So, you are thinking about starting a startup but aren’t quite sure if you are ready and know all the needed information to be successful?
That’s okay. Startups are all about the unknown. To help you along the way, we have compiled a list of things you should know about yourself, your idea, and business in general before starting a startup.
1. Entrepreneurs Are Dedicated, Adaptable, and Willing to Take Risks
Startup entrepreneurs are special. Although startup founders are not all exactly alike, there are a number of characteristics of entrepreneurs that prove to be necessary for launching a startup.
Launching a startup takes dedication. Startup entrepreneurs need to be passionate, motivated, self-disciplined, and persistent in pursuing a vision.
Launching a startup also entails adaptability. Startup founders must remain curious, open-minded, and always ready to learn. You need to be observant, pay attention to the market, listen to your customers, and be ready and willing to pivot to pursue opportunities.
Launching a startup also requires a willingness to take risks. Risk is an inherent part of opportunity and innovation. To be an entrepreneur, you have to be willing to take the calculated risks that come along with launching a startup.
Recommended: Are you ready to create a startup and become an entrepreneur? Take the Entrepreneurship Quiz to find out!
2. Know Your Strengths and Weaknesses
In addition to adapting an entrepreneurial mindset, as an entrepreneur, you need to understand your strengths and weaknesses. This involves assessing what you are capable of and what tasks you need to turn to outside help to accomplish.
This may involve hiring a lawyer, bookkeeper, accountant, payroll service, IT administrator, web developer, or any other number of experts. Part of starting and growing a business is organizing your resources, including your own time.
If there is a particular set of skills that you are lacking, you may want to consider seeking a cofounder. Start with your own network, or try one of a co-founder network like CoFoundersLab or Founders Nation.
3. It’s Never Too Early to Start Building Your Entrepreneurial Network
Even if you’re just thinking about launching a startup, you should begin working on building your entrepreneurial network. This is your network of other founders, entrepreneurs, advisors, mentors, and other members of your local startup community.
Your entrepreneurial network is a crucial source of resources — including knowledge, advice, and connections to their networks.
Or, start locally. Check out our page on local business resources to find groups and organizations in your area.
4. Find a Mentor
Every startup founder should have a business mentor. Ideally, it’s someone who has the knowledge and experience to guide you on your entrepreneurial journey.
Having a good mentor can provide a number of benefits. For example, good mentors act as sounding boards for your ideas, offer encouragement, and provide their knowledge and advice.
As you build your entrepreneurial network, start thinking about who might make a good mentor for you. While you might consider anyone with more experience than you as a potential mentor, you should, ideally, look for a mentor with knowledge and experience working with companies similar to yours.
Another place many entrepreneurs turn to for advice is their 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.
5. Don’t Fear Failure
Creating a startup involves risk, and part of that risk is risk of failure. The truth is, most startups fail. However, the risk of failure shouldn’t stop you from trying.
You may have heard the phrase “fail fast, fail often,” which was popularized by lean startup methodology. The idea of failing fast and often means that you should always be testing new ideas and learning from the results.
If what you are doing is not working, take the time to better know your market to figure out why. Get feedback. Listen to your customers. Pivot.
Know Your Market
6. Your Startup Idea Should Focus on Solving a Problem
A common mistake among startup entrepreneurs is that when coming up with startup ideas, many startup founders fall in love with their solution instead of focusing on the problem they are really solving.
Rather than focusing on the product or service that you are providing, shift your focus to the problem you are solving for your customer. Begin by asking why your target market would purchase your product or service idea. What is the underlying problem you are solving? How are you meeting his or her wants and needs?
One useful tool for developing your business idea around a problem is the Lean Canvas. The Lean Canvas takes a problem-solution approach to help you plan your business, focusing on the problems you are solving for your customers.
7. Understand the Industry and Competition
To make effective strategic decisions, you will need to determine your target market and conduct research on your industry, your target market, and your competition.
Start by taking a big picture analysis of the industry you will compete in. What does your overall industry look like today? What are the dominant economic features? What are the driving forces? What is the industry’s competitive environment like?
Once you understand the industry, you can begin to narrow down to your target market. Your target market is the specific group of customers to whom your product is intended. And no, it is not everyone. Although many new venture founders would like to sell their product or service to everyone, you should focus your efforts on your most likely customers.
