Starting a new Business can be tricky. As if starting a business wasn’t hard enough, COVID-19 made it a little trickier. This is a practical guide on How to Start a New Business in 2020.
So how to start a new business in 2020? How does one start and where? And how do we keep the business running after first opening the doors?
Well, let’s dig in and find out.
1.What are you good at and what are looking for?
“One of the most important of all personal leadership skills is self-awareness”- Robin Sharma
The first step in you might have expected: you have to find out what you’re good at. You can check out this article on self-awareness to find out why it’s so important.
So first ask yourself, what am I good at? What are my skills? Do I have special knowledge or industry insights?
This can be anything. Perhaps you are a great strategist. You can start a consulting company.
Or perhaps you are really good at baking, you can start a pastry. There’s nothing really out of reach in today’s world.
Second, you have to think about why you’re doing this.
Why do you want to start a business? Money? Freedom? Flexibility?
Is this really what’s going to make you happy? Imagine yourself doing this for free, would you still do it? If yes, you’ve found something you love.
And you should go for it.
Answering these questions (and many more you can come up with) will make sure you find out the true intentions and your abilities. This will not ensure you’re going to be successful in your new business, but will give you a great insight into what motivates and inspires you to do this.
After all, the most important thing is that the business matches you and your personal aspirations.
If not, you’re going to be very miserable and end up just doing it for the money.
And believe me, you need more than that to keep going.
There are two ways to find out what industry you’d like to be in. The so-called “Inside-out” approach and the “outside-in” approach.
Check out the infographic below for the differences.
After you’ve identified your skills and reasons for starting a business, you can move to the next step: Research your Industry.
Which brings us to Step 2:
2. Research your Industry
“No Research without action, no Action without Research.” – Kurt Lewin
It’s funny that many people believe that having an idea and dedicated execution results in success. I can’t blame them: it seems as though successful people become successful overnight. Or with risky and bold moves.
What people don’t realize is that these “overnight successes” dedicated thousands of hours in research before making that “bold move”.
Don’t get fooled.
Bill Gates didn’t just make a bold move and started Microsoft. Jeff Bezos didn’t just start Amazon out of his garage and Elon Musk didn’t just jump in the automobile industry.
All of these entrepreneurs spend more time on research than most people in their entire business.
Don’t be mistaken: know your industry and do the research. There’s no way around it. Otherwise you’re building a business nobody wants.
Remember: you can be the best whale oil producer in the world. But the world only consumes so much whale oil. In other words: do the research to prevent yourself from building a business nobody is looking for.
So how do you research your industry?
There are a few things you can try. For example:
- Google Searches
- Speaking to people already in the business. Find them on LinkedIn
- Books related to your industry
- Industry Magazines or news articles
- Statistics. Try a free account on Statista so see your market
3. Find your Target Market
“Understand why you are different and how you help, recognize your target market, and give them something they might not even realize they are missing.” – Chris Murray
Targeting is extremely important. There is an old saying in economics: when you’re targeting everyone, you’re targeting no-one.
Although you should focus a target audience as large as possible, don’t make the mistake to target too much.
The process of finding your target market is called: “Market Analysis”.
Market Analysis can consist of three steps: finding similar needs in your market, the size of your target market and competitor analysis.
First, try to find a target market with similar needs and demands (note that needs are not the same as demand. Needs are basic necessities like food, water and shelter. Demand is a need backed by the ability to pay. For example, the need for Porsche sports cars are way higher than the demand, because not everyone that wants a Porsche can afford one).
Are there demographic or geographical similarities between customers? Can you combine multiple “customer segments” to create a larger target market? Perhaps reports already exist defining your target market (I’m sure there are).
When finding your target market, you should always take into account:
- The size is sufficiently large (is there any money to be made?)
- The growth of the target market (is the market growing or slowing?)
- The similarities of the target market (can I create one product for the entire market? Or do I need variations?)
- The competitors that also target your target market (How strong are my competitors? Can I beat them?)
- The reachability of your target market (Are the customers in reach? Or does it cost a lot to reach them?)
4. Setup your Business
We can keep this relatively short.
When you’ve identified your skills and target market, you need to get legal.
Setting up a business is just an administrative thing that needs to be done. You can check out the US Chamber of Commerce guide on setting up a business here.
As a starting business, you most likely need to start a Sole Proprietorship. However, an LLC (Limited Liability Company) would be recommended. Although this can be more expensive, it’s well worth the money.
An LLC is a separate entity and is legally responsible on its own as a business. So in most cases not the person owning the LLC.
