By the time you read the title of this article, 80 new startups will have commenced operations. There has never been a better time for entrepreneurs than today. It is estimated[i] that every day 137,000 new businesses commence operations. A startup business is a new business venture that focuses on growth. Traditional businesses have always focused more on profit. Startups prefer growth that over time lead to profits. Starting a startup has never been as easy as it is today.
Governments across the world are encouraging startups as they contribute to the economic growth of the country and also create employment opportunities. Getting funds for a startup is easier thanks to the advent of venture funding. However, you must be aware of a startling statistic[ii]. 75% of all venture-backed startups fail. In fact, 50% of all new businesses that start in the US fail within five years. No market need for the product, shortage of cash, and not having a good team are some of the top reasons[iii] why businesses fail.
If you want to start a startup, your starting point can be to understand why startups fail. Once you understand that, you can ensure you don’t commit the same mistakes and can start a successful startup. Lack of planning, not having a business model are common mistakes new startups make. These are critical issues for the success of a startup. Keeping all these in mind, here’s you can start a startup that can be successful.
- Have a workable idea
The starting point of a new business or any innovation is an idea. This is something new that you have to offer to the world. There have been many instances of successful ideas not taking off because of poor backing. Today, the culture of promoting startups has ensured that if you have a good business idea, you can convert it into a business opportunity. However, the idea alone is not sufficient. It needs to be a workable idea that has a demand in the market.
42% startups fail because there was no market demand for their idea. An idea needs to be worked on to convert it into a product or service for which there is market demand. This is what you need to do first before you start a startup. Create a workable idea that people would like and would be willing to spend money on.
- Create a business model and write a business plan
A well-defined business plan that outlines your business model can be the difference between success and failure. A study[iv] showed that a business that had a well-defined business plan was twice as likely to succeed as one that didn’t have such a plan. A business plan is not just a document, but is the design and model of your startup. You need to have a business model that can earn you revenue. For this, you need to work out two things:
- Cost: You need to estimate at an early stage the cost involved in a startup. You need to invest in infrastructure, facilities, and people. There are running costs involved. All these need to be carefully factored. This is a very important aspect that you need to focus on. A lot of work is needed to make a proper estimation of all your costs. A wrong estimate can affect your profitability at a future stage. Therefore, determining expenses is a very important activity.
- Price: Once you work out your costs, then you can decide the price of your product. However, pricing need not be related to costs. You can price your product low initially to get more business. It all depends on the market and how much people are ready to pay for a new product. This requires a market study that is vital for the success of a startup.
Once you develop your business model, you can create a business plan that outlines everything about your startup. The business plan can help you get funds for your business easily.
- Get funds
To start a startup, you need funds. Depending on the kind of product you are planning, you may need a little money or a lot of it. If you have money, then you can skip this step, else this step is critical for your new venture. A good idea can get you funds easily. If you have created a good business plan and are confident of presenting your business idea, you can get funds easily.
Venture capitalists, Angel investors, and crowd funding avenues are available for new startups. This is apart from traditional sources of funding like banks, and borrowing from family and friends. You can get funds for your business if the investor is convinced your idea will work. So,you need to work on a sales pitch to promote your startup to investors. It can help you get funds for your startup and you can use the same sales pitch to acquire customers later.
- Register your startup
Once your funds are arranged, you can start the startup by registering it. Decide on a suitable name for your business. You can run your startup all by yourself as a proprietorship concern. You can involve partners who can contribute to your startup’s growth. You can register as an LLC, S Corporation, or as a Corporation. You can take the help of an accountant to decide the best form of registering your company. You may also need approvals or licenses from local governing bodies like city councils. Make sure you complete all legal formalities.
- Start the Startup
Once the formalities are completed, go ahead and start your startup. Just before you start, you need to ensure the following:
- Create a team of competent and committed employees.
- Establish an office and get all the resources you need – facilities, equipment, materials, etc.
- Launchyour marketing campaign to start acquiring customers
- Develop a website for your company
Starting a startup is easy today, but converting it to a successful venture is possible only through proper planning.