Launching a new business can seem daunting, especially when failure rates are high. You don’t want to see your hard work go to waste.
However, with enough planning and preparation, you can give your new company a foundation for success. This includes finding your market and funding your company. You must also understand the risks that can put it out of business and plan to protect it.
Before you can do that, the first step to creating a viable startup is developing a marketable business idea.
Conducting Market Research
Market research helps you to analyze marketplace data, such as buying patterns and consumer trends, allowing you to grow your business idea into a tangible offering. It comes in two parts. The first and most essential aspect of creating a startup is developing a valuable service or product.
Researching the Viability of Your Business Offering
How do you know if your idea is viable? First, review the industry and sector your product or service serves. Gather information through surveys, interviews, and focus groups of likely customers and industry leaders. This ensures your offering has potential and helps you to price and support it.
Before developing surveys and other feedback content, set your goals. Write out the problem you want to solve, such as comparing the effectiveness of two potential product or service offerings. If you’re creating something new, your research will be more exploratory, seeking out needs and problems that your company can address. Once done, you can develop your product or service with a better understanding of where it can fail and how it will scale.
Researching your Ideal Market
Once you have a viable offering, your next area of market research involves finding your ideal market. There are several components to this as well:
- Research your ideal customer. You should go beyond basic demographics to discover their pain points and how they discuss them. You can create an avatar, a real-life mockup of an ideal customer with a name and even an image, to help you better visualize who they are and how you can solve their problem.
- Analyze your competitors. Discover who your competitors are and research what they are doing. This allows you to fill in service gaps they might be missing to stay ahead of them.
- Testing to fine-tune. You should test your products and services among a small group before doing a wide-scale launch. Pilot programs allow you to try different marketing approaches and tweak them according to customer feedback.
Market research is by no means a one-and-done process. As your company grows, you’ll utilize tools that can measure your website analytics, social media performance, and much more.
This gives you a solid foundation to build an ongoing marketing plan, which will be necessary as you seek investors.
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Funding your Startup
You’ll never get your startup off the ground without funding. Some of it comes from you, but as you grow, you may require investors. Financing your new business is crucial and includes budgeting and external cash sources.
Creating Your Business Budget
Many startups fail because they don’t have enough funding, even with investors. Set up your corporate budget before spending money on bringing your business to life. To start:
- Assess your expenses. Costs are either fixed, like a business loan, or variable, such as office utilities and marketing costs. It’s better to overestimate than underestimate, but try to get the numbers as close to reality as possible.
- Reserve emergency funding. You can’t plan for every foreseeable challenge, but you can set aside some assets for emergencies. Those may include natural disasters, harsh weather events, theft, lockdowns, or supply chain disruption.
- Allocate funds for running your business. This includes operational costs, like taxes, fees, salaries, insurance, marketing budgets, and future growth. You may want to create separate budgets for important items, such as cybersecurity.
- Monitor all expenses. Use a reliable software service to track income and expenses. Regularly revisit your budget every six months and when you have changes in your business.
Part of this planning includes funding to help your business scale. Cash flow management prepares you for these costs.
Cash Flow for Future Growth
Planning cash flow to sustain and grow your company helps you prepare for future success. Use data from your market research while analyzing new market trends, customer behavior patterns, and business cycles in your sector.
You may also need outside cash sources, like business loans. These can be securities-backed, allowing you to get a loan, often with a better interest, without selling off all your securities. However, they are riskier than traditional loans.
Venture capital is another resource. These investors fund your future by purchasing stock in your company’s growth potential. They often help mentor you and provide connections within your industry. The downside is that you will have to share business responsibilities, which may lead to conflict if you don’t share the same vision.
The risks of different funding options are just some of the ones you may encounter when starting a new business. Understanding common threats to new startups will help you protect your company.
