Building My Own Company Step by Step: Your MVST Startup Guide
If you’re unsure how to build a startup, we’ve put together a 13 step-by-step guide to show you how to found a company the right way. Follow the steps below to launch your business plan and you won’t need to worry about anything else. Every tip and trick you need you will find in this Guide.
13 Step-by-Step Startup Guide to Build Your Own Company
Many people dream of becoming the CEO and founder of their own business. Small businesses are emerging and since Covid, many founded their own Startup. And to be honest, what sounds better than being your own boss and making your own decisions about how to do business. Just look at Jeff Bezos and Bill Gates who started their entrepreneurship in a garage and join the ranks of the most successful people in the world.
Step 1: Set Your Mindset and Your Priorities Straight as an Entrepreneur
If this is your first experience with entrepreneurship, you might be in for a few surprises. Founding your own company and being a fresh entrepreneur comes with many ups and downs that you’ll need to be prepared for. You have to understand the commitment and responsibilities that comes with being a business owner:
Start by determining your “Why":
- Why are you founding your own company?
- Why are you becoming the CEO of your own company?
Once you know why you are doing it, stay focused on that when the going gets tough. If your “why“ is strong enough, you can withstand the many struggles new business owners face. Always remember: Success lies outside of your comfort zone.
Step 2: Market Research is Key
You’ll need more than just a great idea to build a successful company. Research the market before you start to ensure the time is right to launch your new business and increase your chances of a successful business. You do not necessarily have to invent things new but make sure your business idea has demand.
You can complete your market research by using existing sources, surveying potential customers, or completing your own research online. Remember that current sources are limited because the studies were not created for your specific needs. On the other hand, conducting your own research and collecting data can be expensive and take up your valuable time.
Complete the following steps when doing your market research:
Are many people interested in purchasing your product or service? Will they continue to be interested in the future, or is their demand temporary? Answering these questions will help you determine if there is a high demand for your potential new business. If you find that the demand is lower than expected, you might want to reconsider your new business idea.
2. Market Size:
How many people will want to buy from you? You’ll need to know your market size or how many potential customers you have for your new product or service.
3. Economic Indicators of Your Market:
Are your customers going to be able to afford your products or services? This information will help you make important decisions, such as pricing.
4. Customer Location:
Where are your customers? How can you reach them? Knowing your customers’ locations is essential to your product launch. Are your customers nearby? If not, how will your marketing messages reach them?
5. Market Saturation:
Review the market to determine how many alternatives your potential customers have to your product. What other options are already out there for them? What are the barriers to entry within your market? You’ll want to be sure there is room in the market for your new business. If it is already saturated with options, you might want to reconsider your new startup idea.
6. Pricing For Your Product or Service:
Use your competitor’s products in the market and your market economic indicators to decide how you price your products or services. What are people willing and able to pay for your offerings? What do they already pay for alternatives? Use this information to find a price that your market can afford but will still generate profit for you.
Step 3: Research Competitors to Your Founding Company
Once you understand your market, it’s time to learn more about your competition. Identify your competitors based on their products or services and the market segment they target. Keep an eye open for new product developments. Google Alert gives you the opportunity to notify you about new announcements from your competitors.
For each competitor, consider the following:
- Their current market share
- Their strengths and weaknesses
- Their target market and how it compares to your own
- Their possible advantages and how you could compete with them
It is also worth considering any indirect competitors who might not offer the same products as you but still compete for your sales.
This information will help you determine if this is the right time to enter the market. It will also help you see if any of your competitors will pose a risk to the future success of your company.
Step 4: Every Entrepreneur needs a Business Plan
Once you are confident that you will have a market niche for your business and be able to compete against existing alternatives, you will need a business plan. A business plan is a document that identifies the structure of your business, the details of your offerings, who you will sell to, and your general strategy for success.
A business plan is essential to the success of your new business, especially if you will be seeking funding from investors. Potential investors will want to see a long-term plan for your business to determine the likelihood of receiving a strong return on their investment. And yes, also small businesses need a business plan and a strategy. It will help you to stay on track with your development. That doesn’t mean, that you need a 60 page document with every step in detail, but you need a frame where you can later paint your picture in.
