So, you decide that 2021 will be the year you start your own business. Despite all the setbacks brought by the ensuing pandemic - the startup ecosystem is still burgeoning with growth and exciting promise.
If you get excited about the opportunity to be your own boss, solve people’s problems, and build something valuable - the entrepreneurial path is right for you.
Below we share 6 practical steps you can take to start a business in 2021.
Validate Your Idea
Validating your idea usually means validating a problem first. Many entrepreneurs start with an idea and then try to find a market for it. I would argue, it’s more effective to go backwards: find a real tangible problem that hasn’t been solved, and then reverse-engineer the solution that best takes care of the problem.
Answer these questions:
- How severe of a problem am I solving with this new product?
- How many people have that problem?
- Will they pay for a solution?
This should give you a better understanding of the market you’re in.
You may be operating in a niche market where a severe problem affects a handful of people. For example, oil pipeline corrosion is not something that impacts everyone - yet it costs Oil industry billions of dollars annually.
On the flip side, you might be thinking about a problem that affects a big chunk of the population. Meatless burgers and soy milk reach hundreds of millions of people who struggle to consume traditional meat and dairy products.
Finally, it’s important to be working on a solution to a problem that is significant enough for people to pay.
Build A Prototype
Armed with market insight, the next step is to build a small prototype to show to potential customers.
If this is your first rodeo and you’re entering the entrepreneurial scene for the first time, you should get really comfortable with the term “MVP”. In the startup land, MVP refers to the Minimum Viable Product. It’s a term that was popularized by Eric Reis in his book “Lean Startup”. Instead of building a complete product from day one, you can start by sketching out and then assembling a small prototype for demo purposes.
Prototypes are clunky, and not perfect, but they should deliver the value - aka the solution to a problem you’re trying to solve.
Becoming comfortable with imperfection will help you succeed as an entrepreneur in 2021. Many teams decide to over-invest in building perfect products before they even show or mention anything to potential customers. They think clients will not take them seriously without a complete finished product - where in reality, without market validation, they are building towards a dead end. It’s like trying to navigate the maze without a map.
(Optionally) Find a Co-founder
When starting out on your own, you enjoy the creative control and ability to make decisions quickly, without going through your typical corporate org chart, seeking managerial approval.
Yet entrepreneurship can be lonely sometimes. Not only do you have to bear the burden of making all the right decisions yourself - sometimes you may lack specific industry expertise or skill (such as technology or sales) to build a successful business.
If you heavily lean toward one end of the skillset spectrum, you may benefit from bringing a co-founder whose skills and personality traits are the complete opposite.
It’s very common to start a business with a co-founder. Investors actually prefer to invest in co-founder-led startups rather than solo-founders. They believe a co-founder would be able to challenge certain assumptions, particularly in areas where they have more experience and understanding.
Adding a co-founder does come at the price - as you’d have to give that person company ownership or compensate with salary for their time.
It may also be risky: unless you have known a specific person for a long time and have built trust, and might be hard to know if this relationship will work out, or if they are the right fit for the business you’re trying to build.
Make a Sale
Nothing ever validates an idea as the first customer paying you money. It could be during your first week in business, or after 365 days day - but it feels amazing to finally make that first sale.
Unlike giving products away for free, asking for money makes customers truly evaluate the value of your product or service.
Of course, you need to market your product. Your customers, no matter how excited they might be about using your product, will not know you have it unless you tell them.
Be proactive with your outreach in your early days: tell your friends, ask them to tell their friends, and reach out to people in your personal and professional network, first selling them the MVP, and later in your product development journey - a complete product.
And always remember to put a price tag on your product. If it creates value - you should be able to capture a portion of that value as revenue. If customers aren’t happy with your product - you can always refund them later.
Formalize Your Venture
At some point in your entrepreneurial journey, you’ll decide that it’s time to take your business idea more seriously.
Some founders reach that moment when they make their first sales. Others - after bringing on a co-founder, or attracting an investment from a wealthy individual.
No matter the moment, you’ll know when it’s right to double-down on your idea. More customers reach out. More people ask you about your business. More hours in a day are spent contemplating new features or unique marketing ideas.
At that point, entrepreneurs typically choose to formalize their idea - by registering their business.
There are many benefits of incorporating your business. You can save on taxes, access funding, and remove personal legal and financial risk if things don’t work out.
As a first-time founder, the process of creating a legal entity might seem confusing, daunting, and even scary. You don’t want to make a mistake when filing articles of incorporation, for example, because it might cost even more money to fix it later.
Luckily, you have options. You may choose to register your business yourself, hire a law firm, or use a service like coSquare to have it done for you. With coSquare, you get a law-firm quality incorporation package for just $99 which is a great value, compared with a typical cost of $1,000-$2,000 when hiring a lawyer.
Raise Capital or Bootstrap Your Idea
At some point as your business takes off, and you start reaching your personal capacity to create, market, and sell your product - you’d need to hire some help.
It’s a good idea to reinvest all the profits back into the business - by hiring some help in areas you’re not good at. For example, some people struggle with sales - and may choose to bring on a sales hire. Others might not be good at design or web development - and would need to bring on a tech person when the opportunity arrives.
But sometimes those revenues may not be enough - particularly when you’re just starting out and your sales are small but growing.
In that case, you can explore external financing opportunities for your business.
Raising capital from investors - such as angels or venture capitalists - requires selling a piece of your business (only incorporated companies can do that). Raising money from investors would allow you to grow your business further, and would even attract some expert help - as most investors would be incentivized to help with introductions and mentorship to help you grow.
If venture capital is not available, or you’re not interested in selling a portion of your business, you can tap into grants and other sources of non-dilutive funding. The government is incentivized to promote entrepreneurship and small business initiatives - and will even help you secure a bank loan, if necessary. In other cases, you can join an incubator program that connects founders with experts, funding, and even customers - usually for free.