Starting a business can be a challenging feat if you do not know where to start. To help you out in this endeavour, below are 15 key questions to answer when setting up a new business.
After reading this article, you will learn where to begin in starting your business venture. Answering the key questions below can help boost your chances of setting it up, whether it is the right time or not.
Question 1. Why do you want to establish your own business?
This is an important question you need to answer before you start a business. If you don’t have the answer to this question, setting up your business for success can be challenging.
You should never begin a business for the wrong reasons. Starting a business may sound easy, but things can get overwhelmingly fast if you are not ready.
You may want to start a business because you want to be your own boss. You may want a business of your own, so you can earn an unlimited amount of cash instead of having a set wage.
Whatever your reason is, you need to understand the difference between wanting to look like an entrepreneur and actually operating as an entrepreneur.
Question 2. Do you have a business idea that creates a business opportunity?
When starting a business, you will need an idea that creates business opportunities. Brainstorm various business ideas that can highlight the products/services your business provides.
To help in this effort, you can conduct market research. Look for feedback from potential customers and check if an idea can help your business.
Feedback is essential for all businesses. It can help you plan how to operate your company efficiently.
Question 3. Who are your competitors?
Knowing who your business competitors are is vital for any business. Competitor analysis provides insights that can guide when you’re starting your business.
Competitive analysis helps you learn from your competitors. This provides your business with a competitive edge that creates sustainable revenue.
You can determine your competition by market segment or by product line or service. After finding potential competitors, you need to assess the following:
- Strengths and weaknesses
- Market strength
- The importance of your target audience to your competitors
- Any factors that may hinder your entrance to the market
- Your opportunity to enter the market
- Competitors that can impact your success
Question 4. How much should you invest in your capital?
Money or capital is a crucial factor for all businesses. When you are only starting out, use your money on essential business needs.
Make sure to invest in marketing and developing your product and services. These two are vital to helping you get your business off the ground.
When you’re saving money for capital, make sure to keep the following precautions in mind:
- Maintain an emergency fund. This account should have enough money so it can cover emergency expenses.
- Pay off high-interest debts. These debts are a financial burden you do not want to deal with while starting your business.
- Cut expenses, not employees. Before you lay off an employee, look at your business budget and see if you can save on other costs instead.
- Automate your savings contributions. Set up an automatic savings plan. This way, you don’t have to think about it. This can help you save for your emergency fund faster.
Question 5. What are your sources of funding?
There are different options to choose from when you are looking to fund your business. Below are some of the most common sources of funds for businesses:
- Personal investment
- Merchant cash advance
- Venture capital
- Grants from the government
- Bank loans
- Asset-based loans
Question 6. What are your company’s unique selling points?
Your business’s unique selling point (USP) refers to your company’s biggest strengths. These unique points make your business stand out from competitors.
Below are three ways to determine the USP of your business:
- Know your strengths and weaknesses.
- Identify the emotional need your product/service addresses.
- Create short, clear, and concise phrases about your unique product.
Below are some of the phrases from brands that showcase their USP:
BMW: “Sheer driving pleasure.”
Starbucks: “Love your beverage or let us know. We’ll always make it right.”
Question 7. How do you plan to market your business?
Marketing is a crucial factor for your business because it helps you sell your products. At the end of the day, the goal of any business is to make money, and marketing helps you reach that goal.
Today, several marketing avenues can help you promote your products. One of the most popular today is social media marketing.
Other benefits of using social media marketing include:
- Increased traffic
- Improved sales
- More business partnerships
- Generated leads
Question 8. Who are your target customers?
You should collect basic demographic data about your customers. These include age, gender, lifestyle, and income level.
Knowing your customers allows you to understand why they shop and how they shop.
You should also consider their spending habits. This allows you to ascertain how much they can spend on your products.
It is essential to learn their expectations of your business and your competitors.
There are several ways to know your customers. One way is through social media.
You can create a social media page and have a feedback section for customers. This can help you identify your customer’s needs and pains.
Question 9. How big do you want your company to be?
Depending on your budget, you can have a small, medium, or large-scale business. But, if you are facing funding issues, starting small is a smart option.
Small businesses are typical in the US. According to the SBA, the country has 31.7 million small businesses.
Having a small business at the start of your launch can offer several advantages.
A small business offers more flexibility. It lets you make the necessary changes that can help your business survive.
