Launching a Tennessee Startup
Are you ready to start your own startup company?
If you’re reading this, you most likely are ready to be your own boss and create a Tennessee startup of your own. However, you can’t become an entrepreneur just by wanting it. If you mean business about launching your startup in Tennessee, these are the eleven steps you need to take to get started.
1. Determine if You Have What It Takes to Found a Startup
Launching a startup is not for the weak at heart.
Starting and growing any business takes dedication. Launching a startup takes even more.
Although there are numerous types of entrepreneurs, there are a number of common characteristics often attributed to startup founders. Some of the most important entrepreneur characteristics are passion, creativity, motivation, and self-discipline. Entrepreneurs also have to be adaptable, observant, and willing to take risks.
Creating a startup in Tennessee is not just coming up with a great idea. It also involves building your entrepreneurial network, planning your startup, funding your startup, registering your startup, setting up an accounting system, marketing your startup, and growing your startup. If this sounds like a lot, it’s because it is.
But, that shouldn’t stop you from starting the startup of your dreams. In fact, Tennessee has several advantages to offer entrepreneurs planning to start a startup in the state, such as:
- Low corporate tax burden
- Business-friendly regulations
- Right-to-work state
Launching a Tennessee startup is probably going to involve you doing a lot of learning. But, don’t worry. There are a lot of resources to help you along your entrepreneurial journey. Here are some great learning resources for aspiring startup owners in Tennessee:
- Tennessee Smart Start - This small business guide is comprehensive and thorough. It will give you all the basic instructions you need to launch your business in the state.
- Tennessee SmartStart - This is a resource for entrepreneurs interested in starting a business in Tennessee. It can guide you through the process and connect you with resources like mentorship.
- Knoxville Business Resource Guide - The City of Knoxville offers a guide for new businesses interested in setting up shop in Knoxville.
Recommended: Are you ready to create a Tennessee startup and become an entrepreneur? Take the Entrepreneurship Quiz to find out!
2. Choose, Develop, and Refine Your Startup Idea
If you are looking for startup ideas for your business in Tennessee, one of the first places to begin your search is by looking at what you already know. This includes your capabilities, skills, interests, and passions. The most common sources of business ideas draw from people’s work experience, education and expertise, hobbies and personal interests, and technological knowledge and skills.
You should also consider how close the startup idea is to your sweet spot. What is your sweet spot? Think of it as the place where your capabilities and skills and your interests and passions all align with an attractive opportunity. When brainstorming or searching for ideas for startups, look for those within this sweet spot.
Attractive startup opportunities, those created with rapid growth in mind, are desirable, feasible, sustainable, and timely. Feasibility indicates that you have, or can acquire, the skills and resources needed for the project. Desirability means you want to do it — the risk vs. the reward is worth it to you. Sustainability means that it will last and is economically viable, socially responsible, and environmentally friendly. Timeliness means that now is the right time for the market, the idea, and also for you.
Tennessee is home to numerous industries and business sectors. Some have been around for as long as the state has existed. Others are newer to the scene but quite influential. Some of the most important industries in Tennessee are:
- Agriculture - The agriculture industry produces over $50 billion each year for the state’s economy. Some of the larger players in this sector include General Mills and Pure Foods.
- Entertainment - Nashville is a major location in the music industry. The music industry accounts for over $10 billion in economic output for the state.
- Advanced Manufacturing - The state produces a variety of advanced products, including porcelain tile, automotive parts, and whisky. The Made in Tennessee label can be found on numerous products inside and outside the country.
- Health Care - There are nearly 350,000 employees in this sector in Tennessee. The state produces surgical tools, pharmaceuticals, nutrition supplements and much more.
Recommended: TRUiC’s free business ideas generator allows you to explore a curated list of business ideas according to your interests and capabilities with just three easy steps.
Analyze the Industry Landscape and Develop Your Idea
Before you launch a startup in Tennessee, analyzing the state of the industry landscape, including the funding environment, the market size, and the competitive landscape, is vital to launching a successful startup. The goal of doing this is to establish whether there is ample opportunity within the industry to support your entrepreneurial goals.
