12 Things To Know Before Starting A Business

Do you have a brilliant idea for a business? That's amazing.

You could be on the way to creating something incredible, but you must be ready for the challenges and opportunities ahead.

Whether you want to build your business online or offline, the following are the top considerations to sort out to maximize your return on investment, time, resources, and energy.

1. What You Are Selling

To start a business, you’ll, of course, need products or services. And if you hope to turn them into a success over the long haul, your products must be the type that’s guaranteed to sell.

Here are things to keep in mind regarding products and services.

Product

If you already have products in mind, consider the following

• Profit margins - This means how much profit you can make from each product after deducting the costs of production, distribution, marketing, and taxes. You'd want products that have high profit margins and low overhead costs.
• A unique selling point - What makes your product different from and better than your competitors? Is it the features, price, story, etc.?
• A strong market demand - How many people can buy your product at your desired price point? Is the demand consistent throughout the year, or is it seasonal?
• Sourcing - You’d want to sell products that can be sourced easily but are not widely available to consumers.
• Scalability - Is there room for growth? Can you increase your sales volume without increasing your costs proportionally?

Alternatively, if your ideas about that ideal product aren't very clear, you could start developing one by

• Start from your Interest - You could develop those product ideas from your interests. Perhaps consider a niche you’re passionate about and then conduct market research to ascertain the level of demand.
• Research market - Other reliable sources of ideas would be industry leaders, established brands, and marketplaces. Reviewing their audience engagements, trends, inventory stats, and product options should give you a rough idea of what’s hot in the market. 

For more clarity, you could feed the ideas into automated market research platforms such as Semrush, Google Trends, Jungle Scout, Helium 10, or Viral Launch. They’ll give you insights into the demand levels for each of your proposed products, with some tools stretching further and generating revenue estimates based on machine learning analytics. 

Service

Researching services is similar to researching products, but there are some extra steps you should take.

If you already have a service idea, try getting feedback from your target market. You can do this by testing your minimum viable service with real customers and collecting their opinions. You should use this feedback to refine and improve your service design and delivery.

If you’re still perfecting the service idea, look for gaps in the market where existing services are not meeting the needs or solving the problems of potential customers. You can find these pain points and unmet needs through surveys, interviews, focus groups, or online research.

2. Who Your Customers Are

Once you’ve found bankable product ideas for your ecommerce business, the next step should be defining the market you intend to sell to. This is where you get to figure out your potential customers, what they do, where you’ll get them from, and so forth.

You could, for instance, try answering the following questions while drafting your business plan;

1. What is the geographical boundary of your target market?
2. What are the ages, gender, and income levels of your target buyers? 
3. What are their preferences? 
4. Which devices do they use? 
5. How much are they willing to spend? 
6. Which social media platforms do they spend the most time on? 
7. Which pain point do they need solving?

You could draw insights from market research tools, census data, industry survey reports, search trends, established businesses, and your own interviews and consumer surveys. 

Consider, for example, examining the web traffic analytics for various commerce store URLs that specialize in your product niche. Tools like SimilarWeb, Ahrefs, and Moz can help you with the numbers. 

And while you’re at it, you might also want to review what industry leaders say about existing customers. 

All these data points will ultimately clarify your target audience and give you the much-needed head start to building well-personalized marketing strategies. 

3. Your Competitors  

If you want to thrive, you ought to know your competitors just as much as you understand your online business. 

Define your ecommerce business rivals in terms of the following;

For online business, competitor research tools like Semrush, AccuRanker, Sprout Social, and Moz should help you with most of the spying. They’ll identify your top rivals for each of the product keywords, and then proceed to dig into their traffic analytics, marketing channels, backlink profiles, social signals, etc. 

You get to borrow the best-performing tactics while, at the same time, capitalizing on your rivals’ weaknesses and missed opportunities. 

4. Your Business Model  

This is where you decide how to approach your business idea, how the whole thing will be structured, plus the monetization formula that you’ll be using when selling products, whether offline, online, or both.  

In other words, what type of business are you setting up? How many selling channels will it be leveraging? How do you intend to scale your resources? 

Here are some common aspects to consider

Target Market

• B2B - Businesses that sell products or services to other businesses.
• B2C - Businesses that sell products or services to individual consumers.

Distribution Channel

• Brick-and-mortar - Businesses that operate in physical locations require customers to visit them in person.
• Ecommerce - Businesses that operate online and deliver products or services digitally or physically.
• Hybrid - Businesses that combine online and offline elements, such as allowing customers to order online and pick up in-store or providing online services with offline support. If, for instance, you happen to be running a brick-and-mortar business, you could sync it with the online storefront. 