Your business plan should include the following elements:
- Market Research Summary:
This should consist of your research on your target market and competitors.
- Financial Analysis:
This analysis should summarize your startup costs and determine how much you will need to generate to break even. It should also provide your projected revenue based on product pricing, fixed costs, variable costs, and projected sales.
- Product and Service Offerings:
Your business plan should also detail the products and services you will offer and their projected pricing.
Step 5: Secure Funding For Your New Business
Before you find funding, you’ll need to calculate how much you need to launch your business. Funding is one of the most important things to consider when planning how to startup. In this Startup Guide we collected the most common ways on how to calculate your expected costs and expenses for your startup.
Omnicalculator is a website where you can find a bunch of startup calculators for every need. To be exact, it has 2747 free calculators to help you set your startup costs right. For example a Business Budget calculator for estimating the budget of your company or a build vs. buy calculator to find out if you should build your own website or rather buy one.
Some other startup calculators:
- Discounted Cash Flow Calculator
- Return on Invested Capital Calculator
- Payback Period Calculator
- Business Budget Calculator
- DPO Calculator
- Financial Leverage Ratio Calculator
So now you know how much money you need for you business and unless you are already a millionaire we collected a few funding options to consider for your startup capital.
These are the most popular ways of funding your startup
Apply for a commercial loan through your bank or a small business loan through the US Small Business Administration.
If you have the money, you can fund your business by paying for the startup costs yourself. Ask your family and friends to support you in the beginning if you need equity for a bank loan. This sort of funding is also often called bootstrapping - which means the owner pays for all business expenses.
Seek venture capital from investors who will pay your startup costs in exchange for an ownership share and/or active role in running your company.
Fund your startup by accepting money from individuals who want to see your business idea succeed. Crowd funders will not expect a return for their money or role in your company.
Get help as an entrepreneur from the ground up. Typically fee-based, an Incubator helps you by providing office space, access to partners for business consulting as well as administrational support, they often compare to a mentorship. They don’t require equity but also do not offer capital.
Venture Capital Funding:
Venture capital is privately held equity capital for start-ups that show great potential for long-term growth. Mostly provided by venture capitalists who manage these specialized businesses or funds, this money is often a classical "give-and-take" scenario, as they take equity by having a say in decisions concerning the company for funding your business. For example, one of the top Venture capital firms are Accel, Benchmark, Intel Capital or Index Ventures.
Small Business Grants:
The Small Business Administration offers grants to business owners that meet specific characteristics, such as veterans, minorities, and women.
An angel investor provides capital to a company, mostly startups, usually in exchange for convertible debt or equity. They usually support startups in the early stages, when most investors are not willing to support them. You can find Angel investors through LinkedIn but there are also some websites like Angel List or Angel Investment Network.
Step 6: How to Structure Your Startup Business as the CEO
In this Startup Guide we show you four legal business structures to choose from with their pros and cons, however there exist more but we wanted to focus on the most common ones.
You own your business and are responsible for all debts and obligations that arise from it.
- low cost process
- less government regulations
- advantage on Tax payment
- sole beneficiary of profits generated
- easier to manage
- whole liability
- limited capital raising or funding
- higher tax incidence
- limited in growth and expansion
You own your business with one or more other people with whom you share personal liability.
- possible tax advantages
- additional source of investment
- broader management base
- limited regulation
- unlimited liability
- lack of continuity
- possible differences among partners
- Decision making takes longer
You create your business as a separate entity from yourself, able to own property, pay taxes, and take on liability associated with doing business
- limited liability
- transfer of ownership
- perpetual life
- external source of investments
- expansion potential
- double taxation
- conflict of interest
- complex process
- lack of business confidentiality
- extensive rules
Limited Liability Company:
You create your business as an LLC, which allows you to keep the personal tax benefits of a partnership while maintaining the legal protections of a corporation.
