How to start a business from scratch
We understand the basics of entrepreneurship. Telling you how to open your own business: where to start, what to look out for, how to study the market, analyze the competition and test the idea with minimum cost.
- How to start a business
- How to find an idea
- How to test a business idea
- How to choose a niche and a key segment
- Where to get money for the business
- Typical mistakes of beginners
How to start a business
Entrepreneurship should be understood as independent actions that are aimed at systematic profit. This can be selling goods, doing work or providing services.
Business is always a risk, there is no one hundred percent guarantee that a certain algorithm of action will ensure a steady income. But there are recommendations based on the experience of other people.
Conventionally, the entire process can be divided into several stages:
- The entrepreneur searches for a business idea, comes up with it himself, does something on the advice of others or copies, improves an existing one.
- Checks the idea for strength, studies the demand.
- If the idea seems promising, studies the market, i.e. analyses the target audience and competitors, selects a niche, a customer segment, thinks over development strategies, makes a business plan.
- He thinks about how to sell his product.
- Calculates how much money he needs to fully launch the business, looking for seed money.
- Starts the business, analyzes the results and clients’ behavior, gradually improves the product, and eliminates errors.
The process can be simplified. For example, some entrepreneurs do not even try to launch their online stores, as they rely on marketplaces.
How to find an idea
There are several ways to find business ideas.
Brainstorming . A new idea is born out of nothing through creative thinking techniques.
For brainstorming, you need to gather a company of several people, it is good if they will differ from each other in income level and main activity. For 2-3 hours, you just need to choose a topic and toss in ideas, even the most unrealistic. You can make analogies, think of associations.
Then the list of ideas is subjected to critical analysis, the most successful options are chosen.
Adjustment for the client. The idea of opening your own business often arises out of a desire to work for yourself and use the experience you have. Experience is not only having knowledge in a particular area, but also an understanding of customer problems and the ability to meet customer demand.
For example, some delivery services do not tell the customer the exact time of the courier’s arrival, and sometimes they have to wait all day. The manager collects feedback and sees that this causes dissatisfaction among customers. So, solving this problem can become a business idea, a competitive advantage of the new courier service.
Implementing an ordinary idea. In most cases, a new business is unoriginal – it is grounded in simply solving customer problems. These are barber shops, grocery stores, flower shops, and points of domestic service.
Copying someone else’s business. The original idea is not always the key factor in the success of a startup. It happens that an entrepreneur uses a trivial idea, but sets up business processes in such a way that it stands out among competitors on several criteria at once: price, service, additional bonuses.
How to test a business idea
Testing a business idea is hypothesis testing. First a certain assumption is made, and then in practice it is either confirmed or not. It is good to test a business idea with minimal resources.
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Concept Formulation . Any business idea can be constructed by answering the questions:
- What need or problem does my business solve? The bakery near my home provides a quick and inexpensive snack, chain store – to buy everything you need in one place, a coffee shop – to comfortably spend an evening.
- To whom will I offer the product? Who are my customers? It is important not just to describe the socio-demographic characteristics, but also to narrow down the audience. For example, customers of the bakery – the inhabitants of the neighborhood, customers of the website constructor – designers, copywriters, aspiring entrepreneurs.
- Where will I sell my product? You need to understand what markets you can organize sales and how much it will cost. For example, trading on the marketplace will be cheaper at the start, but with large volumes developing your own site may be more profitable.
- How much will it cost? You need to find out how much customers spend to solve the problem, and set a price for your product.
Survey. You need to find out if the customers suitable business idea, if we are not mistaken in the analysis of the audience, in assumptions about the needs. This can be done through interviews with potential customers.
It is worth being interested not in assumptions, but in people’s experiences. For example, instead of asking “How do you like the product?” ask questions like: “You have such-and-such a problem. Tell us how you solve it? Why did you choose this particular product? How did you choose – was it based on price or reviews?
Pre-order. The formulated concept of a business idea can be presented as a list of hypotheses to test. For example, we set the price of the product at about 1,000 rubles. We need to find out if it’s acceptable for customers or check if our product is really necessary for a certain category of customers.
Asking potential customers about it is useless. They might promise to buy, but when it comes to the actual transaction, they’ll find a lot of reasons why they’re not ready to part with their money right now.
Therefore, prices and interest in the product are checked with the help of pre-orders. For example, organize the production of cheese, talk about the process in social networks, accept pre-orders, perhaps at a discount. If the entrepreneur makes a small profit even without the actual product, it can be assumed that the price and concept are appropriate.
Sales without sales . Let’s say we decided that it would be a good idea to carry cosmetics of a certain brand from Korea. Demand can be checked even before ordering a batch:
- Post information on classifieds sites with photos of the supplier.
- Make a small promotional page and buy some targeted advertising.
