This is The First Thing to Do BEFORE Starting a Business for enterprenur...

Market research and competitive analysis Market research helps you find customers for your business. Competitive analysis helps you make your business unique. Combine them to find a competitive advantage for your small business. Use market research to find customers Market research blends consumer behavior and economic trends to confirm and improve your business idea. It’s crucial to understand your consumer base from the outset. Market research lets you reduce risks even while your business is still just a gleam in your eye. Gather demographic information to better understand opportunities and limitations for gaining customers. This could include population data on age, wealth, family, interests, or anything else that’s relevant for your business. Then answer these questions to get a good sense of your market. Demand: Is there a desire for your product or service? Market size: How many people would be interested in your offering? Economic indicators: What is the income range and employment rate? Location: Where do your customers live and where can your business reach? Market saturation: How many similar options are already available to consumers? Pricing: What do potential customers pay for these alternatives? You’ll also want to keep up with the latest small business trends. It’s important to gain a sense of the specific market share that will impact your profits. You can do market research using existing sources, or you can do the research yourself and go direct to consumers. Existing sources can save you a lot of time and energy, but the information might not be as specific to your audience as you’d like. Use it to answer questions that are both general and quantifiable, like industry trends, demographics, and household incomes. Check online or start with our list of market research resources. Asking consumers yourself can give you a nuanced understanding of your specific target audience. But, direct research can be time consuming and expensive. Use it to answer questions about your specific business or customers, like reactions to your logo, improvements you could make to buying experience, and where customers might go instead of your business. Here are a few methods you can use to do direct research: Surveys Questionnaires Focus groups In-depth interviews Use competitive analysis to find a market advantage Competitive analysis helps you learn from businesses competing for your potential customers. This is key to defining a competitive edge that creates sustainable revenue. Your competitive analysis should identify your competition by product line or service and market segment. Assess the following characteristics of the competitive landscape: Market share Strengths and weaknesses Your window of opportunity to enter the market The importance of your target market to your competitors Any barriers that may hinder you as you enter the market Indirect or secondary competitors who may impact your success Several industries might be competing to serve the same market you’re targeting. The Department of Justice provides a diagram of Porter’s Five Forces as one way you can differentiate your competitive analysis by industry. Important factors to consider include level of competition, threat of new competitors or services, and the effect of suppliers and customers on price. Write your business plan Your business plan is the foundation of your business. Learn how to write a business plan quickly and efficiently with a business plan template. Business plans help you run your business A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business. Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice. Pick a business plan format that works for you There’s no right or wrong way to write a business plan. What’s important is that your plan meets your needs. Most business plans fall into one of two common categories: traditional or lean startup. Traditional business plans are more common, use a standard structure, and encourage you to go into detail in each section. They tend to require more work upfront and can be dozens of pages long. Lean startup business plans are less common but still use a standard structure. They focus on summarizing only the most important points of the key elements of your plan. They can take as little as one hour to make and are typically only one page. Traditional business plan format You might prefer a traditional business plan format if you’re very detail oriented, want a comprehensive plan, or plan to request financing from traditional sources. When you write your business plan, you don’t have to stick to the exact business plan outline. Instead, use the sections that make the most sense for your business and your needs. Traditional business plans use some combination of these nine sections. Executive summary Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company’s leadership team, employees, and location. You should also include financial information and high-level growth plans if you plan to ask for financing. Company description Use your company description to provide detailed information about your company. Go into detail about the problems your business solves. Be specific, and list out the consumers, organization, or businesses your company plans to serve. Explain the competitive advantages that will make your business a success. Are there experts on your team? Have you found the perfect location for your store? Your company description is the place to boast about your strengths. Market analysis You'll need a good understanding of your industry outlook and target market. Competitive research will show you what other businesses are doing and what their strengths are. In your market research, look for trends and themes. What do successful competitors do? Why does it work? Can you do it better? Now's the time to answer these questions. Organization and management Tell your reader how your company will be structured and who will run it. Describe the legal structure of your business. State whether you have or intend to incorporate your business as a C or an S corporation, form a general or limited partnership, or if you're a sole proprietor or LLC. Use an organizational chart to lay out who's in charge of what in your company. Show how each person's unique experience will contribute to the success of your venture. Consider including resumes and CVs of key members of your team. Service or product line Describe what you sell or what service you offer. Explain how it benefits your customers and what the product lifecycle looks like. Share your plans for intellectual property, like copyright or patent filings. If you're doing research and development for your service or product, explain it in detail. Marketing and sales There's no single way to approach a marketing strategy. Your strategy should evolve and change to fit your unique needs. Your goal in this section is to describe how you'll attract and retain customers. You'll also describe how a sale will actually happen. You'll refer to this section later when you make financial projections, so make sure to thoroughly describe your complete marketing and sales strategies. Funding request If you're asking for funding, this is where you'll outline your funding requirements. Your goal is to clearly explain how much funding you’ll need over the next five years and what you'll use it for. Specify whether you want debt or equity, the terms you'd like applied, and the length of time your request will cover. Give a detailed description of how you'll use your funds. Specify if you need funds to buy equipment or materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future strategic financial plans, like paying off debt or selling your business. Financial projections Supplement your funding request with financial projections. Your goal is to convince the reader that your business is stable and will be a financial success. If your business is already established, include income statements, balance sheets, and cash flow statements for the last three to five years. If you have other collateral you could put against a loan, make sure to list it now. Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to clearly explain your projections, and match them to your funding requests. This is a great place to use graphs and charts to tell the financial story of your business. Appendix Use your appendix to provide supporting documents or other materials were specially requested. Common items to include are credit histories, resumes, product pictures, letters of reference, licenses, permits, or patents, legal documents, permits, and other contracts. Example traditional business plans Before you write your business plan, read these example business plans written by fictional business owners. Rebecca owns a consulting firm, and Andrew owns a toy company. Lean startup format You might prefer a lean startup format if you want to explain or start your business quickly, your business is relatively simple, or you plan to regularly change and refine your business plan. Lean startup formats are charts that use only a handful of elements to describe your company’s value proposition, infrastructure, customers, and finances. They’re useful for visualizing tradeoffs and fundamental facts about your company. There are many versions of lean startup templates, but one of the oldest and most well known is the Business Model Canvas, developed by Alex Osterwalder. You can search the web to find free templates of the Business Model Canvas, or other versions, to build your business plan. We’ll discuss the nine components of the Business Model Canvas version here. Key partnerships Note the other businesses or services you’ll work with to run your business. Think about suppliers, manufacturers, subcontractors and similar strategic partners. Key activities List the ways your business will gain a competitive advantage. Highlight things like selling direct to consumers, or using technology to tap into the sharing economy. Key resources List any resource you’ll leverage to create value for your customer. Your most important assets could include staff, capital, or intellectual property. Don’t forget to leverage business resources that might be available to women, veterans, Native Americans, and HUBZone businesses. Value proposition Make a clear and compelling statement about the unique value your company brings to the market. Customer relationships Describe how customers will interact with your business. Is it automated or personal? In person or online? Think through the customer experience from start to finish. Customer segments Be specific when you name your target market. Your business won’t be for everybody, so it’s important to have a clear sense of who your business will serve. Channels List the most important ways you’ll talk to your customers. Most businesses use a mix of channels and optimize them over time. Cost structure Will your company focus on reducing cost or maximizing value? Define your strategy, then list the most significant costs you’ll face pursuing it. Revenue streams Explain how your company will actually make money. Some examples are direct sales, memberships fees, and selling advertising space. If your company has multiple revenue streams, list them all. Fund your business Your business plan will help you figure out how much money you’ll need to start your business. If you don’t have that amount on hand, you’ll need to either raise or borrow the capital. Fortunately, there are more ways than ever to find the capital you need. Pick your business location Your business location is one of the most important decisions you’ll make. Whether you’re setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements, and revenue. Choose a business structure The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability. Choose your business name It’s not easy to pick the perfect name. You’ll want one that reflects your brand and captures your spirit. You’ll also want to make sure your business name isn’t already being used by someone else. Register your business Register your business to make it a distinct legal entity. How and where you need to register depends on your business structure and business location. Find out if you need to register your business Your location and business structure determine how you’ll need to register your business. Determine those factors first, and registration becomes very straightforward. For most small businesses, registering your business is as simple as registering your business name with state and local governments. In some cases, you don’t need to register at all. If you conduct business as yourself using your legal name, you won’t need to register anywhere. But remember, if you don’t register your business, you could miss out on personal liability protection, legal benefits, and tax benefits. Register with federal agencies Most businesses don't need to register with the federal government to become a legal entity, other than simply filing to get a federal tax ID. Small businesses sometimes register with the federal government for trademark protection or tax exempt status. If you want to trademark your business, brand or product name, file with the United States Patent and Trademark office once you’ve formed your business. If you want tax-exempt status for a nonprofit corporation, register your business as a tax-exempt entity with the IRS. To create an S corp, you’ll need to file form 2553 with the IRS. Register with state agencies If your business is an LLC, corporation, partnership, or nonprofit corporation, you'll probably need to register with any state where you conduct business activities. Typically, you’re considered to be conducting business activities in a state when: Your business has a physical presence in the state You often have in-person meetings with clients in the state A significant portion of your company’s revenue comes from the state Any of your employees work in the state Some states allow you to register online, and some states make you file paper documents in person or through the mail. Most states require you to register with the Secretary of State’s office, a Business Bureau, or a Business Agency. Get a registered agent If your business is an LLC, corporation, partnership, or nonprofit corporation, you'll need a registered agent in your state before you file. A registered agent receives official papers and legal documents on behalf of your company. The registered agent must be located in the state where you register. Many business owners prefer to use a registered agent service rather than do this role themselves. File for foreign qualification If your LLC, corporation, partnership, or nonprofit corporation conducts business activities in more than one state, you might need to form your business in one state and then file for foreign qualification in other states where your business is active. The state where you form your business will consider your business to be domestic, while every other state will view your business as foreign. Foreign qualification notifies the state that a foreign business is active there. Foreign qualified businesses typically need to pay taxes and annual report fees in both their state of formation and states where they’re foreign qualified. To foreign qualify, file a Certificate of Authority with the state. Many states also require a Certificate of Good Standing from your state of formation. Each state charges a filing fee, but the amount varies by state and business structure. Check with state offices to find out foreign qualification requirements and fees. File state documents and fees In most cases, the total cost to register your business will be less than $300, but fees vary depending on your state and business structure. The information you’ll need typically includes: Business name Business location Ownership, management structure, or directors Registered agent information Number and value of shares (if you’re a corporation) The documents you need — and what goes in them — will vary based on your state and business structure.
Get federal and state tax IDs You’ll use your employer identification number (EIN) for important steps to start and grow your business, like opening a bank account and paying taxes. It’s like a social security number for your business. Some — but not all — states require you to get a tax ID as well. Apply for licenses and permits Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, location, and other factors. Open a business bank account A small business checking account can help you handle legal, tax, and day-to-day issues. The good news is it’s easy to set one up if you have the right registrations and paperwork ready.