Essential Steps to Launch a Startup, Part 2
Launching a new start-up business is a real challenge even for experienced entrepreneurs. Last time we talked about how to develop your big business idea, the idea that will drive the business. There’s more to it than just a product or service. The next two essential steps to launching a startup are to create a plan and find funding for the idea.
What’s the Plan?
Once you’ve identified your product and your market, you can begin building your official business plan. Your business plan is where you outline all of the specific steps you will take as you launch a startup business. This will include your business idea and your market research, as well as information such as pricing plans, budgeting for supplies, capital, and employees, financial projections for the next several years, and even an exit plan should your business fail.
Your business plan is essentially your roadmap for success. You need to think hard about how to launch a new business, how to keep it afloat, and how to expand it when you succeed. Your business plan will begin with a solid value proposition, an executive summary of the company’s organization, and a description of what exactly it is you want to do with your company. The process of writing your business plan can be tedious and lengthy, but it will force you to answer honestly what it is you hope to accomplish with your business and whether you can actually do what you aim to do.
This plan will help keep you organized as you develop your company’s business strategy later down the road. More importantly, though, it will serve as a reference point for your next two steps: securing your funds and making your business legal.
Finding the Funds
Armed with a comprehensive business plan, it’s time to get to the foundation of any good business: money. While some people are able to fully fund their business dreams with their savings or lottery winnings, the rest of us have to obtain fairly sizable loans or bring in outside investors. Either option will get you the money you need to finance your dream, but they have very different approaches to help you launch a new business.
Obtaining a Loan
The most common way new business owners obtain the funds they need is by securing a small business loan through a bank or credit union. There are numerous resources available including federal and state grants, subsidized loans, and artificially lowered interest rates for people looking to launch a startup business. Most of these loans will require a minimal credit score, some matching funds, and, of course, a completed business plan. Be sure you know your business inside and out, and be prepared to point to reliable financial projections based on your thorough market research. The more you can do to prove you are a good investment, the easier it will be to obtain the funds you need.
Also, it’s important to shop around. Some banks may require collateral on loans, while others may only lend at high interest rates. Compare multiple offers, and if you struggle to find a good rate, consider revising your business plan.
Working with Investors
Entrepreneurs can also obtain start-up funds through investors and outside partners. If you have a particularly valuable idea, unique connections, or a business plan that inspires confidence, any number of investors may be interested in helping you achieve your goals. However, even so-called angel investors are not investing with you solely out of the goodness of their heart. They believe in what you can accomplish and are planning to make back the money they lend with interest.
To win over key investors, it is doubly important to have a strong business plan with reliable financial projections. Prove that you have what it takes to run a successful business. Consider running the business on your own on a restricted budget in order to demonstrate the potential of your product. With a proven track record, investors are more likely to put their money on the line.
These two steps will help you get on your way, with a plan and funding to put it into action. What advice do you have for entrepreneurs looking for funding? Share in the comments, and come back tomorrow for the final essential steps for a startup, jumping through legal hoops and actually launching the business.