Finally, you should understand the competition. This may include anyone offering alternatives to your solution that people are using now to solve the same problem. You will want to understand and explain who your competitors are along with their market share, price, major competitive advantages and disadvantages, and what makes your product unique from theirs.
8. Be Open to Feedback
Many aspiring startup founders are afraid to talk about their idea. Some are afraid that their idea isn’t ready yet. Others worry that someone will steal their idea. But, the truth is, you have more to gain than to lose by sharing your idea.
The probability of someone dropping everything and stealing your idea is very unlikely. However, without sharing your idea, you won’t have the opportunity to collect one of the most valuable resources for a startup founder.
Feedback can be used to flesh out your ideas, build new products and services, and assess feelings about your brand. There are constant opportunities to “get your idea ready” and improve your idea, your business model, and your chances of success. But without feedback, you might not know where to begin.
Be receptive to all kinds of feedback. Feedback can come from your network, your advisors and mentors, your employees, and even your customers.
9. Listen to Your Customers
Really get to know your customers. Many businesses flounder because they fail to identify and understand their target customers.
Once you identify your target market, track them down, ask them questions, and then analyze their feedback. Find out what they like and don’t like. Find out their wants and needs.
With this information in hand, you can refine your product features, functionality, and pricing, as well as your messaging, to closely align with your target market’s most important wants and needs.
10. Be Prepared to Pivot
At some point along your entrepreneurial journey, you will likely need to pivot. A pivot is when you shift your business model or strategies to adapt to feedback or changes in customer preference, technology, the industry, or sector, etc. The truth is that all startups pivot.
Pivoting is an essential part of lean startup methodology and the build-measure-learn feedback loop championed by Eric Ries in his book “The Lean Startup.”
Pivoting is following opportunity. As startups collect feedback and learn, they pivot toward new product and service offerings. They pivot toward new markets, and they pivot toward new revenue streams. Before launching a startup, be prepared and willing to pivot.
11. Understand the Basics of Business and Continue Learning
Launching a startup is not just coming up with a great idea. It also involves execution. Successful execution requires a wide range of skills and expertise, including business planning, strategy, human resources, IT, bookkeeping, accounting, and marketing, among many others.
You are not expected to be an expert in each of these areas, but you will need to have some level of basic knowledge and be willing to learn.
When you are ready to begin building or brushing up on your business acumen, check out our many useful guides on:
- How to Start a Business
- How to Start a Corporation
- How to Build a Website
- Small Business Insurance
12. Understand Financials and Funding Options
One of the first things you must consider is how you are going to fund your startup. Startups need funding to cover their initial expenses until they generate a profit. Funding is also needed to expand, build inventory, and weather the slow seasons.
Prior to seeking funding, you should be completely aware of startup costs and your financials and financial projections. You will need to know how much you need and when.
To do this, you will need to understand your business’s financial statements and projections, such as the income statement, balance sheet, and cash flow.
You will also need to determine what types of funding are right for you.
The most common funding options are:
- Friends and Family Loans
- Small Business Loans
- Small Business Credit Cards
- Small Business Grants
- Angel Investors and Venture Capitalists
13. Writing a Business Plan Has Huge Rewards
The process of writing your business plan allows you to take an in-depth look at your industry, market, and competitive position. Business planning helps you set goals, determine your keys to success, and plan your strategies. It also allows you to explore your financial projections and manage cash.
Whether you write an informal business plan like the Lean Canvas or Business Model Canvas, or you write a full-length traditional business plan, writing your plans down helps solidify your ideas and puts them into context. Sooner rather than later, you should take the time to write a business plan.
Recommended: TRUiC’s Business Plan Generator is a free tool that provides you with a step-by-step guide to help you get started writing your business plan today.
14. Strongly Consider Incorporating Your Startup
There are several types of informal and formal business structures; however, you should strongly consider incorporating your startup into a formal business structure. The two primary types of formal business structures are limited liability companies (LLCs) and corporations. 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, natural exit strategies, and many angel investors and venture capitalists will not invest in ventures that are not incorporated.
For more information on business structures, read our guide on how to choose a business structure. Once you've chosen a structure, consider hiring a professional service to help you form your business.
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