20 min read
Jan 20, 2021
Tech 101

How To Start a Business From Scratch in 9 Steps

If you’ve ever wondered how to start a business from scratch, we’ve got you covered. Follow these nine steps to get started on the entrepreneurial journey.

C.C.
Collin CoueySenior Content Writer

Building a business from scratch takes time, effort, and a lot of planning, but if you have a clear vision and the right tools for the job, you’ll be able to live your best entrepreneurial life.

You might have a great idea for a product or business without having a clue how to make your business idea a reality. If you’re struggling with first steps as a new entrepreneur, don’t worry—we’ve got you covered with this guide. From idea to launch, we’ve provided you with a checklist of nine important things you need to have in place before you start your business.

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1. Have a clear vision

Chances are you already have a pretty good business idea if you’ve been thinking about starting a business from scratch. But having a good idea isn’t enough. It might sound obvious, but you need a clear vision about your business that goes beyond just your idea. Thinking about your vision isn’t as tangible as writing a business plan, but it’s an important first step to take when beginning your business. Think past just your product or initial idea and plan out your long term goals.

If you’re struggling with what your vision might be, here are some questions to help get you started:  

  • Are you going to be a small business, or do you plan on expanding and growing larger?

  • Where do you envision your business long term? 

  • What is the gap that your business is filling? 

  • What is your company’s purpose? 

If you can’t immediately answer these questions, take the time to sit down and think about what long-term success means for you and your business and then write it down in order to refer back to it as your business grows. Getting a handle on the high-level aspects of your business this early will put you ahead of the curve when it comes to the next steps you’ll need to take.

Recommendation

Once you can answer these questions, meet up with a friend and give them a 2-minute breakdown of what you think your business will become. Think of this as your elevator pitch.

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2. Research your market

You’ve got your business idea. You understand what long-term success looks like. Now it’s time to figure out if your idea is going to resonate with your target market—this means doing market research. 

It might seem complicated, but it’s actually pretty easy to get a base-level understanding of your potential customers and see if what you’re planning will make an impact.

Survey potential customers

One of the easiest ways to do this is to reach out to your potential customers and ask them point blank: “Do you need this thing I’m trying to sell?” 

If they don’t, dig deeper and find out what they do need. If it’s related to your original product idea, make tweaks during this stage of the process to meet that need. After all, starting a successful business is all about finding a gap in the market and filling it.

Leverage your community and friends here. Use them to test out any early versions of your product, idea, or service and get honest feedback. If you start gathering community feedback early, you’ll have an advantage when you launch since you’ll know what’s most important to your primary audience.

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Use survey software to develop and distribute these questionnaires to your network for easy access to customer data.

Perform a SWOT analysis 

This is also a good time to do a SWOT analysis. A SWOT analysis is a framework which allows you to analyze any strengths, weaknesses, opportunities, and threats. Basically, it will help you build on what you do best, fix what you might be doing wrong, reduce risk, and improve your overall chances of success. 

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Read more information about SWOT analysis including what one might look like here.

Calculate market demand

Another useful part of the market research process is to calculate market demand. At its simplest, market demand is how much consumers want your product over a period of time. You can figure it out based on a few factors: the number of people looking for a product similar to yours, how much the typical customer is paying for the product, and how much of the product is available. 

Other ways to do market research exist, but it all depends on the scope and scale of your business.

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3. Write a business plan

Writing a business plan is where a lot of new business ideas go to die. We get it. It can be stressful and daunting to sit down and write a business plan, but we can’t stress how important it is for the success of any new business.

The benefits of writing a complete, comprehensive business plan will pay dividends for you when starting a business from scratch:

  • You’ll have a better idea if your business has a chance of making money.

  • You can calculate start-up costs and finance concerns which will help convince investors to help fund your business.

  • You’ll have a revenue estimate because of your market analysis. 

  • You’ll spot potential problems you can solve before you invest capital which could lead to disaster down the road.

We’re not going to spend a lot of time telling you how to write a business plan because there are dozens and dozens of free sources out there that can do a more thorough job, but here are the basic things you should include in your business plan:

  • Executive summary: This is a one-page summary of your entire plan. Think of this as an elevator pitch that you can hand someone to see if they’re interested in your business. Write this part last, once you have the rest of it fleshed out, because you’ll have a more complete idea of your business by then.  

  • Company overview: This is where you’ll include things like business structure, business model, business vision, and mission statement. 

  • Market analysis: Luckily you’ve already done some market research, so this should be a piece of cake. Include things like estimated market size, market demand, and SWOT analysis here. 

  • Products and services: Make your sales pitch about your product here. What product or service are you going to feature and promote? 

  • Marketing plan:  Clarify how you plan on getting the word out to your target customers here. What are your top priorities? How are you planning to market your product or service? 

  • Logistics and operations plan: Lay out everything that you need in order to accomplish that task here. How are you planning on getting your product or service in the hands of your customers? 

  • Financial plan: Use your market research to plan out your startup expenses. You’ll need to have a few things hammered out here: an income statement, a balance sheet, and a cash-flow statement. Without having these laid out, you’ll struggle finding investors. 

You don’t need to worry about getting things perfect. It’s easy to get caught up in tiny, unimportant details instead of actually getting things rolling. What’s most important is that you’ve thought through every step of your business plan and have something to refer back to. 

And you should refer to it often. Don’t think of your business plan as a static document. You should revisit it annually or semi-annually to make adjustments or to make sure you’re still on track.

Recommendation

We’ve developed a useful template for writing a business plan for eCommerce businesses, so if selling online is something you’re intending to do, take a look.