In order to launch a Tennessee startup, you will need some amount of funding, whether you choose to save your own money (“bootstrap”) or seek investment from venture capitalists. Answering these questions should help you establish what you need to know about the funding environment of your chosen industry. It could also potentially lead to more industry-specific questions that will provide you with the answers you need to get started, such as:
- What are the common startup funding sources for this industry?
- What type of funding will my startup need?
- What startup stage does my company need to be at in order to acquire adequate funding?
- Is funding highly competitive in this industry?
Analyzing the competitive landscape gives you a better idea of your startup’s unique value proposition (UVP), allowing you to focus on pivoting the business model to make your startup stand out. There are two ways to conduct a competitive landscape analysis — researching your competitors and identifying the market structure.
Analyzing Your Competitors
Start by identifying who your competitors are, the impact they have on your Tennessee startup (are they primary competitors or secondary competitors), as well as their content, marketing strategy, and social media.
Then, evaluate the data you’ve collected to establish their strengths and weaknesses, target markets, and the threat they could pose to your startup’s success. Pay attention, additionally, to the challenges startups in the industry are currently facing and how you could approach the problem from a different angle to set your startup apart. It can also be helpful to look at innovations from different industries to identify ideas you could apply to your industry and startup.
Next, you need to establish the industry’s market structure. There are three distinct market structures: winner takes all (WTA), winner takes most (WTM), and fragmented.
A winner-takes-all market (you can think of this as an oligopoly or duopoly) is when one or two companies dominate the industry or at least 80% of industry market shares, such as Google or Amazon. A WTA market is categorized as such by a few factors: scalability, global distribution capabilities, and network size that allows them to offer extremely competitive pricing smaller companies can’t offer. In addition to this, the cost to switch from a top company to a smaller competitor is high.
A winner-takes-most market, comparatively, is defined by the top ten companies in the industry taking the largest percentage of market shares. An example is the ride-share industry, which is defined by companies like Uber, Grab, Bolt, and Lyft. This is an ideal market for venture capital-focused startups because it offers high scalability and more opportunity. A WTM market is categorized as such by a few factors: multiple services or products are able to operate simultaneously (such as Facebook and Twitter), the network is more localized and less global, and there are antitrust regulations in place.
A fragmented market means no company owns a majority share of the market, and therefore, no company has market influence. Typically, these businesses will not grow to venture scale. A few of the common industries of this type are creative businesses, retail, and distribution. Industries that are part of fragmented markets tend to have low entry barriers and scalability isn’t a focus as it's not necessarily beneficial to these startups.
Market Size and Demographics
Market size varies greatly by industry. It is critical to understand the market your Tennessee startup has available to it, including the market size as well as consumer locations and demographics such as age, gender, and average income.
An effective analysis of a startup’s potential market makes it easier to assess the opportunity available (or lack of opportunity) and plan more effective marketing and product development strategies. Consider industry trends and where there may be creating new pain points, new sources of demand, or new/underserved market segments.
An effective tool to establish market potential for your startup is studying Tennessee demographic information provided by the most recent Tennessee census. For example, if you’re developing a product that is geared toward younger people, you know the percentage of the population that is under 18 years old in Tennessee is roughly 22%.
The value of your industry today is essential information to understand the state of the market and the industry’s impact. But, what does research show about the industry’s projected growth? If the industry is growing fast, do some research to identify the factors that are driving that growth.
Additionally, try to recognize a segment of the industry where existing products or services aren’t meeting the needs of the market. Pain points in the industry that aren’t being addressed (or addressed well) offer an opportunity for you to make your stamp on the industry.
Research and Refine Your Idea
Now that you’ve got a basic understanding of your industry, competitors, and the industry’s projected growth, your next step is to research and refine your startup idea. There are two common rules of thumb you should keep in mind when refining your startup idea:
- The product or service should be 10 times better than the existing solution.
- The product or service should solve the problem, not simply supplement it. (i.e., a painkiller instead of a vitamin)
If your product or service will cost more than existing solutions, you are going to need to work harder to get customers to adopt the new product or service you’ve created. It can be difficult and expensive to gain traction with an “evolutionary” innovation; however, it isn’t impossible. And, while this is especially true for higher-cost products, it can still apply to cheaper products that aren’t necessarily easy for consumers to adopt.