- Create pages in social networks and publish ads there.
- When the client calls, we answer that we have already sold out the batch, and we are waiting for the next one in a week or a month.
The goal is to find out how the advertising channels will work.
How to choose a niche and a key segment
After testing all the hypotheses, the entrepreneur has an understanding:
- How much his idea solves the needs of buyers.
- Who his target audience is, who is ready to buy immediately, who needs more time to think.
- Which niches are free for his business idea, and where there are many competitors.
For example, we decided to sell guitars. With the help of interviews we found out that inexpensive instruments are mainly interesting for schoolchildren and students. We made an online store on a free constructor, uploaded several ads on “Avito” and similar services, tried to trade on “Ozon”.
After testing, you need to calculate what demand was on each sales channel, how much each sale was worth, taking into account advertising, and focus primarily on the source that brings more customers at lower cost:
- The online guitar store brought in 0 applications.
- “Avito” turned out to be a profitable channel, but there were only 2 sales in a month.
- On “Ozon” managed to sell 10 guitars, despite the modest range. However, for each transaction, taking into account marketing and shipping, I had to pay 10% commission.
Conclusion: since “Ozon” provided the largest volume of sales, you need to analyze the marketplaces and go to them. “Avito” should deal with them in the second place.
Where to get money for the business
Own savings. A long, but reliable way.
Loans. It could be a bank loan. It is important to compare the profitability of the business with the cost of the loan. For example, if the business makes 2-3% per annum, but the loan has to pay 20% per annum, it is probably not a very profitable deal.
Finding an Investor . You can try to find a person or company who will be interested in the idea, assess the profitability and offer financing. Usually you have to give a share in the business for such help. Before looking for an investor, you need to write a business plan and calculate a financial model, arguing why the entrepreneur needs exactly the amount he is asking for.
Grant or subsidy. There are several types of support for business in Russia. It is possible to receive a grant to start a new company, to reimburse part of the costs, or to organize a new project on co-financing conditions.
Typical mistakes of beginners
Copying without taking into account the nuances . If someone else’s business is successful, it does not mean that his complete copy will also make money. It is useful to look around and focus on best practices, but it is important to consider the specifics of your field, the presence of competitors, the nuances of the product and the audience.
Product for yourself. There is a rule in business – don’t think of yourself as a reference customer, judge by yourself. If an entrepreneur likes a product or service, it does not mean that other people will immediately rush to buy it.
Care only about direct competitors . If we open a bakery, our direct competitor is the same bakery around the corner. But there are also indirect competitors, that is, businesses that solve similar problems. For example, if a bakery offers a quick lunchtime snack, it will have to fight for the customer’s attention with any fast food place nearby.
Excessive savings. Cutting costs is a good practice, but only as long as it doesn’t destroy the sales funnel. If customers are mainly led by targeting advertising, then even in a crisis it is wise not to reduce spending on it, but instead to increase it.
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How to start your own business. 10 simple steps for aspiring entrepreneurs
If you have decided to put your ideas into practice and start working for yourself, this guide is for you. You will learn how to find your niche, where to get the money to start your own business, and how to save a considerable amount of your own money and build up your client base with the help of state support in the “My Business” centers.
1. Choose a niche for starting a business
Every business starts with an idea. Answer the following questions as honestly as possible:
- What do you do well?
- What inspires you?
- What do you and those around you lack?
- What could you do better than others are doing now?
- What product or service would you offer?
- Who is your customer?
- What will you be paid for?
That way you can roughly define your niche.
After that, start participating in meetings with entrepreneurs in your chosen niche. This can be webinars for SMM-specialists, if you want to engage in online promotion, business breakfasts with entrepreneurs, or, for example, free seminars at centers “My Business”, where speakers are experienced entrepreneurs who are willing to share their real success stories. This will help you figure out if the direction you’ve chosen really interests you.
Finally, ask your friends, acquaintances and followers on social networks what you do best. Try to make a prototype of your product or service and “sell” it. In general, “practice on cats” as much as possible.
2. Test your knowledge!
Determine what professional and personal qualities you need to strengthen in order to become a successful entrepreneur. By tightening up the gaps in your business education you will gain skills and competencies that will help you to build a plan of action and minimize the risks of launching your own business.
If you prefer offline learning, you can enroll in free courses for aspiring entrepreneurs. For example, the “ABCs of Entrepreneurship” at the My Business Center in your area, where you can learn the basics of running a business.
In your personal account on the Digital platform SME.RF (registration required) is available an express test of competencies. With the help of testing, it is possible to determine the level of professional and personal skills, and then to receive personal recommendations on their development. A special feature of this service is the ability to find a personal mentor in the area of interest and immediately sign up for an online meeting.
On the same site at the link You can get free online training to develop your skills.