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4. Figure out finances

Now it's time to show this business plan to potential investors in order to secure your startup capital. 

First things first: Figure out your cash flow. Several options are available:

  • Family

  • The government

  • A bank

  • Crowdsourcing

  • Angel investors

  • Venture capitalists

If you have a solid idea and will fill a market demand, there are plenty of places you can secure funding to start your business. You’ll make your business more marketable to investors if you’ve spent the time to figure out upfront costs and projected profits so that your investors can feel confident they’re going to see a return. 

Some businesses can start without much capital. If you’re an online business that’s selling your own handmade products out of your home or a small office space, you won’t need to worry as much about a storefront or inventory costs. 

On the other hand, if you’re a restaurant, you’ll need to find a space, outfit it with new furniture and equipment, and have a clear idea of inventory costs, hiring needs, leasing agreements, etc. It's critical to have all of that hammered out before you approach investors. 

Whatever the specific case for your business, it’s crucial you have a clear idea about every expense you’ll have to get your business off the ground.

Recommendation

You should have a solid handle on your bookkeeping and accounting as soon as you begin thinking about spending money. If you aren’t an accounting professional and don’t have access to one, a good alternative is to invest in some solid finance and accounting software

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5. Take care of licenses and government certifications

The last thing you want to happen to your new business is to run into any legal hiccups, so research what licenses and government regulations you need to comply with in order to operate. 

Look up local, state, and federal laws that regulate your specific industry. These will change depending on which city, state, or country you’re in, so it’s important to look at your government websites for the right documents. 

If you’re completely lost when it comes to this, consider consulting a lawyer who specializes in the field. You’ll save yourself legal trouble down the road if you invest the time and money here.

In general, you need to take care of a few things to get started:

  • Register your new business with the government

  • Obtain any business license or permits necessary to run your business

  • Obtain a tax ID

To help make taxes easier, open a business bank account that's separate from your personal account.

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6. Determine if you need a physical location

By the time you’re scouting locations, you should have a concrete handle on your business plan. The last thing you want to do is sign a lease without knowing how you’re going to finance your inventory or get the funds to remodel your retail or restaurant space. 

The type of location you need depends on your business and the market demand for your product or serviceIf you rent out a huge space downtown but are planning on selling automotive parts, you’re probably going to have a hard time because the demand for that product isn’t high in that area. 

This is why market research is crucial before you get to this stage. You know what gap your product or service is going to fill, so find a location that is missing your product or service and scout there. 

It’s also important to understand that not all businesses need a location. Many businesses have found success with a completely remote team that can occasionally rent temporary office spaces for important meetings. It’s true that having a concrete location can lend you some credibility, but if you’re operating almost entirely online, it’s worth considering forgoing a lease in order to spend in more important areas. 

Recommendation

If you do plan to go with a remote team, compare and read reviews about different remote work software.

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7. Fill in your knowledge gaps with talent or software

Your job as the business owner is to make sure every aspect of your new business is handled properly. You’ll initially be spinning a lot of plates without help, so it’s important to take note of any gaps you might have and fill those with people you can trust.

In general, you need a team with a solid understanding of accounting, marketing, design, and shipping (if applicable to your business).

You can hire full-time staff members to help fill those needs, but that can quickly become expensive for a new small business. If the budget is tight, software or other online tools can help fill those gaps.

Whether you’re hiring a full team or not, recognizing any gaps you might have and filling them with either employees or digital tools is important when starting and growing your business.

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8. Develop your brand and begin marketing

Your website, social media presence, logo, and store design will all matter in attracting customers, no matter what your product or service is. Once you’ve got your customers’ attention, you can focus on selling them your amazing product or service—but you first have to make sure they know who you are.

In order to do this successfully, research and understand what other businesses in your industry are doing. Spend some time looking at the top names in your market to find inspiration. If you’re a small business, look at other successful small businesses in your field instead of juggernauts such as Apple or Google. They’re so big that they can succeed using different marketing strategies that might not necessarily work for you.

If you aren’t confident in your design and marketing abilities, consider finding outside help either by utilizing software, outsourcing it to another company, or hiring someone to be your full-time brand and marketing director. 

Whether you plan on doing it yourself or hiring someone to help, it’s important to understand the different tools out there that can help you succeed:

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9. Launch your business

Finally, it’s time to figure out your launch details, such as getting the word out about your new business. You can do that in a few ways:

  • Leverage your network. You have friends who have friends. You’d be surprised how much word-of-mouth you can generate by having a few enthusiastic friends help spread the word. And this method is totally free, so it should be a no-brainer.

  • Offer discounts at first. Offer an incentive for early adopters or customers so you build a strong customer base right off the bat. 

  • Run some paid advertisements. Paid ads are an extremely effective way to get your name out to your target audience, even if your budget is tiny. The earlier you’re able to start testing and utilizing paid ads, the better you’ll get at reaching your ideal audience.

  • Collect feedback early. Use early reviews and solicit feedback directly from your early customers so that you can quickly upgrade your customer service to meet customer needs.  

It’s important to have a strong start in order to generate word-of-mouth as quickly as possible. This is where having great branding and design will help you out. People will be more likely to remember you and recommend you to others if you make a strong first impression.

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You’ve got this

It’s important to note that this is a general guide. Think of it as a starting point that covers the most important things to consider when starting a business.

Becoming a successful entrepreneur and starting a business from scratch is certainly not going to be easy, but if you have a great vision, good ideas, and helpful resources like this guide, you’ll be well on your way. 

If you need any help determining which software solutions might be best for your new small business, you can always compare different options, read real user reviews, and see detailed feature lists for thousands of different types of software at GetApp.

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