Fortunately, there are ways to prepare for pitching your product or service to potential customers:
- Conduct interviews with customers you think might buy this product. Ideally, you will be able to use this insight to refine your value proposition or target market, if necessary.
- Use tools and software available to discover, organize, and learn from industry and market data. Some popular tools are Statistica, Think With Google, KNIME, and PickFu.
- Utilize startup incubators or startup accelerators in Tennessee to network with other entrepreneurs that can help with brainstorming and fine-tuning startup ideas.
3. Craft Your Story
Create a Business Model Canvas
Once you have zeroed in on a startup idea, you will then need to develop your idea into a viable startup in Tennessee. This is the process of business planning. And, one of the first steps in business planning is writing it down.
Whether you begin with an informal or formal business plan, the process of writing your business plans down requires you to think through all of the key elements of your Tennessee business. It allows you to take an in-depth look at your industry, market, and competitive position. It helps you set goals, determine your keys to success, and plan your strategies. It requires you to explore your financial projections and manage cash.
There are many different types of business plans, depending on the stage of your Tennessee venture and the purpose of your business plan. In the earliest stages of your business idea, you may want to start with an informal business plan such as the business model canvas.
Once you are ready to begin seeking investments, you will most likely be required to provide a formal business plan to lenders and potential investors.
The business model canvas, created by Eric Ries in his book The Lean Startup, helps map out the nine key areas of a startup. These nine areas include:
- Customer Segments — describes your target market(s)
- Value Proposition — depicts the value that your product or service provides
- Channels — summarizes how you will communicate with and reach each customer segment
- Customer Relationships — describes the types of relationships (and how) you will establish with each customer segment
- Revenue Streams — reports on how you plan to generate income from each customer segment
- Key Resources — describes the assets required to make your business model work
- Key Activities — describes the most important activities your business in Tennessee must do to make your business model work
- Key Partnerships — identifies who you will be forming relationships with in order to maintain customer relationships, reach customers, acquire resources, and complete key activities
- Cost Structure — provides an overview of the cost structure to operate your business model
Create a Pitch Deck
Before you secure funding, there are a few things you need to have in place to increase the likelihood that your pitch is successful, whether you’re reaching out to angel investors or attempting to acquire a small business loan. The most important being your pitch deck.
Crafting a compelling story is essential, not only to the success of your startup but also to creating an impactful pitch deck. This is one of the most important differences between a pitch deck and a business plan. The latter is more of a business execution plan than a depiction of the company’s vision. Additionally, you should also think about your elevator pitch, a 30-second pitch that includes the pertinent information about your company in Tennessee that will appeal to an investor.
A startup’s pitch deck should include the following:
- An introduction to your startup
- Examples of problems or issues your startup aims to solve
- Examples of the solutions your product or service provides
- The size of the market and opportunity
- A clear description of your startup’s product or service
- An outline of the projected growth, major goals, and future steps
- An introduction to your core team members
- Define your competitors and establish your competitive advantage
- Prove your financial planning and management ability
- A description of how investment funds will be used and why you need them
A few business planning resources in Tennessee include the following:
4. Build Your Founding Team and Entrepreneurial Network
Startups with two founders are 19% less likely to scale prematurely than solo founders. Research shows that entrepreneurs launching a startup without a co-founder take 3.6 times longer to see significant growth — enough to outgrow the volatile startup stage.
Despite these statistics, not all entrepreneurs need a co-founder to be successful. Bringing on co-founders is all about filling important gaps to ensure all of the company’s needs are met, such as:
- Skills gaps
- Leadership experience
- Industry knowledge gaps
- Startup experience
- Fundraising experience
- Personality gaps
If you do choose to bring on a co-founder, you need to have a founders’ agreement. This document outlines all expectations now and in the future — including roles and responsibilities, vesting, anticipated roles (i.e., CEO), expected capital contribution, equity or compensation, and time commitment. For example, if you are going to utilize venture capital, you will most likely want founders to agree to a full-time commitment.
Find Advisors if Needed
Startup advisors can be especially helpful during the beginning stages of startup ownership if you aren’t fully confident in a specific aspect of business ownership, such as legal and compliance requirements, marketing, or manufacturing. Additionally, startup advisors are helpful in making key introductions to help your Tennessee startup grow as well as helping develop ideas and concepts for the company.