- limited liability
- competitive tax advantages
- distribution flexibility
- credibility & reputation
- less legal requirements
- Difficulty in raising capital
- Regulations are not the same everywhere
- no perpetual existence
- Difficulty in ownership transfers
Step 7: Register Your Company with the IRS and Government
Once you know how to structure your business, you can register with the IRS and your state government.
What do you need for the registration:
- Incorporation Certificate Before you start, you will need to create articles of incorporation, that includes your business details. This document will consist of your business name, purpose, structure, and other information. LLCs will also need to create an operating agreement.
- Employer Identification Number When you register with the IRS, you will receive an Employer Identification Number (EIN). You will use this EIN to file your taxes. You are only required to get an EIN for your business if you have employees.
- Shareholder Agreements To ensure fair treatment of your shareholders and define the relationship between other shareholders. Between shareholders and the cooperation, you will need a stock purchase agreement that determines the quantity of shares to be acquired, the price and the terms of payment.
- Business License Some businesses must obtain a business license from their local city hall before beginning operations. You may need professional permits or licenses to conduct business or drive relevant vehicles in specific trades.
- Sales Tax License You may also need a permit to collect sales tax on your products or services. Once you register with your state, you will receive a permit to do this legally. You can check your state’s requirements at your state website.
Step 9: Consider Your Insurance Options and Purchase a Policy
Consider what types of insurance you need to protect your business. You’ll need coverage you will also need liability insurance to protect against damage or injury to yourself or others.
Business Insurances you definitely need:
A Business Owners Policy (BOP) combines business property and general liability insurance. The first one protects your building and belongings in claims of natural disasters, theft, vandalism or other covered events. The second one covers claims that could arise from your business operations, including claims for bodily injury or property damage, and claims related to personal injury and advertising damage.
A Workers compensation provides income compensation to injured workers and pays for medical expenses if they are injured while at work.
Data & cyber breach liability insurance: If your business processes or stores customers' personal information, you probably need data break liability insurance. This insurance protects your business in the case you are being sued, penalized or may eventually lose your business due to a cyber attack or hack. It provides you with the resources to respond swiftly, mitigate further damage and restore customer trust. (you should also think about some cyber security at one point)
Step 10: Set up Your Books and Financial Software To Guide Your Startup
Once your business is up and running, you’ll need to track your costs, profits, and performance because if you lose track of your expenses and billings, your startup won't last long. Many software options can help you do this on your own or with the help of an employee.
Here are some of the best accounting software for startups that we picked for you:
- Wave - if you’re on a budget this accounting software is for you
- QuickBooks Online - ideal package for any kind of startup
- Oracle NetSuite - cloud-based all-in-one ERP solution for larger startups and businesses that require inventory management
- Zoho Books - for small businesses to medium-sized startups who need an ERP solution on a budget
- GoDaddy - for small retail startups, this is the most suitable accounting software
- FreshBooks - the most popular accounting software, comes with a feature-rich platform
If you aren’t comfortable doing your own books, consider hiring a bookkeeper or a CPA who can help you get organized. A CPA will be especially helpful during tax season when you need to file taxes on behalf of your business.
Step 11: Establish Your Physical and Online Space
Now that your business is ready to go, it’s time to establish your physical and online spaces for doing business. Set up your physical location to be clean and welcoming to your new customers.
Even if you are not planning to sell products online, you should still set up a website for your business. Potential customers need to be able to find your business in the digital space. You can pay for a professional website or use a free website builder to design your own.
Step 12: Grow your Customer Base
First of all, what is a Customer Base? It’s a bunch of people who are buying your product or your service over and over again. A solid Base of Customers is important since this is where you generate the most financial value. You have to be aware of who your potential customer is, to target the right people. Marketing is the tool that helps you to approach the right target group.
How to build and grow a Customer Base:
- You need running social media accounts, whatever fits best to your target group e.g. Instagram, Facebook, Pinterest, TikTok, LinkedIn etc.