Revenue Model

• Retailer - Businesses that buy products from manufacturers or wholesalers and sell them to customers at a markup.
• Fee-for-service - Businesses that charge customers for using their services or accessing their resources, such as subscription, membership, or pay-per-use models.
• Freemium - Businesses that offer a basic version of their product or service for free and charge for premium features or upgrades.
• Advertising-based - Businesses that generate revenue by displaying ads to their users, such as online platforms, media outlets, or content creators.

Moreover, if you are doing ecommerce, are you going with a dropshipping business model, print-on-demand, storing your inventory, or an online store specializing in services or digital products instead of physical ones?

Besides, are you creating your ecommerce store from scratch, buying pre-existing ecommerce businesses, or taking advantage of already-established online marketplaces – such as Amazon or eBay?  

These are all things you could evaluate before entering the industry.

💡Tip: If you're considering using Amazon as your ecommerce store, check out our guide on How to start an ecommerce store on Amazon.

5. License And Permit

Depending on the type and size of your business, you may need to obtain licenses and permits from local, state, or federal authorities.

The common licenses and permits include the following:

• Business registration - Business registration gives your business a legal identity and permission to operate in a specific area. Some independent businesses, like freelancers and used goods dealers, may be exempt, but requirements vary based on local regulations and the type of business.
• Tax identification - This number identifies the business for tax purposes. It is also known as an Employer Identification Number (EIN) or a Federal Tax Identification Number. You can apply for EIN online via the IRS website.
• Seller's permit - A seller's permit is required for businesses in states with sales tax. It allows the sale of taxable items in-store and online and the collection of sales tax.
• Zoning permit - A zoning permit is required for businesses operating in areas not zoned for commercial use. This permit allows them to use the non-commercial area and property for business purposes, provided that the operation does not cause any disturbance or harm to the surrounding area.
• Health permit- Health permits are necessary for businesses dealing with food, health, and beauty, such as restaurants, beauty salons, and cosmetic sales.
  

6. Business Account

Another thing to consider when starting a business is to separate your personal and business finances.

It is a misconception that a personal account is more convenient and cost-effective for starters. In reality, business account benefits more in the long run.

A business account is essential for your 

• Cash flow management - A business account provides a clear view of your finances. It helps prevent confusion between personal and business transactions, ensuring accurate bookkeeping and accounting.
• Taxes management - A need bookkeeping will also help determine your tax obligations and deductibles.
• Personal assets protection - Mixing personal and business finances in the same account makes it difficult to determine ownership, potentially putting your assets at risk if your business faces a legal problem.
• Business credit - A proper business account and financial records enhance your credibility and increase your chances of securing funding, whether through a loan application or investor pitch.

💡Tip: Learn why you should have a multiple business account

7. Market Your Store  

If you're running a business offline and have a prime location, using flyers is sufficient to reach local customers. However, if you want to target a broader audience or if you have an online store, online marketing is a suitable choice.

That said, now that consumers are exceedingly fed up with online ads and brick-and-mortar stores have joined ecommerce businesses in scrambling for online recognition, you need a highly strategic marketing plan to generate buzz around your new business. 

You should invest your time and money in a solid marketing strategy, whether an omni or multichannel marketing approach, depending on your objectives and the service or product you offer.

Consider the following:

• Continuous workflow - The marketing plan should form one continuous workflow from pre-launch to post-launch – with the constituent campaigns being sequenced systematically across multiple channels based on your business goals and customer journey. 
• Personalization - Considering 72% of consumers only engage in personalized messages, you might want to granularly tweak the campaigns based on your target audience's interests and pain points. Only then will you set yourself apart from all the noise in the interwebs and connect with potential customers.
• Anticipatory marketing - At the pre-launch stage, you could try rocking the market with anticipatory marketing. Create a landing page with a curiosity-evoking "coming soon" message, promote it across social media, and then request the targeted traffic to opt into your mailing list for exclusive giveaways. The giveaways, freebies, discounts, and vouchers should subsequently come right before the big launch of your store. These are meant to convert all the anticipation and excitement around your new business into some form of publicity.
• Social media marketing - Use social media platforms like Facebook, Instagram, and TikTok to raise brand awareness and connect with the audience. You can create and share posts, stories, videos, etc., that engage and encourage followers to interact with the brand, which could ultimately lead to sales.
• Search engine optimization (SEO) - When the ecommerce store finally goes live, you can deploy full-scale search engine optimization to run alongside social media marketing. However, organic search engine optimization is a long-term plan that might take some time to generate results. In the meantime, you could spread brand awareness using paid advertising, influencer marketing, etc.
• Paid advertising - you pay to display ads on the internet or relevant platforms.
• Influencer Marketing -You can partner with an influencer to review or promote your products.
• Affiliate Marketing- a popular method that enables individuals to earn commissions by promoting products or services through unique referral links.  If you have no experience with affiliate marketing, passive income ideas might be a good step to understanding what is to come.