Depending on the type of startup you’re launching, there are two common methods for finding a startup advisor. For high-scale startups, investors (venture capitalists or angel investors, typically) are often great startup advisors. However, if you’re launching a business that doesn’t have high growth in mind, you can find startup advisors through resources such as Nashville SCORE or the Tennessee Small Business Development Center (SBDC).
Keep in mind that it’s important for all parties involved that you create an advisor agreement. This document solidifies the terms of your relationship, whether that means solidifying that the advisor is compensated with equity or simply outlining the time commitment and method of communication.
Hire a Lawyer if Needed
The next step is learning how to find a great lawyer for your startup. What makes a good startup lawyer, essentially, is understanding the nuances of startups, such as establishing deal terms with venture capital firms and applicable business taxes.
Every company should build a relationship with a lawyer to help with all of the legal requirements associated with forming and operating a business. Not only will your lawyer be essential in ensuring that your startup in Tennessee is legally formed without a hitch, they can help ensure that your business stays compliant if you plan to implement customized vesting schedules or share allocations.
To find a lawyer for your Tennessee startup, you first need to establish your startup’s legal needs. Once you know this, you can move on to finding the right lawyer for your startup using these resources.
Network Network Network
Networking is one of the most impactful tools for startup entrepreneurs to grow and support their businesses. There are many different networking resources available to Tennessee entrepreneurs, such as startup incubators, networking events, and local entrepreneur communities to make connections. To develop the most impactful networking strategy, you need to connect with a wide range of people, such as:
- Fellow entrepreneurs or founders
- Advisors or mentors
- Potential customers
- Industry leaders
- Members of your local startup community
- Training programs
- Hackerspaces and makerspaces
- Connections to investors
- Online communities
One place to expand your entrepreneurial network is within your local startup community in Tennessee. Many communities have thriving entrepreneurial ecosystems, with numerous opportunities to network within your local community.
In addition to providing opportunities to build your entrepreneurial network, your local startup community in Tennessee may provide a host of additional resources, including training programs, mentoring, the use of hackerspaces and makerspaces, and connections to investors.
Another place many entrepreneurs turn to for advice is local SCORE mentor programs. SCORE is a network of more than 10,000 expert business mentors across the US that provides free mentoring to startup and small business owners. Find a mentor by visiting the Tennessee SCORE website.
Some startup networking resources in the state of Tennessee include the following:
- Total Networking Team - This Knoxville-based networking organization brings business owners and professionals together. It hosts events regularly where you can meet other entrepreneurs.
- Tennessee Valley Business Network - Here you will find a variety of events targeted towards business owners who want to make a difference.
- Business and Professional Women of Tennessee - You can connect with other women business owners and professionals here.
- UTRF Business Incubator - The University of Tennessee helps new business owners by providing incubator services.
Wherever you decide to turn, it is never too early to work on building your entrepreneurial network and getting involved in the conversation.
5. Formally Establish Your Tennessee Startup
Name Your Startup
Naming your Tennessee startup is a very important consideration. Choosing an optimal name depends on the type of business, industry, and target market.
You can confirm your business name's availaility by using the business name search on the Secretary of State’s site. Once you verify your name is available, you can register your business through the state’s online portal.
If the name you were hoping to use is already in use, you will have to come up with another. If you end up having trouble coming up with a name, here are a few tools that might help:
- How to Name a Startup: TRUiC’s How to Name a Startup guide discusses how to choose a name for your startup, register your startup’s name, and find a domain name for your business.
- Business Name Generator: TRUiC’s free business name generator allows you to search for available startup names by keyword, location, and industry.
- Business Name Generator by Industry: TRUiC’s business name generator provides names for a variety of industries so you can find an available startup name that aligns with your business goals.
- Business Name Generator for Local SEO: TRUiC’s business name generator for local SEO fine tunes your startup name options to optimize your site traffic locally using your city in Tennessee and keywords.
Choose a Business Structure
One of the first things you will need to do to establish your startup in Tennessee as an actual business is to choose your business structure (i.e., the legal form of your startup).
Choosing the legal structure of your Tennessee startup, in part, depends on (1) whether you are launching your startup alone or with co-founders and (2) the stage and growth plans of the venture.
