You have a business concept that you are excited about. However, you are unsure whether it is feasible. You have to test the idea to know how it withstands a list of strenuous concerns.
You are constantly testing.
Because whatever you started out is seldom what you ended up with. What is your client profile? Perhaps your service or product or appears like simply the best solution for you.
However, are you able to identify a clear client base beyond yourself? What are your clients’ greatest problems? How can your service or product help resolve them?
It is crucial to understand and segment your market. What are you replacing? Whatever your business concept is, somebody out there is purchasing something else in its place.
What makes your service or product so compelling to replace what is currently in the market?
This does not limit to a service or product to have a similar function as yours. You might want to study your target clients’ spending habits. And think about how you might get them to purchase from you instead of someone else.
How do you show this business concept to others? Make your concept as concrete as possible. That could mean creating illustrations or a working prototype.
The ability to demonstrate your concept to other people is very important. Who do you require on your team? In the beginning phases, you will have to determine whom you can rely on for honest feedback on your concept.
You will also have to consider whose brainpower you desire on your side.
Be it product development, IT, marketing, or another function. Look for ways to approach such people. And assess their interest in your concept.
What resources do you require? Ask yourself what you will require. From computers to office space.
Make a list of all the essential assets. And determine if you can acquire them. Prior to you investing money and time in product development and testing.
How long is your purchase cycle?
You need to know the purchase cycle for your service or product so you can plan your cashflow. For a longer purchase cycle, you will require more money upfront before you begin generating income. For instance, selling medical equipment to a hospital might take a year to complete.
While a mobile app can be sold for immediate download. What is a reasonable sales projection? You need to evaluate the actual business operation in order to come up with an accurate sales projection.
For instance, a restaurant projection would consider the seating capacity, the expected average bill, and the hours of operation. How is the growth potential of your concept? Consider how big you want your business to be.
Find out if your business concept can meet your expectations.
For instance, making something by hand may not grow as fast as making something that can be mass produced. Are you selling your time, which is limited? Or are you selling a service or product, which is unlimited?
Very often, this is not apparent to people. Do you have the required abilities? Having a concept and making it happen are two very different things.
Be truthful in evaluating if you are qualified to materialize your concept into a business. If a concept needs high technical abilities or business experience that you do not have, are you able to find people to fill those gaps? Can you do this for the next two years?
Developing a business concept can be exciting.
But will you be committed to it for a minimum of the next two years? Do you have support from family and friends? Are you ready to make the necessary sacrifices?
You need to look at opportunity cost. And understand that any new venture is going to take an astounding amount of time and energy.
Many businesses fail every year. Mainly because people are unfamiliar with the basics of running a business. All businesses involve risks.
Consult certified accountant and lawyer prior to investing in a venture. The very first thing you ought to think about when starting a business is the legal entity you will be operating as each type has its own advantages and disadvantages.
There are essentially four types. Sole proprietorship, partnership, limited partnership, and corporation. One of the major reasons for a business to fail is because the founder wastes startup capital on frills like expensive office and furnishings.
If you want your business concept to be successful.
You must have a tight rein on your expenses. Anything that does not safeguard your investment or make money for you should not be purchased at this time. Naturally, this applies to the expenses of setting up your business.
Unless you have a partnership and start your company as such. The only genuine benefit of forming a corporation would be to protect the property you personally own. Yet, if you are found guilty of misusing corporate funds, your creditors can come after your possessions.
But if you invest everything you have in your business concept, you do not actually need a corporation since you have nothing to protect. Basically, your personal asset is already protected by the homestead provision of the Federal Bankruptcy Act and cannot be taken away from you. As a sole proprietor or a business partner, you will be paying taxes on your overall earnings as if you were holding down a salaried job. Whether you draw out money as salary or not will have no impact on your business earnings and tax return.
The advantage of incorporating is that you can control your salary to minimize on tax.
When your company is successful and starts to make a lot of money, you should look into incorporating. There are also disadvantages of incorporating. Corporation pays higher taxes, reports more detailed accounts, has stricter business laws.
Hence, your accounting and legal fees are higher as a corporation than as a sole proprietor or a partnership. As a sole proprietor or partnership, there will be many areas that will require your registered business name, such as opening a business bank account. Choosing a business name is very important, especially relative to marketing.
Your business name should describe the service or product you offer. Should you purchase, lease, or rent a space for your business? Be prudent before you make any decision.
As businesses tend to either grow quickly or they never get off the ground.
Purchasing a property gives you the ownership of the property regardless of what happens to your business. Leasing a property over any length of time will tie you down to paying for that space regardless of what happens to your business. For starting out, it is good idea to rent with a choice to lease in future.
Next, you must open a business bank account. Different banks specialize in different types of businesses. Choose one that is convenient to your business location. You will want to set up the handling of major credit cards with your bank.
Having the ability to accept credit card transactions will greatly increase your sales volume. For corporations, you will require a corporate resolution authorizing of the opening of your business account. Every state’s regulations on sales tax permits and licenses vary widely.
Many suppliers will not sell to you at wholesale prices until you can show them your sales tax permit. If your business sells in other states, you are not required to collect taxes other than in those where you have stores or offices.