Idea, market, financing, legal status and action. What steps are necessary before setting up a business?
Having an idea
Every project starts with an idea. What is your “niche”? What is the reason for the existence of your business? Why do you want to offer this product or service? There are two ways to come up with your idea. The first is to find a totally innovative idea. You can design a totally new product or service, something that does not yet exist on the market. The second solution is to improve what already exists. Then you have to find out how to do better than the competition in an existing market.
Studying the market
The best idea is not necessarily marketable. From my 3 years at Business School, there is one thing I will remember above all: always starting from the customer’s needs. Before creating your company, you have to study your market. Does your project have potential? Study your suppliers, your customers, your competitors, your product, your price and your distribution channel. You can use SWOT analysis, PESTEL analysis and the 5 strengths of PORTER.
Plan the financing
Your project has potential. But is your project viable? Your projected budget will answer this question. Based on market information, the third step is to make a financial forecast. Always start from the turnover you expect to make. Be realistic, even if you have to make 3 assumptions: a low, a medium and a high assumption. Usually forecasts are made for the first 3 years of operation. Based on the forecast activity of your business, determine the expenses necessary to run your business. Your expenses are made up of fixed and variable expenses. Revenues are equal to the difference between turnover and expenses.
With which resources will you launch your business? The financing of a business can take different forms: your personal contribution, love money (investment of your entourage), bank loans (count a minimum contribution of 10 to 20% of the loan), grants and subsidies.
Finally, also draw up a monthly cash flow plan. The cash flow plan should ensure that you will be in the positive and will always have cash available.
Choosing your legal status
There are different legal statuses for your company. This step will be the subject of a future article. Let’s take a quick look at your choice between sole proprietorship and partnership. Ask yourself the following 3 questions. Am I alone or are there several of us? Are there heavy investments at the entrance? Do I have a patrimony to protect?
Creating your business
Take action! Contact influencers, your suppliers and above all the main financers of your business: your customers!