Many startups begin as sole proprietorships and general partnerships. They begin as an idea, or a hobby, or as a low risk way to test and validate an idea.
Sole proprietorships and general partnerships are informal business structures. In informal legal structures, the startup is considered an extension of the owners, and the owners bear the tax and liability burdens of the business.
However, as the idea evolves and launching a startup begins to look more likely, the need for a formal business structure emerges.
LLCs and corporations are the two primary types of formal business structures. These forms of legal structures require registering your venture with the state as an independent entity. Because the venture is an independent entity from its owners, formal legal structures provide liability protection for the owners and unique tax benefits for the business.
The most popular business structure for startups with aspirations of high growth is the C corporation. This is because most investors prefer C corporations. A C corporation (C corp) has investor-friendly taxation rules, simple transfers of ownership, and natural exit strategies, and many angel investors and venture capitalists will not invest in ventures that are not incorporated.
To start a corporation in Tennessee, take the following steps:
- Create a Name For Your Tennessee Corporation
- Choose a Tennessee Registered Agent
- Choose Your Tennessee Corporation’s Initial Directors
- File a Domestic For-Profit Charter
If you decide an LLC is the best choice for your startup, you can start an LLC in Tennessee by following these steps:
- Name Your LLC
- Choose A Registered Agent
- File TN LLC Articles of Organization
- Create an Operating Agreement
- Get an EIN
For more information on business structures, read our guide on How to Choose a Business Structure.
Choose a Location
Generally, the best location to start your startup is the state you’re already located in. Starting a business in a state other than the one you’re located in requires more complicated paperwork and complex tax requirements. However, if you’re thinking of starting your startup in a state other than Tennessee, some states are more business-friendly than others.
For example, many founders choose to incorporate their startups in Delaware due to their immense business-friendly policies. Startups that form in Delaware are able to do business in other states and therefore bypass the state income tax — a huge tax advantage for any business. However, this isn’t the case in every state. We recommend consulting with a tax professional or attorney before deciding to do business in another state.
Choosing the right location to start your Tennessee startup is crucial to its success. Tennessee boasts several great places to start your business, whether it is an established startup hub or an up-and-coming locale that offers incentives for new startups.
- Franklin — A short distance from Nashville, Franklin offers strong economic growth and a large number of successful businesses.
- Alcoa — Close to Knoxville, Alcoa boasts a litany of government incentives for small and new businesses.
- Pigeon Forge — Primarily known as the home of Dollywood, Pigeon Forge has dedicated government time and resources to supporting business growth in the city as well as stimulating economic growth.
Create a Founder Employment Agreement and Vesting Agreement
Startup founders aren’t typically bound by severance agreements that would be applicable to other employees. Instead, founder employment agreements represent the legal agreement between the founder and company.
A vesting agreement is an agreement between the company and a shareholder (typically an employee) that provides restrictions for the shareholder’s ownership of the company. In short, the employee will not be granted their share until the vesting requirements are satisfied.
Formalize Advisory Agreement
If your Tennessee startup chooses to involve advisors and equity is involved in the relationship, you will need to also formalize an advisory agreement. Essentially, this means that all the requirements and stipulations of the relationship between your company and the advisor are outlined, including terms of equity and confidentiality.
Create Cap Table and Issue Shares/Certificates
A capitalization table, otherwise known as a cap table, is a document (such as a spreadsheet) that outlines the equity capitalization of your startup company. The cap table outlines your startup company’s securities (e.g., stocks, warrants, certificates, etc.), who owns each security, and the percentage of ownership they have.
Next, you will want to issue shares or certificates of your company to each party based on the cap table you’ve created.
Establish Corporate Governance
Corporate governance is essentially the rules, regulations, and guiding principles that govern a company. Not only does the corporate governance provide much-needed structure to help the startup obtain its goals and objectives, it balances the needs of each company participant. From shareholders to employees and the community, corporate governance ensures every need is balanced and met.
Register Your Tennessee Business with the IRS
It is recommended that one of the first things you should do is register your business with the IRS by obtaining an Employer Identification Number (EIN). An EIN is the IRS’s way to identify a business.
There are several reasons you may need an EIN for your Tennessee business:
- EINs are required for many business structures such as corporations, partnerships, and multi-member LLCs.