- Start cooperations with bigger brands to make your new business more known
- E-Mail Newsletter Campaigns can also help you to grow your Base. There are several tools like mailchimp that support you with that
- LinkedIn and other networks can help you find people that have similar or are substitutes to your product or service
- Your Customer Service has to run smoothly. Without a proper Customer experience you run the risk of losing customers because of unsolved issues
- Ask your Customers for Feedback
- If you offer a Service: offer free testimonials, so potential customers can try before they buy
Step 13: Hire Employees to Assist You As Founder
You’ll need to hire employees to help you bring your business to the next level. You might be a great CEO and have the next best idea in your field, but surrounding yourself with those with other talents will help your business thrive.
Consider hiring a team that fills the gaps in your own expertise. The right team will help your business grow to new heights.
Useful team members to efficiently grow your business could be:
- a professional with finances/accounting
- a professional with Human Resources
- a Marketing Professional
- a Developer/tech expert
- a Sales expert
What Can You Do With Your Idea? How to Have a Successful Business
You can use a great idea in many ways to start a successful business. The best ideas come onto the market to solve a problem. What problem is your great idea solving?
If you’re not sure that your idea is ready for the market, consider other ways to use the same idea in a more marketable way. Can you tweak the delivery of a product or service to make it more desirable? Can you adjust it to make it a better fit for your target customers?
A great idea can often be reimagined in various ways. If yours isn’t working, try repurposing it to better fit the existing market needs.
Don'ts When Founding a Startup
There’s a lot to learn about how to start a startup. Here are a few common pitfalls to avoid during the process.
1. Don’t Try to Do It Alone (Even If You Are A Great CEO)
One of the first things you’ll learn about how to build a company is to create a stellar team to help you grow your business. Consider opening as a partnership and choose a partner(s) that will complement your abilities. In other words, look for people who are good at the things you struggle with and accept their help and advice.
2. Don’t Choose a Name That’s Already Taken For Your Company
A common mistake new business owners make is to become invested in a name that is already taken. Because business names are registered at the state level, it’s essential to search more than just your state’s business registration. State databases are not connected, so this will not tell you if your name is used somewhere else.
Search nationwide trademark or copyright databases to see if your business name has been taken. Use Google or another search engine to see if any businesses use the name online.
3. Don’t Let Your Legal Documents Lapse
Depending on how you register your business with the state, you must submit certain documents every year. These can include any articles of incorporation or operating agreement. Take note of when you will need to submit your documentation so that nothing slips through the cracks.
You can hire a Registered Agent to handle the paperwork with the state for you. These services range in price depending on what you use them for and can be an excellent option for new founders still learning how to open a business.
Websites You Need As Founder or Co-Founder of a Start-Up
Here are a few websites every new business owner will find helpful:
- Small Business Administration
- Small Business Administration Small Business Grants
- Small Business Administration Small Business Loans
- Small Business Administration Business Counseling
- IRS State Websites for tax guidelines
Is Everything Legal? Small Business Legality
Make sure your business is set up to succeed from a legal standpoint.
Some states will not require you to register until you’ve generated a certain revenue. Others will only require specific services to charge sales tax, and the amount will vary with the type of service.
It’s always best to check your state guidelines to learn the specific requirements for doing business where you live. You can get this information from your state’s website or from a consultation with a business attorney.
Most states will require you to do the following to operate legally:
- Register your business with the state
- Register with the IRS to receive your Employee Identification Number for Tax Purposes
- File taxes for your business
- File sales tax returns for your business
It is also good to purchase copyrights, trademarks, or patents to protect your intellectual property. Other ways to protect your great ideas are trade secrets and confidentiality agreements. These can prevent employees and others you work with from stealing your intellectual property.
Now that you’ve read our guide on how to start a small business, you are ready to get started. Follow our steps to open your own business and become a successful CEO. Most important: Be sure to complete all the paperwork to legally register with your state before you open your business. There will be some hurdles along the way to a successful Entrepreneur, but don't let these hurdles stop you from fulfilling your dreams. Where there's a will, there's a way!