Hello dear readers. Today I want to talk about where to start your business and about some of the mistakes that novice entrepreneurs made that I also made. I also want to give you a step-by-step plan for opening any (or almost any) business. And share a link to the section about business ideas and how to start your own business from scratch without money! Now let's move on to the topic of this article.
Content
- Why I decided to write this article
- Some errors and their solutions
- Where to start your business - 10 steps from scratch
- Step 1. Business idea
- Step 2. Market analysis
- Step 3. Business planning
- Step 4. Finding money for business
- Step 5. Register your business
- Step 6. Taxes and reporting
- Step 7: Quickly test your idea
- Step 8. Business Development
- Step 9. Active promotion
- Step 10: Scaling
- What else can you pay attention to?
- How to start and open your own business using a simplified scheme
- Conclusion
What qualities should a ready-made business process diagram have?
The construction of business processes should end with the presence of a clear and well-thought-out scheme. Looking at it, you should get an idea of the following things:
- how the process begins and ends;
- with what other processes and how is it connected;
- what operations are performed, by whom and in what order;
- what documents are used and in what operations;
- what tools and materials are required;
- how high the performance indicators need to be achieved for the process to be considered successful.
A high-quality diagram, prepared taking into account all the recommendations for construction, should be informative and easy to understand. It should be obvious how the process is performed in real life.
A business will be profitable only if important business processes are created in a timely manner. Essentially, they represent a strategy that helps achieve the desired results. Therefore, building business processes, identifying the most important ones and modeling them should become an obligatory stage in the development of a company.
Example of a business process diagram
Some errors and their solutions
1. Break-even point not calculated
Many people start a business without even calculating how much they need to sell in what period in order to break even. This is important because many business models are cut off at this stage.
Calculating the break-even point is simple. You calculate how many expenses you incur per month and then calculate how much you need to sell goods or provide services per month to recoup these expenses. If the figure is too large and seems unrealistic to you, then it is better not to take on such a business. If you think that you can sell the right amount of goods to cover expenses or start covering expenses in a few months, then you can think about this business further.
Conclusion 1: Until you have a complete financial picture of the business in your head, you cannot borrow money or even use your savings.
2. Everything must be perfect
When starting your business, you want everything to be correct and beautiful: the most modern equipment is purchased, the most functional website is created, the office is renovated, etc.
Striving for better is useful, but there is one “BUT” - before spending money, check the viability of your business model. When planning to make an expensive website design, first make sure that your services or products are in demand at all.
Or, if you are opening a cafe, before making expensive renovations, try to start selling in the premises you have with minimal investment. If sales continue and the location in a given area of the city generates at least some profit, then you can expand or do some major renovations.
Conclusion 2 : Do not invest significant amounts until you are sure that people need the product itself. And there is no need to bring everything to perfection, thereby delaying the start. Start with what you have and gradually develop and improve.
3. Lack of understanding of your future business or simply no love
I personally think that a business should at least be liked. For example, I love every business project I have, and if I didn’t love them, they wouldn’t be profitable.
Some aspiring entrepreneurs write to me with questions like “What to sell”, “What services are profitable to provide”, “What business is profitable to start”, etc. I answer everyone: “Open your own bank.” And no one likes my answer, although it answers all these questions. Every entrepreneur has a different life situation, different interests and different knowledge. If one likes to sell toys, and the other likes to sell men's suits, then they will not be able to switch businesses and be as successful. This is because they don’t understand the model itself and simply don’t feel interested.
Conclusion 3: You cannot build a business on an idea just because you simply know that it is profitable and have no interest in it. Business needs to be understood, loved and “in the know.” For example, I would not be able to open a massage parlor and lead the business to success. Not because I don’t have enough money, but because I don’t know anything about this business.
Register your business
You can conduct business as a sole proprietor (IP) or as a legal entity (usually an LLC).
- IP
Suitable for those who have a small business - for example, a small store or production.
- OOO
is a company that you can open on your own or with partners. Suitable for those who are planning a business with large turnover, and for those who will transfer large amounts by bank transfer.
Each form has its own advantages and disadvantages. More details about this can be found in the comparative material about LLC and individual entrepreneur.
Where to start your business - 10 steps from scratch
To begin with, I want to say that below I will give 2 plans on how to start your business: complete and simplified. Let's start with the complete one.
Step 1. Business idea
Of course, to start a business, you need to know what exactly to start. I have always said, I say and will continue to say that an entrepreneur must have an idea. If you can’t even come up with an idea, then what kind of business are we talking about? You don't have to be an innovator and come up with something unimaginable. You can take an already working idea, look around, find shortcomings in it, or simply improve it the way YOU see it, and it will be a different business. It is easier to enter an established market than to form it yourself. And the idea does not have to be global; you can start a micro-business or business with minimal investment.