- EINs are also required if you have any employees.
- Most banks require you to have an EIN to open a business bank account.
Register Your Business for Sales Tax
Depending on the nature of your product or service, you may need to collect a sales tax.
You can register your business with the Department of Revenue in Tennessee through the Tennessee Taxpayer Access Point (TNTAP).
Obtain Licenses and Permits
In addition to registering your business, you will likely need to obtain a number of licenses and permits from your local, state, and federal government.
Federal Permits and Licenses
If your business falls under the regulation of any federal agency, you will likely need to obtain the appropriate permits from that agency. These include commercial activities in:
- Alcoholic Beverages
- Firearms, Ammunition, and Explosives
- Fish and Wildlife
- Commercial Fisheries
- Maritime Transportation
- Mining and Drilling
- Nuclear Energy
- Radio and TV Broadcasting
- Transportation and Logistics
For more information on federal licensing, visit the Federal Licenses and Permits page on the sba.gov website.
State Permits and Licenses
Most businesses are required to file for a permit or license to operate legally within their state. The permits and licenses you may need vary widely by state and type of business.
To find out more about the permits and licenses in your state, use TRUiC’s Business License guide to find business license resources for your state. You can also check out the Licenses & Permits section of the Tennessee State government site.
Local Permits and Licenses
Most businesses will need some kind of local license or permit to legally conduct business within their town, city, or county. These may include anything from occupancy permits and food and beverage permits to special permits and licenses for signage, lighting, and noise.
You will need to check with your local county clerk’s office about the types of licenses and permits required.
Get Business Insurance
Most startups will need insurance in one form or another. Some forms of insurance, such as worker’s compensation or unemployment insurance, are required by your state. Other forms of insurance may be optional but are important to protect you and your company from disaster.
You may choose to carry several types of additional insurance, such as general liability, professional liability, property, or auto, among many others. Or, you may choose to bundle several types of insurance together in what is known as a business owner’s policy.
To learn more about the types of business insurance you may need, or search for our specific guides on business insurance recommendations in over 650 types of small businesses, make sure to read our Small Business Insurance guide.
When you are ready to start shopping for business insurance, read our guide on the Best Small Business Insurance Companies.
Protect Intellectual Property (IP)
Protecting your Tennessee startup’s competitive advantage means you need to obtain the proper patents, copyrights, and trademarks to ensure your intellectual property (IP) is protected. By registering ownership of intellectual property, you mitigate the risk of competitors utilizing the ideas, designs, or concepts that are protected.
Furthermore, developing a Founder Intellectual Property Assignment Agreement essentially transfers the founder’s IP rights to the company, allowing the startup to utilize the IP while still maintaining its protection. Since founders are typically also shareholders in the company, they still benefit financially from their IP.
6. Get Startup Funding
Startups require funding for a number of reasons. Startups often need capital to cover their initial expenses until they become profitable, and they need money again to expand, grow, build inventory, and even get through slow seasons.
When planning your business in Tennessee, you should determine what types of business funding options your company will need and when. You need to be completely aware of startup costs and your financials and financial projections before seeking outside funding. Knowing exactly what you need and when is the best way to choose the right kind of funding.
It is worthwhile to consider fundraising when you are starting your business - but also at critical stages in the future. Once you know what you need and when you will need it, you can determine where to get the funding. Are you at the right stage to seek venture capital funding? Perhaps seeking funding from friends and family would be better?
Investors are going to want to see your business plan - which is why you should always have your documents in order before seeking funding. But, investors may not be willing to go through the whole document at first. That’s where a pitch deck comes in. It’s a brief presentation that gives an overview of your business plan. Develop a pitch deck before you step out and start knocking on doors.
Don’t be too discouraged if you hear “no” the first few times you seek funding. That’s normal. Even if it takes a hundred requests before you get what you need, it’s still good that you are putting yourself out there. The more you network, the more opportunities are likely to come your way.
The most common types of business funding are:
- Self-funding using your own assets
- Friends and Family Loans
- Business Loans
- Business Credit Cards
- Business Grants
- Angel and Venture Capital Investors
Before you secure funding, there are a few things you need to have in place to increase the likelihood of your pitch being successful whether you’re reaching out to angel investors or attempting to acquire a small business loan. The most important being your pitch deck.