Other things to keep in mind is naming your business. Here’s a great article on naming a business.
But I’d advise you not to waste too much time on naming your business.
There are companies with ridiculous names out there. It’s about the value proposition, not necessarily the name.
5. Create a Business Strategy
“Without a plan, even the most brilliant business can get lost. You need to have goals, create milestones and have a strategy in place to set yourself up for success.” – Yogi Berra
If you are seeking financing, a business plan isn’t just a good idea, it’s mandatory. But even if you’re financing your business yourself, it’s still a good idea to have a strategy in place.
A strategy creates focus. It’s a road map from where you are to where you want to go.
You can write out your plan using various templates. Usually these topics are mentioned in a business plan:
- The Executive Summary
- Target Market
- The Product and/or Service
- Marketing Plan
- Milestones and Metrics
- Company Overview
- Management Team
- Financial Plan
One tip: many people believe investors are looking for a detailed and thorough business plan.
I received my business plan back in 10 minutes from an angel investor saying to me: I’m not going to read a start-up business plan that’s 5000 words long. Make it shorter!
You plan doesn’t need to be 5000 words long. Or 20 pages long.
It needs to be precise, simple and to the point. Nothing in the beginning is set in stone, so it makes no sense to get lost in the details.
Because those are going to change anyway.
Very few business stick to the initial details. So focusing on them can be a waste of time.
While writing your business plan, though, try to make it explicit and precise.
This will help you uncover holes and inaccuracies. Fix those and perhaps retry finding your target market.
Only if everything makes sense, you can call it your finished business plan and your very own official strategy.
6. Do you need any Funding? And how to get it.
Depending on the size of your business and your own goals, you may need some funding.
Usually funding starts with friends and family but you can look outside your circle for financing as well. For example:
- Angel Investors
- Small Business Loans
Angel investors are rich individuals who usually invest between $500-$10,000. Usually, these individuals want a piece of your company. For example 5%.
Some blogs refer to angel investors as “venture capital”. This is not the case. Venture capitalist are large corporations that only invest in companies that already have traction in the market. They usually invest between $1M to hundreds of millions of dollars. This is not similar to angel investors at all, and you should not waste time on contacting VPs, but spend time contacting angel investors instead.
Crowdfunding is extremely efficient in today’s world. You receive the money for a small fee (usually around 15%) and you don’t have to give up any shares of your company.
Although I do not recommend taking loans for starting businesses, if you’re really confident in your concept you can try it out.
Small Business Loans (SBA) can be acquired via your local bank. You need to have a sound business plan (remember, not necessarily a long business plan) and set up an interview. Make sure to dress formally and have answers ready for questions you might think the banker might ask.
Be prepared and don’t be afraid to tell the banker you don’t have all the answers yet. There’s nothing wrong with saying: “That’s a good question, I will sort it out and get back to you with an answer.”
7. Find your Space
To start off: don’t rush. Don’t create unnecessary costs like rent, cars or warehousing.
This all increases your cost price and decreases your margin (bottom line).
When starting a business, you need to be as lean as possible. Stick to the essentials and deliver value.
Sometimes a space is necessary. In this case you ready to find a location, negotiate leases and buy inventory (if applicable).
Your business location will dictate the type of customer you’re going to attract.
A good location doesn’t necessarily mean success, but bad one can surely mean failure.
When finding a new location, think of these things:
- Price (what can you realistically afford?)
- Visibility (Is it easy to find you?)
- Competitors (Are they close? Is this a problem?)]
- Regulations (Is your kind of business allowed on that location?)
Also keep in mind the design. It reflects your business and your product or services. The design is the first thing customers see, and it doesn’t matter how good your products is, they will base much of their buying behavior on that first second in the store.
8. Think. Do. Learn. Repeat.
I’ll be honest with you: successful people have failed more than you’ve probably ever tried.
It’s not embarrassing. It’s not the end.
Being a business owners means making lots of mistakes and learning from them. Be open-minded, creative and look for opportunities.
That’s just how it is.
Don’t be afraid to fail. Try out new stuff, learn and improve.
You can check out this great article on problem solving.
Now I’d like to turn to you
I hope this guide cleared a path for you and showed you how to start a new business in 2020.
Now I’d like to turn it over to you:
What business would you like to start?
Do you have any other tips or experiences you’d like to share? I’m very interested!
Either way, let me know by leaving a comment below right now or you can e-mail me.
Interested in starting a new business and need some help? Check out our services for new businesses.