In order to come up with or find a business idea, read the following articles and after reading you will 100% decide on the idea:
- Timeless small business ideas that work 100%;
- Business for small towns - ideas and features;
- What business to open and how not to make a mistake in choosing a niche;
- Which business is more profitable? How to evaluate the benefits of a business idea;
- What business to start and how to come up with a business idea;
- What products can be sold or how to find your niche in business.
After reading the articles and coming up with ideas, you can move on to the next step.
Step 2. Market analysis
After choosing a business idea, you need to analyze the market, find out whether people need your product at all. Assess the competition, identify the positive and negative sides of competitors, find in yourself what will distinguish you from your competitors. Compare prices, quality of service, assortment (if this is a commodity business ) and look to the maximum for what you can be better at. It is necessary. Why? Read this article!
Once you have assessed supply and demand and realized that you can compete with existing companies, you can move on.
Step 3. Business planning
You can draw up a business plan for yourself and describe in it all the expenses, promotion options, everything you need to start, determine the prices for your goods and services (an article about how to make a markup will help for this), break-even point, planned income, etc. You are writing it for yourself, and not for a bank or investor, so write it in the form in which it will be more convenient for you to work with it in the future. This is done more in order to keep less information in your head. This way you won’t forget to do anything and in the future you can check completed tasks and goals against the points of the plan.
In the plan, also write down all the expenses that you will initially incur and try to stick to them. Take extra just in case. Most importantly, do not look for ready-made business plans!!! They write complete nonsense in average values, which in fact differ greatly from reality!
We will not dwell on this in detail, because after the idea appears in your head, you will quickly take this step, I assure you!
Step 4. Finding money for business
You need to invest money in any business. You can start a business without money, but this is very rare and you have to wait a long time for results. In the last step in business planning, you should have calculated how much money you will need for your business in the initial stages. Take the amount and add at least another 20% (MINIMUM) to it. This is just in case. It’s better when there is a little money left than not enough and you have to look for it in an emergency.
When you know the amount, you need to look for this money. It’s good if you have them, because I categorically do not recommend starting with credit money. It’s possible to develop a proven working business model, but I don’t recommend starting it. In general, I already wrote an article about where to get money for a business.
Step 5. Register your business
This step cannot be skipped because the business must be registered. You can use LLC or individual entrepreneur. It all depends on your activity. The following articles will help you with this:
- Pros and cons of individual entrepreneurs;
- How to open an individual entrepreneur in 15 minutes;
- What documents will you need for an individual entrepreneur or LLC;
Once your business is registered, you can move on to the next step.
Step 6. Taxes and reporting
I indicated this step right away, because you must initially decide which tax system you will work under. This must be done immediately, because the amount of taxes and methods of payment depend on this. To do this, read the following articles:
- Do I need to pay taxes and how does the tax office find out about income;
- Taxation systems for individual entrepreneurs. Which one to choose?;
- What taxes does an individual entrepreneur pay under different taxation regimes?
- Where and how to pay taxes for individual entrepreneurs.
And also read other articles in the “Accounting and Taxes” section, because there you will always find up-to-date and complete information about maintaining tax and accounting records. You can also ask your question and get an answer from a specialist.
Step 7: Quickly test your idea
Some will say that you can test without registering a business. And you're right! This is possible, but it was not for nothing that I wrote at the very beginning that there will be 2 options for the development of events and in the second I will talk about it. Now let's move on to the testing itself.
What you initially need is quick testing - “testing in combat”. Use your own money to test the idea, give minimal advertising, make the smallest possible product and try to sell it. Study the demand in practice, so to speak. You have to look at your plan, evaluate what you minimally need to get started, and start right away. Why is this being done? At the very beginning, I wrote about one of the mistakes of beginning entrepreneurs, which is delaying the start, constant improvements, etc. There is no need to bring it to perfection, you need to start as quickly as possible in order to test the idea in action, get the first sales and be inspired to continue development.
If the start does not give the first sales, then you need to reconsider the plan, idea and look for mistakes. A quick start is also done so that in case of failure you will spend less time, effort and money. Would you agree that it would be more annoying to prepare for a year and then fail? It’s less offensive to realize your mistakes right away, while you still have little time to do. This way you can make adjustments along the way and everything will start to work out!
To test your idea and your business, THIS article can help you. It is more for testing an idea on the Internet, but it is also suitable for the real sector (offline).
Step 8. Business Development
After the tests have been carried out, the plan has been adjusted and sales have slowly begun, you can develop your business and refine everything that you wrote in the plan to perfection. Now you can improve the site, increase warehouses or offices, expand staff, etc. When your idea and business model have shown their effectiveness, it is easier for you to set more global goals. Moreover, you have already received the first money from your first orders or sales and can reinvest it in development.
If there is not enough money, then you can already resort to loans and borrowings, because the business brings in money and you can borrow for its development with a clear conscience. If you don’t need a lot of money, then even a credit card may be suitable. In THIS article I told you how you can use credit card money for your business without interest.