A startup’s pitch deck should include the following;
- An introduction to your startup
- Examples of problems or issues your startup aims to solve
- Examples of the solutions your product or service provides
- The size of the market and opportunity
- Give a clear description of your startup’s product or service
- Provide an outline of the projected growth, major goals, and future steps
- Introduce your core team members
- Define your competitors and establish your competitive advantage
- Prove your financial planning and management ability
- Describe how investment funds will be used and why you need them
Keep in mind that your Tennessee startup will require different funding sources during different stages of development. For example, during the seed stage, bootstrapping or friends and family loans may be the best funding choice. However, as your startup becomes more established and reaches the growth stage, venture capital or angel investors are more likely to want to invest.
That isn’t the only factor you need to consider, however. The type of startup you’re operating also plays an important role in determining the right funding source.
Before you get to know potential investors, you need a pitch deck or similar material in place that details who you are, what your startup is about, and why it is a good investment.
Then, you need to put yourself out there. Networking is the best way to generate startup funding — a warm introduction goes a long way with potential investors. But, keep in mind that you probably won’t be successful right away. The road to starting a successful startup isn’t easy, and securing funding is no exception. Prepare yourself for potential pitfalls, rejection, and be ready to combat demoralization to keep your momentum going.
The goal early on in this process is to learn to sell yourself and your startup and to leverage each meeting for new connections.
The best way to meet potential investors is without a doubt networking and a warm introduction; the more you put yourself out there to get to know investors such as VC firms, the more likely you are to find funding. There are also plenty of business resources in Tennessee that can help you explore financing options and secure funding. Here are a few to consider:
- TNInvestco Funding - Startup businesses can apply for funding through TNInvestco by filling out this form and submitting it. This is a state-sponsored venture capital fund.
- SBA Express Loans - The Small Business Administration works with lenders in each state to help provide funding to entrepreneurs.
- USGrants.org - This site keeps a running list of grant opportunities for small businesses in each state. These are the grants available in Tennessee.
7. Set Up Accounting for Your Startup in Tennessee
Business accounting is an important (and required) aspect of operating a startup in Tennessee. Accounting allows you to know how you are performing financially, track benchmarks and goals, and lets you know how much your startup is worth. In addition to serving legal and tax-related purposes, you also need an accounting system in place to accept payments, pay your employees, and manage your startup’s finances.
There are a number of options for handling your business accounting, including hiring an in-house accountant, hiring a bookkeeper, using a payroll service, or using small business accounting software. However, no matter how you handle your Tennessee startup’s accounting, you will need to have an accounting system in place.
Recommended: Schedule a consultation with a business accountant today to find out how much time and money your business could save on tax, payroll, and bookkeeping services.
8. Establish Your Brand and Business Presence
Just because you build an awesome product, service, or experience does not mean that customers are going to show up at your door. You are most likely going to need to find them first and let them know about your startup in Tennessee. You will need to build your brand.
Design a Logo
One of the first things you will need to do is to design a logo for your brand to begin building awareness and recognition. A well-designed logo helps people to identify and remember your brand and builds trust.
Build a Business Website
Every legitimate business needs a website. And sooner than later, your startup in Tennessee is going to need its own website too.
If you have never built a website before, don’t worry. It is easier than ever, and TRUiC’s How to Build a Website guide walks you through it.
When choosing a website builder, there are many to choose from depending on your needs. Website builders like GoDaddy offer a multitude of features, functions, abilities, and applications based on your company’s needs.
One thing to keep in mind when designing and writing content for your website is your search engine optimization strategy. Search engine optimization (SEO) is the process of increasing your website traffic (and your brand) by designing your site’s content to rank higher in search engine results.
Recommended: To learn more about how to implement SEO on your startup’s website, check out our beginner’s guide to SEO: How Do People Find Your Website - SEO 101.
Establish a Social Media Presence
In addition to building a website, you will also likely need a social media presence to establish your brand and grow your startup in Tennessee. Social media provides a way to reach, connect, and engage with customers and potential clients.