Otherwise, we'd advise tapping into more personable channels like email and SMS campaigns for lead engagement and conversion optimization. The automation here should even include post-purchase follow-ups – aiming to turn customers into repeat buyers and encourage them to leave reviews to build social proof. 

8. Customer service  

Aggressive marketing will get you leads and conversions, but great customer service drives brand loyalty. 

77% of consumers agree, and they even add that good customer service could turn them into brand advocates who'll champion your business. 

So, you could say customer service is the key to retaining repeat customers and generating recommendations from your customer base. 

That said, great customer service begins with meeting all the expectations across each stage of the customer's journey. This is best achieved by setting up an omnichannel customer experience pipeline, which addresses their key pain points in a personalized manner over a continuous engagement funnel. 

You could bring Customer Relationship Management software for online business to help you manage the whole thing. The best CRM tools for the job include HubSpot, Salesforce, Pipedrive, and Zoho. 

Whichever you pick, you should be able to set up the entire sales funnel in your business – from brand awareness to post-purchase follow-ups. Throughout this journey, the CRM software will track your contacts across their experience touchpoints and add the resultant analytics to their profiles. 

It's these contact profiles that your support teams will be referencing when assisting customers. 

And speaking of which, we'd strongly advise you to set up well-defined communication channels for technical assistance. Your new business could especially do with phone, email, and live chat support channels. Then during off-peak hours, you could have a pre-configured voicemail, automated email, or chatbot standing in for the support staff. 

9. Fees and Costs

Meeting all these business requirements takes dedication, time, and, of course, money. 

Before you can generate revenue, you'll probably have invested significant personal and business finances.

No absolute figure or range can be quoted as the standard cost to build a business. The biggest cost-differentiating factor is the business model.

Other determinants include:

• Products Inventory - The cost of buying or producing goods sold to customers. This cost depends on your products' type, quantity, and quality.
• Warehouse - If you don’t own your space for housing the products inventory, you may need to pay rent for a warehouse. This cost depends on the warehouse's size, location, and amenities. Overall, the average US warehouse space cost is $7.91 per square foot per year in 2021.
• Website cost - This is the amount spent on creating, hosting, and maintaining your online presence for your business. The cost depends on the types of websites and features used.
• Order fulfillment service - All costs associated with packing and shipping orders. The cost depends on volume, weight, and destination.
• Marketing strategies - Marketing strategies' cost is the amount spent on advertising and promotion. The cost varies based on strategy type, target market, goals, and competition.
• CRM software - This is the cost of software that helps you manage customer relationships and data.
• Payment gateways are the cost of accepting online payments, namely transaction fees.
• Business administration charges are the expenses related to running your business operations, such as accounting, legal, licensing, insurance, and taxes.

Therefore, at the very least, you can expect to spend hundreds of dollars within the first year of business – possibly stretching into the thousands. Planning will give you a more conclusive budget to work with and help you avoid financial risks in business.

10. Where to Get the Funding

Following the above consideration, you'll need to know where to get all the support.

To finance a business, you have several options:

• Personal funding - Use your savings or assets. This allows you to avoid interest payments and maintain full ownership.
• Investors - You can present your business idea to angel investors or venture capitalists who seek high-growth startups. They will provide funding in exchange for a share of your company. Some investors may want involvement in your business decisions.
• Loans - Banks, credit unions, or other financial institutions can offer loans to initiate your business. However, you typically need to pay interest. You must also have a good credit score, a sound business plan, and collateral to obtain a loan.
• Grants - Government agencies, corporations, or nonprofits offer grants that don't need to be repaid. However, grants are competitive and have specific requirements and deadlines.
• Friends and family - You can ask for financial support or investments from your close ones. While this can be a convenient option, keep in mind that it may strain personal relationships if complications arise.
• Crowdfunding - You can launch a campaign on platforms like Indiegogo or Wefunder to raise funds from the public.

11. Risk Assessment

Business risks can be internal or external.

Internal risks like financial and operational risks are within your control and specific to your business. On the other hand, external risks, such as the changing economy, new regulations, and new competitors, are beyond your control.

Before you start a business, it's best to identify those risks, consider their impact, weigh them against your goals, and document them.

Next, develop a scoring system to prioritize them based on severity and establish handling procedures.

Risk assessment should be done both before and during the business operation.

12. A Business Plan

Now that you have a big picture of your business, it’s time for a thorough business plan.

In short, a business plan is a document that outlines all of the steps you will use in your business. The main elements include the overview of your business, business structure, product and service list, market analysis, competitor analysis, customer segmentation, marketing plan, financial plan, and operation plan.

Recap

Starting a business is an exciting and challenging adventure that needs careful planning and research.

Before you launch, make sure to study the market, potential customers, competition, and risks. Additionally, go on and pick a business model, get the necessary licenses, open a business account, and create a business plan. 

At the end of the day, a business is an ongoing process of learning and adapting to changes in the market, trends, and customer demands.