Necessary Safeguards to Protect your Business
The key to success in launching your startup lies in being prepared to address these threats. For example, as you set up your organization, you want to make sure that you select the business entity best suited to protect you from disaster. Being a sole proprietor can put your personal assets at risk, but registering as an LLC, S-corporation, or corporation provides more protection.
Other major business risks include threats to your company’s reputation, legal challenges, and operations. Education is the best defense; every entrepreneur should know the greatest threats to their burgeoning business.
Reputation Threats
Threats to your reputation can come from a myriad of sources. They can be external, such as a competitor starting a smear campaign on social media, or internal, such as unknowingly producing a defective product. Startups must be vigilant about baseless claims and prepare themselves for hits to their reputation. Address unsubstantiated attacks on your business, especially on social media, to protect yourself.
Another way to protect your company is to ensure that you have professional liability, or errors and omission, insurance. It can protect your company from mistakes in your company, including errors, inaccurate advice, misrepresentation, missed deadlines, undelivered services, and professional negligence.
Legal Challenges
It’s wise to have a business attorney or legal team in place should the worst happen, such as a lawsuit or a baseless claim. You are responsible for the safety of people on your property, including the health and wellness of your employees. General liability insurance protects your assets against personal injury suits and property damage. Provide them with a safe and hassle-free environment.
Make sure that you have workers’ compensation insurance to protect anyone who has been harmed on the job. Put safety protocols, rules for conduct, and conflict policies in place and train your staff on them from day one.
Operational Risks
Anyone who started a business in early 2020 would have had no way to forecast how their year ended. The pandemic changed rules and regulations, disrupting the supply chain in ways no one had seen before. That said, many companies survived and even thrived in the aftermath. How? They were savvy enough to prepare for operational risks.
Hopefully, that kind of disruption won’t happen again. However, you can still be at risk from other unforeseen factors, like natural disasters. To address them, you should create a crisis management plan, assigning duties such as evacuating the office, alerting authorities, and developing crisis communications. Additionally, you should invest in business owners’ insurance, which combines general liability with business-specific coverage, such as business interruption and property damage.
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Enacting Cybersecurity Measures
One of the dangers of the digital age is that our data, finances, and identity are at a greater risk every day. Getting hacked can compromise your reputation, finances, and data even before you launch. Startups and new businesses must provide robust cybersecurity to protect their firms’ connected devices. There are several measures you can take to protect your company:
- Introduce multifactor authentication to reduce your risk of getting attacked. It also provides security by allowing your IT team to discover and address unauthorized attempts.
- Control your networks and data by using secure systems. Verify connections with managed system providers and vendors, and use a secure network such as a VPN.
- Use trustworthy vendors by using a system like Know Your Business. These vendors help you verify the security vendors have in place to protect their systems and your data.
Data protection is crucial since a data breach can impact your company, customers, and all stakeholders. Your data is especially vulnerable to attacks when you have remote teams. Risks can come from personal and unencrypted devices connected to your server, lack of IT support, and lack of secure backups.
To protect your data, you must be aware of the challenges and take steps like:
- Make employees adhere to a strong password creation policy to access the system.
- Ensure that connected devices have encryption tools to turn data into code, which protects it during transmission.
- Employ the best security tools, such as trustworthy cloud solutions and WAN (Wide Area Networking), to add more layers of protection to your system.
- Develop strong cybersecurity policies, including disaster recovery and incident response plans, and update them regularly.
Once you have policies in place, employee training is key to ensuring that everyone follows best practices when accessing the network, especially if they are working remotely. Invest in training to help employees comprehend that their practices are secure. This ensures the safety of your systems, reduces human error, and builds a foundation for safer outcomes.
Final Words on the Foundational Knowledge Every Entrepreneur Needs
Starting a new business is challenging, but with proper planning and diligence, you can address every risk with a sound solution. Whether it’s doing market research to create a successful offering, finding affordable funding, managing common risks, or securing your systems, you can prepare in advance to protect and scale your business for long-term success.
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