The most popular social media platforms include Facebook, YouTube, Instagram, TikTok, Snapchat, Twitter, LinkedIn, and Pinterest. However, additional platforms such as Yelp, Reddit, and Quora all have large followings of niche users. The social media platforms and strategy you choose to establish your startup will depend on the nature of your product or service and your target market.
To learn more about establishing your Tennessee startup’s presence on social media, feel free to read our Social Media Guide for Small Businesses.
Distribute Press Releases
Another way to let people know about your startup in Tennessee is by creating your own publicity by writing press releases. Press releases create visibility and help you establish your brand.
So, what is a press release? A press release is an official statement by your company written by you and distributed to the press to provide public knowledge and promote your Tennessee business and brand.
Of course, you can hire professional press release writers or press release distribution services such as Sitetrail, but if you choose to write your own press releases, you can read our guide on How to Write a Press Release.
9. Build a Team
It’s simple: a startup is only as strong as its team. Hiring the right people to run, support, and grow the company alongside you is vital to the success of your company. A successful startup team is motivated, talented, and passionate; however, a positive and supportive company culture is arguably the most important factor.
Typically, an early-stage startup will need to hire or assign the following roles:
- Chief Executive Officer (CEO)
- Chief Operations Officer (COO) or Chief Technology Officer (CTO)
- Chief Financial Officer (CFO)
- Chief Marketing Officer (CMO) or Director of Marketing
- Product Manager or Designer
- Product Developer or Engineer
- Sales Manager
- Customer Service Representative
It is common for a startup’s founder(s) to choose to fill one of these positions themselves, typically one of the chief positions, depending on their time commitment and skill level. Outside of these assignments, you’ll need to find people with the talent, personality, and dedication to help make your startup successful.
If you’re not sure where to start, there’s good news. Fortunately, there are several ways to find talent for your company such as word-of-mouth recruiting, online job boards, or even working with a professional recruiter.
Additionally, you can find state-specific employer resources for everything from the tax credits you’re eligible for to information about where and how to hire talented professionals on the TennesseeWorks website.
Before you expand your team, however, you need to establish your startup’s mission and values. This will not only help you navigate through the candidate pool — it will increase your chances of attracting the right candidates for your startup. Furthermore, an effective job description can go a long way in securing the right candidate for the role.
Registering for Employer Taxes
In Tennessee, if you have employees, you need to register to pay Unemployment Insurance Tax through the Tennessee Department of Labor & Workforce Development.
Setting up Payroll
We have no doubt that your company is great; however, in addition to providing a great workplace, you will need to compensate employees for their time and efforts. If you have hired employees, you’ll need to set up payroll. Using a payroll service such as ADP makes issuing paychecks easy, saving you time and helping you navigate employee withholding taxes and state compliance requirements.
10. Grow Your Tennessee Startup
The work doesn’t end at launch or after your first sale. You will then need to focus on carrying out your plan and growing your business in Tennessee. This will require dedication, perseverance, and the willingness to seize opportunities to grow.
These opportunities might include expanding to new regions, seeking additional target markets, or expanding your product or service offerings.
Opportunities for growth also might come along in the form of innovation, quality improvement, customer-focused development, and streamlining your business model.
Or, opportunities for growth might include internal growth factors such as building your entrepreneurial network, growing your team, and building a strong company culture.
Create a Strategy to Motivate Growth
While growth can happen organically, you are more likely to reach your Tennessee startup’s desired objectives if you create a strategy for growth. Once you’ve captured initial customers, expand your reach beyond early adopters and existing customers to establish a sustainable growth trajectory that includes tactics for both profitable and sustainable growth.
Start by asking yourself the following questions:
- If you plan to raise more funds in the future, what milestones will you need to hit in order to justify a new round of funding?
- How long will it take to get to the stage where you will need another funding round?
- What kind of “burn rate” is rational for your Tennessee startup's expected growth and current operation needs?
Additionally, you will need to work toward not only understanding but improving unit economics such as your payback period, customer retention rate, lifetime customer value (LCV), and customer acquisition cost (CAC). These unit economics can be measured by channel, customer segment, and product line. By developing strong measurements to better track and understand this data, you’ll be able to more easily develop strategies to grow your customer base and product line as needed.
Recommended: Read our guide on How to Grow Your Business for tips on seeking and finding opportunities for growth.