3. 3. Make a financial model for starting a business
How will your business generate income? A financial model is an accounting and calculation of the company’s current and future cash flows, i.e. the economics of your business.
Write out for yourself the 4 main indicators :
- Product price : how much will you sell the product/service for?
- Demand : how much product/service will you buy per month?
- Production costs : how much will you spend to create a product/service?
- Fixed costs : what payments will you have to make all the time, regardless of the sales volume (e.g. rent payments)?
This is the basis for your future business plan.
By the way, the My Business Center can help you draw up a detailed business plan for free. Specialists in the center will work with you to calculate all the costs required to start a business, a calculation of the cost of production, a production and marketing plan, etc. 4.
4. Find sources of financing
After preparing a business plan, you will understand how much money you need to open a business. There is no single minimum amount for everyone, it is always individual, depends on the industry and many other factors. If you start you do not need raw materials and tools, you can start literally from scratch. If you need at least a minimum investment, then think in advance about where to find the money to start. Let’s give a few hints:
- Conclude . social contract and get 350 000 rubles for business development.
- Take advantage of a preferential microloan at a reduced interest rate at My Business” center.
- Take preferential bank credit to start a business.
- Take part in the grant program for young entrepreneurs under 25 years old or social enterprises.
- Receive an “Argostartup” grant for beginning farmers.
If none of these items work for you, consider who can become your business partner and contribute to starting your business.
5. Find out what documents are required for your chosen area of business
Some businesses require special permits and documents to start a business – licenses, certificates, declarations, patents, medical certificates, etc. In most cases they are not required, but if your activity will be connected to work with children, catering services, or, for example, the manufacture of food products, we recommend checking the legislation on this in advance.
To find out the exact list of documents required specifically for you, sign up for a free consultation at the My Business Center.
6. Deciding on a business location
This all depends on the scale of your project and what you plan to do. The cheapest way to start is to work from home, but that doesn’t apply to all types of businesses. You may want to consider the following sites for running your business:
- Business incubator
- Mobile commerce, fairs
- Non-stationary trading facilities
- Commercial or municipal office rental, manufacturing, warehouse, catering outlets
- Industrial and technology parks
7. Choose the legal form of business and the taxation system
Once the new entrepreneur has decided to start his own business, he faces the question of choosing the legal form and tax treatment of the company. Hasten to reassure – here everything is simple enough.
- If you will work and sell your own goods or services without hired workers – choose self-employment .
- If you will resell other people’s goods or engage hired workers – become self-employed. IE is almost always more profitable to keep on the “simplified tax system” (US). If the cost of goods is more than 60% of revenues – choose USN “income minus expenses”. If less – STS “income”.
- If you have partners – create a limited company.
To understand the intricacies and details of each regime will help you in the center of “My Business”. Get advice from subject matter experts in person at the office, by telephone, by e-mail or messengers.
8. Register your business!
Finally, it’s time for you to register your business.
- If you’ve decided to become self-employed, it’s as simple as possible: download the My Tax app and do a quick registration (on iOS or Android)
- If you have decided to open a sole proprietorship or a limited liability company, you can apply for registration at the My Business Center, MFC, tax office, notary’s office or banks.
To open a sole proprietorship you will need:
- a passport with residence registration
- The chosen types of activity (OKVED)
For registration of limited liability company have with itself:
- passports of founders
- Address (letter of guarantee in case of rent or certificate of ownership)
- A standard charter, which you can choose from at the Tax Service website
9. Launch your business
You have a lot of work to do: purchase equipment, tools and raw materials, hire staff, establish a stable output of quality product, as well as promotion and distribution channels.
You can save time and money by contacting the “My Business” center in your new status. Here you can receive:
- free professional consultations. In these centers there are lawyers, accountants and marketing experts (the latter will help to clearly define target audience, product range, sales channels), as well as HR-specialists
- assistance in filing an application for trademark registration
- Product placement on the marketplaces (which will allow you to expand your sales channels)
- assistance with development of corporate style, logo, website for your company
- profile seminars, courses and educational programs, where you will be helped to develop entrepreneurial competencies in the field of teambuilding, service, marketing, sales, etc.
10. Grow and scale your business
Item last (on the list, but not in life). Stay in touch with the My Business Center at all times. By attending business breakfasts, mitups, forums, you will expand your circle of acquaintances and find suppliers, business partners, employees and like-minded people.
- Participate in Russian and international exhibitions and business missions, and participate in specialized business communities and networking events.
- Try your hand at public procurement
- Package your business in a franchise
Being an entrepreneur means always keeping your finger on the pulse. It’s okay to make mistakes when starting a business, but with My Business, there will be far fewer.
Come for consultations, talk to the specialists of the center, so they can give you a more detailed orientation on services and support measures. “Hotlines and addresses of My Business centers can be found at link.