Have you been thinking about starting a business? You’re in good company — recent data show that the number of people starting a new business in 2020 has been at the highest levels since the Great Recession.
Before you get into forming an LLC or other legal business entity, it’s a good idea to step back and take a big-picture look at what you need to think about and what specific plans you need to make when becoming an entrepreneur.
Here are a few strategic ideas, insights, pieces of advice, and thought-provoking questions that any new entrepreneur should think about when starting a business. While these tips will get you going, we’ve also put together a complete guide to starting your business, sharing our experience and entrepreneurial best practices to help you make the most of your time.
What Type of Business Do You Want?
There are a few key questions to consider when identifying what type of business you want to start:
Do you want your business to sell products or services?
Do you want to sell to consumers (known as a B2C or Business-to-Consumer business) or sell to other businesses (B2B or Business-to-Business)?
What industry will your business be in?
Will your business require in-person contact with customers or a retail storefront, or do you want to run an online business that only sells via ecommerce?
What market will your business serve — who are some of your ideal customers?
Who are the competitors in your industry or business vertical? Is anyone else already selling what you want to sell? Can you learn from their mistakes or improve upon their business model?
What's Your Business Model?
How will your business make money? There are many different ways to build a successful business, but in general, if you want to sell products, you need to think about profit margins: how much can you sell products for in a way that covers your costs (including the cost of labor or the value of your time if you’re running your business as a solopreneur) and still makes money?
If you want to run a retail business, do you want to sell direct to consumer, sell wholesale to other retailers or both? Wholesale can bring you a bigger volume of product sales, but you might have to accept a lower profit margin on each unit sold. Can your business handle that? Crunch the numbers and make sure you understand the financial implications of each business model.
If you’re running a professional services business like a consulting firm or freelance design agency, think carefully about how to charge for your services. Charge enough money during each billable hour so that you can compensate yourself for all of the unpaid administrative time, marketing time, and downtime that you need to have in each workday, workweek and month of the year.
Do You Have a Business Plan?
Even before you choose a business name or start to talk to potential customers, it’s a good idea to write a business plan. This is a good thought exercise to help you clarify your business goals, develop a business strategy and anticipate possible challenges as you get your business off the ground. It’s especially important to have a business plan if you want to seek funding from investors or apply for small business loans.
However, you don’t have to be a professional writer or an experienced entrepreneur to write a business plan. Even if your business idea is still in the early stages, you can start thinking about strategy and the overall framework for how your business can operate and how you will make money.
What's Your Business Name (And Do You Need Any Trademarks?)
Even if you’re not yet ready to make your business “official” by forming an LLC or other business entity, it’s a good idea to look around for possible business names and trademarks. If you have a particular business name that you want to use, or a particular catchy product name that you might like to trademark, spend some time up front doing some research.
Is your dream business name or trademark already in use? Is the website domain name that you want to use for your business still available? These are a few pieces of preliminary research that you can do before you ever file paperwork to officially start your business.
What do you want your life to look like as an entrepreneur? What would your ideal day as a small business owner be like? How would it be different from your old job? Do you want more time with family, more time to travel, a more flexible schedule, the ability to earn a substantially higher income, the ability to save and invest more money for retirement? What are your financial goals and lifestyle goals from starting a business?
As a business owner, your aim should be to create a comfortable, sustainable life for yourself; don’t let yourself get burned out by working too hard. Work-life balance is essential for a successful entrepreneur and you can build this into your business plan by thinking about the business model.
Download Our Complete Guide to Starting a Business
Are you ready for the next steps in your entrepreneurial journey? Incfile has written a helpful, detailed Guide to Starting a Business. This guide will walk you through all of the steps above in more detail and also cover everything else you need to know, such as the legalities of starting a business, business licenses, taxes, funding, marketing and more. Check out this free guide to get you on your way to business success.
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.