Another advantage of having a small business is that you can showcase a compact skill set. With this, people who need your services will know you for your expertise.
This also allows you to work in a field you consider yourself an expert in.
A small business also allows you to add a personal touch to each transaction.
People will prefer to connect with another human being, not with an entity that uses automated and generic responses.
A small business lets you connect with your customers in a more personal way than big corporations can.
Question 10. Are you ready to invest your time and money in this endeavour?
A business does not run itself. You will need to invest much of your effort, time, and energy to build your business. Running your business can even take up your personal time.
You also need to invest money in the development of your business. Marketing materials and sales expenses will require you to save money for your company.
Be ready to make personal sacrifices. It is the only way if you want to see your business succeed.
Question 11. Where do you want to establish your business?
A good location can spell the success or failure of a new business. There are many factors to think about when finding a spot for your business.
This is regardless of whether you are thinking of setting up in Delaware, Wyoming, or another state.
You can do this by researching the advantages and disadvantages of setting up in a particular state. You will need to be thorough in weighing the pros and cons of each location.
To help get started on this, look up Wyoming vs. Delaware LLC.
You may also opt to start an online business. This allows you to save up on costs associated with brick-and-mortar stores.
There are several advantages to conducting business online. These include:
- Global access any time of the day
- Reduced paper waste
- More flexible customer service
- Cost savings
The Internet can help support your business operations. You can also use the Internet to:
- Communicate with your suppliers
- Talk to your customers.
- Get customer feedback.
- Allow customers to make appointments.
- Manage your finances.
- Look up your competitors.
Question 12. How long do you want to wait before you see a profit?
The day you will turn a profit depends on several factors. These include overhead costs and pace of production, among others.
Luckily, investors do not expect you to pay them immediately after you open your business. This gives you the time and flexibility to grow your business.
In contrast, if you’re self-funded, you may want to see profit so you can avoid debts and pay your bills.
You should know your profit goals so you can budget and maximize your profit.
Question 13. How do you plan on establishing the legal structure of your business?
One of the questions to ask when starting a business plan is what business entity you should form.
There are various structures you can choose from in creating your business entity. These include:
- A Limited Liability Company (LLC) is a business entity with members as owners. Members can include corporations, individuals, or other LLCs.
- This involves two or more people who do trade.
- A corporation is a business that distributes profits to shareholders. They trade money, property, or both.
- S corporation. This type of business passes losses, income, deductions, and credits to shareholders.
- Sole Proprietor. This is an individual who owns an unincorporated company by themselves.
Before you decide on your business’s legal structure, you need to consider the pros and cons of each one. Consider your location. Some entities provide more advantages when formed in certain states.
Question 14. What are the taxes you need to pay, and how can you reduce them?
Paying your taxes is an important responsibility you have as a business owner. Below are the taxes you need to pay if you own a business:
- Income taxes. Depending on the structure of your business, you’ll need to pay federal and state income taxes.
- Sales taxes. Some states have sales taxes you need to pay if you sell goods and services. Although customers pay the sales taxes, you can be subject to penalties if you do not collect the taxes.
- Excise taxes. Depending on the business structure they are operating, certain businesses pay excise taxes. These are taxes on highway usage by trucks, fuels, and other activities.
- Employment taxes. These are taxes you must pay if you have employees. If you’re self-employed, you must pay self-employment taxes on your net earnings.
You can always reduce your taxes to save on costs for your business.
There are certain states with no sales taxes. You can choose to open a business in these states to save money.
You can also put aside money for a Healthcare Savings Account (HSA). This insurance can help you and your employees reduce taxes and medical costs.
If you are always travelling, you may also reduce your business taxes. Business travel is deductible, but personal travel is not.
You can combine your personal travel with a justifiable business purpose. Doing this will help reduce taxes.
Question 15. Are you ready for the possibility of failure?
In 2019, data showed failure rates for startups are around 90 percent. Additionally, 21.5 percent of startups fail during the first year. Meanwhile, 30 percent failed the following year.
The numbers imply that starting your own business is a challenging endeavour. Keep in mind that not every entrepreneur finds success.
This is why one of the common questions when starting a business is this: are you prepared to fail?
You need to remember that failure is still a possibility, regardless of how hard you work. You should be ready to fail and accept that this can still happen.
That said, smart business practices can help your business go a long way. These practices can help you face the challenges your business may need to overcome.
Innovative business practices can help you avoid issues while positioning your new business for success.
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