How to Start a Business: It Doesn’t Start Where You Think
How do I start my business? It is the defining question for every entrepreneur. Whether they live in Reno, Las Vegas, or anywhere in the world it helps to know the answer. Let’s assume you already have a dynamite business idea. You might be developing an innovative new product, or you’re filling an existing market need. Whatever the case you know it’s worth a million dollars. You just have to figure out how to get a store front, market your product, and (Here is the most important part) convince someone to buy it from you… twice. So, where do you start? I have a little bit of bad news. It’s not where you think.
Starting a Business Starts Here
Every successful business goes through a series of tests for their goods or services. In order to bring the most profitable product to the market companies can spend thousands of dollars performing market research and conducting focus groups. For you to go from entrepreneur to full-blown successful business you’re going to have to do this exact same thing. However, you must do it without the big fancy budget.
So, Stop! Do not stampede down to step number five and register your business name. Here are a few more steps to get through first if you want to know how to start a business.
The First 5 Steps on How to Start a Business
- Pretotype Test- At the Entrepreneurs Assembly workshop in Reno, one of our mentors, Doug, likes to regale first-time attendees with the origin story of the Blackberry telephone. The founders of the blackberry couldn’t decide on the new interface for their cellular phone. So, instead of building an expensive dummy mock-up of their ideas the founders drew out what the phone would like on blocks of wood. They would then walk around to random strangers and ask, “What do you think of my cell phone design?” Some people couldn’t get past the block of wood and others offered serious feedback on the design.
Pretotype testing is fundamentally important for business success. Your first step in any business venture is to create your product mock-up, or outline your service. Then you walk it around to at least 25 strangers and ask their opinion. Asking your friends and family won’t do you any good. They may offer honest advice, but it can be skewed based on their own desires to see you succeed.
This initial prototype research will shape the rest of the business process. After hearing from so many different people you may decide that a few modifications can be made, or in some cases, you have to come up with a new idea.
- Pricing Test- Once you have established a minimum viable product, you then have to come up with the all-important price point. It is recommended to begin the process once you have a working product, or service, in hand. This process begins by establishing your costs for materials. After that, you need to figure out how much to add for your time and labor. This can be tricky because not all businesses can get away with charging the same price.
To help establish your price you will need to find another 25 strangers and ask, “How much would you pay for this?” You will get responses across the board, but this is okay. You are getting an idea of what prices the market will bear. You are also establishing a minimum and maximum. More importantly, you are establishing whether you should go into full-scale production or not. If you can’t find people that are willing to pay the price you need to turn a profit, then you may not want to move forward.
- Market Research- Market Research is vital when you want to know how to start a business. It comes in many forms, but when you are starting a business you will need to focus on two certain areas. They are market segments and competition. Market segmentation is the act of defining who your customers are. Your product is not going to be purchased by everyone everywhere. Your job is to figure out who will buy your product. Then establish where they are located, what do they do for fun, and what are some of their values. Clubs, gyms, online groups, and classes all have the potential to help you find your market.
Competition is any business, or person, who is selling close to, or exactly, the same thing you are selling. Don’t get discouraged if you find out there are five other businesses selling what you are selling. This is good news. That means there are enough customers out there to support all that business and some of them might even be looking for a new vendor. If there is direct competition, you also don’t have to re-invent the wheel. You can look at their marketing efforts and sales and see what shortcomings you can take make your advantage.
Market Research is the best time to begin thinking about your company’s name. Once you have a good idea of the market landscape, you can figure out how you will best serve it. You want your company name to be reflective of your company goals, but able to be understood by your target demographic.
- Bootstrap/Secure Financing- Securing financing can be one of the most difficult processes for an entrepreneur. Bootstrapping is where some business owners can support their endeavors with a daytime job. Other owners need large sums of money to begin production or file for patents. Loans, investors, and potential partners are all options to consider when you begin undertaking this aspect of your business. If you are going to ask for a loan, then you better have a well thought out business plan written down on paper with complete financial forecasts over three years.
- Register business Name- You did it. You made it to one of the most exciting points of a business life cycle. Once you have filed the necessary paperwork with the city, or state, depending on the local regulations, you will be a business. This information, and form to file your business, is available online, or you can visit your local government offices to file your business license.
Entrepreneurs Assembly is a non-profit organization founded by business owners to promote entrepreneur empowerment. There are monthly workshops across Nevada in cities such as Las Vegas, Reno, Incline Village, South Lake Tahoe, and Carson City. Our business mentors have helped establish, promote, and grow multiple local businesses across a variety of industries through experienced advice and guidance.
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