are, what the ongoing costs would be. You’ll also want to be clear on the limitations, restrictions, and pricing within that franchise agreement. I would probably get an attorney to review a franchise agreement so that it's fair to someone who's opening a franchised business. You will most likely need an attorney to do some legal work in the form of a contract, and you will most likely need a pretty hefty sum of money, for the startup costs.
Patented product or process
Another situation that you can have is, for example, when you’ve got a patented product or process. In those cases, you will, most likely, need an attorney in the beginning. And that attorney would potentially prepare applications for a patent. In that case, your first step would probably be looking into how much that attorney would cost. What would that look like? How much time would it take them or protections provided?
Business is personal
I believe that business is personal. Whatever we do, whatever we create, we must always have our personal financials, our lifestyle, our desires, and our dreams in mind. So, what do we do if we want to create something that could support our life and dreams, so we can do whatever it is we aspire for?
Small business, bold dreams
So, what about your typical small business, like, a “mom and pop shop”, a little flower shop, maybe a liquor store, a freelance designer/marketing advisor... the guys who are just starting out. The ones who don’t really have a lot of capital necessarily available to invest in the business.
Where I advise my clients to start with is making sure that they understand the business model of the business that they're trying to start. A lot of entrepreneurs I found actually skipped that step because they are so wrapped up in the big vision.
Mindset is KEY
Right now, I want to focus on giving you a mindset shift a little bit, when it comes to thinking about and making plans for your business.
Let’s shift away from the traditional process, and let’s avoid focusing on things like, the name, the type of entity, or tiny details that can be figured out later. Let’s focus on the main stuff. The foundational stuff.
Make sure that your business model is solid, that you understand what your cash flow will look like. Meaning, how much money is going to be coming in, and how much money is coming, going to be coming out every day, every week, every month, every year?
This applies equally to franchises. It applies equally to potentially high, capital requirements. Businesses like opening up a physical store, or renovating one. Cash flow applies to every single business that someone can start, so my suggestion would be to really start with understanding it.
Who will be my customer/client?
Okay, so, I am sure you’ve already asked some of these questions to yourself like, “how am I going to make money?” or “who is going to buy from me?”. Maybe it's a certain group of people (like some who are pregnant or breastfeeding).
Start by exploring where they are in their journey. What do they need? What do they struggle with? What is their pain point? Figuring out those answers will help bring you a lot of clarity.
Maybe your customer is an earlier version of yourself. Maybe your customer is someone you've grown up next to or someone you never want to be. You have to understand why that person will buy and why they need YOU. How are you different?
Different doesn’t have to mean cheaper
Being different doesn’t necessarily have to mean being cheaper, but that you have a different perspective and deeper understanding of their needs. Whether you are going to be the cheapest person on the block you still are going to need to differentiate yourself on value.
Remember that Apple doesn't care what other people, other companies, sell their computers for. Computers, tablets, cameras, telephones, whatever; they set their own stage. They set their own rules. And so similarly, you need to be crystal clear on what your business is going to be like.
Having a solid business model is critical as a starting point of anyone who's starting a business, so don't get focused or hung up on “what entity should I be?” That’s often too premature of a question. First, figure out who's going to buy from you, and why. Can you make money in perpetuity, a quick jump, and then plateau? Or worse, a declining hill. You’ll know the answers and have a stronger foundation when you get crystal clear on the who, what, why, and how of your business.
Hope I gave you some food for thought, and if you'd like, jot your answers down on a piece of paper. Maybe your journal and you can also share an email with me at Tatiana@tatianatsoir.com
Check out the full episode at https://www.talktotatiana.tv/firststeptobiz