Step 9. Active promotion
This step could be classified as development, but I took it separately. Once you have wider warehouses, more powerful equipment and website, more employees, etc., you need to provide all this with work. This requires aggressive advertising to the maximum. You should take advantage of many advertising opportunities. Look for clients on the Internet, do offline advertising, engage in direct sales, etc. The more advertising tools you use, the better the result. But be sure to record the results and weed out ineffective advertising tools so as not to waste your budgets.
In order to competently advertise and promote your business, read the articles in the “Business Promotion” section.
Step 10: Scaling
Your business is working well, bringing in money, you are constantly developing, everything is great! But there are also related directions or neighboring cities. If your business model is successful in your city, then you can open representative offices in other cities. If there is no desire or opportunity to go to neighboring cities, then you can simply capture an adjacent direction, if there is one at all.
For example, if you sell household appliances, you can simultaneously open a repair service and provide paid repair services. If your client’s equipment cannot be repaired, you can always offer him to buy something from your store in exchange. In general, look at your business and I am sure that you will find something to latch on to.
Write a business plan
After you have drawn up a general strategy, you need to calculate everything in detail. A business plan will help you with this. You, your business partners, and potential investors or creditors will need this plan.
The business plan must contain a detailed description of the product with options for its further transformation, a market analysis with a description of all groups of competitors and the characteristics of possible buyers.
Without numbers, a business plan, of course, will not be convincing. You need to understand in advance how profitable the business will be. Therefore, a business plan must include several mandatory components:
- production plan and calculation of the cost of goods or services;
- promotion plan and cost estimate for advertising and other types of communication with clients;
- organizational plan and assessment of employee salaries, as well as external (for example, courier) services;
- a financial plan that takes into account all sources of financing and income, as well as everything, including one-time expenses and taxes.
As a result, the business plan should show how much money you will need to launch the project, when it will reach self-sufficiency, how long it will take to return the invested funds, and what profit you can expect.
In order to draw up a business plan, you can use, for example, the one developed by Vnesheconombank.
What else can you pay attention to?
When starting a business, there are several parameters that allow you to evaluate how effective your business is at the start; take them seriously:
- If the net profit of your business is above zero, not counting equipment costs, as well as taxes, then your business will survive because it generates some money. If it’s below zero, it means your business is burning money and won’t have enough loans or investments;
— If you planned sales for 200,000, but sell for 50,000, then this is a reason to seriously adjust your work and, possibly, the plan itself;
- You should be comfortable. Business is hard. If you are also constantly having a hard time, then coping with business tasks will be difficult. Give yourself enough comfort that you don't feel left out by running your own business.
The result of constructing a business process diagram
A clear, thoughtful and understandable scheme is a valuable result that you need to strive for when creating a company’s business processes. The construction, carried out according to all the rules, should give an idea of the following things:
- how the process begins and ends;
- what other processes is it connected with;
- what operations are performed, by whom, in what order;
- what documents are used in various operations;
- what tools and materials are required;
- how high the performance indicators need to be achieved for the process to be considered successful.
A high-quality diagram is always informative and easy to understand. It gives an idea of how the process is performed in real conditions.
Video about building business processes
How to start and open your own business using a simplified scheme
As promised, I’ll give you a simplified diagram of how to start your own business. Because I have already described all the points above, so I will refer to them here so as not to repeat myself.
I myself have used this scheme more than once, because before I launched very small projects in which a lot could be missed. So the diagram looks like this:
- Idea (it should always be there);
- Easy planning, you don’t have to write it down, but put the main points on a piece of notebook. This is done in order to draw a model;
- A quick test of an idea. Perhaps even without investing and finding money. Or you will need very little money and it will simply be in your savings;
- Development and active promotion. After the first orders are received, you can begin active promotion and bring everything to fruition;
- Business registration and scaling.
As you can see, I left out registration at the very end, because some business projects can be implemented without registration, because during the test you don’t get so much money that you have to immediately run to report to the tax office for it. But if the business model has shown its efficiency and after active promotion the profits are growing, then the registration should be instant.
But even in the first stages you cannot do without registration if you need retail space, an office or work with companies under contracts, because for this you need at least an individual entrepreneur.
Why is it necessary to build business processes?
The work of creating processes takes a lot of time, but brings effective results. The following construction goals are distinguished:
- Description. Forming a model will help you study the process from start to finish and evaluate its strengths and weaknesses.
- Rationing. Any type of activity is carried out according to rules, so it is important to regulate the development of business processes.
- Relationships. Creating business processes helps establish relationships between individual elements.
However, just building a model is not enough - you also need to establish logical connections between different processes. The formation of processes is carried out in a certain sequence:
- Preparation: determining the timing of the project, as well as the composition of participants.
- Development: analysis of triggering events, assessment of approximate results and possible risks.
- Verification: comparison of the results obtained with the expected ones.
The company's business processes are built using modern computer technologies and software.
