Starting a business can be scary. It is scary for a reason: fifty percent of all new businesses in the USA fail in the first five years. Also if you are looking to open a tech startup 90% of all startups fail.
Don’t be discouraged, you can prevent failure. You can avoid many mistakes by just learning and gaining knowledge. Then when you have accumulated knowledge and skill in some niche you can start your business with more confidence.
Start with yourself
Be honest. That may sound obvious but it is the first stumbling block on your way to success. By carefully analyzing your own straight and weakness you can pinpoint what you need to learn, and it will help foresee mistakes that are preventable. Take a hard look in the mirror and see what needs improvement. For example if you need to develop leadership skills you can start by learning. Then, find a smaller and no risk task that will allow you to practice what you have learned.
The idea
When you have enough knowledge and skill in some particular field you can start to develop your idea. To build a successful business you need a strong idea. The best way to catch that idea is to find it on the intersection of: your expertise, your passion and market research.
The idea will only work if you know how to execute it (your expertise), if you have extra motivation when things get rough (passion) and if the idea is marketable (market research). If you fail at any of the three your business will probably fail. If for example you are knowledgeable and passionate about one thing but it has no demand on the market it is destined to fail.
Now that you have your idea, research your competition. Find out what they are doing that is good, also learn from their mistakes. Good competition analysis paired with good customer research is very useful for this step. Because it will propel your idea from a fictional world to the real one. It is one thing to imagine the product and to produce it. This is a crucial step, and it will reveal a lot of new challenges. But don’t be discouraged, challenges are an unavoidable part of success.
Research the legal side of opening a business
In order to prevent any mistakes in further planning and development of your company learn the legal obligation. The crucial decision in this step is to decide how you will structure your company and how you will register it. When deciding between sole proprietorship, LLC and corporation keep in mind what you actually need. These choices will affect your taxes. Keeping your taxes low is always the goal, especially in the beginning. You can find a free online tax calculator, as well as other free tools that can help you maintain financial accuracy.
Sole proprietorship is the most common business model. It has the best tax benefits, but it is more suitable for one-man company. The best model for a tech company is the LLC Limited Liability Corporation. While in sole proprietorship company assets and your personal ones are joined, in LLC they are separated. That means, for example, if your company fails your personal assets will remain intact. All this bureaucracy can be (and it is) confusing especially if you consider that every state has slightly different legal obligations. If you are not an expert in this field maybe the best course of action is to contact some local company to help you out. For example, if you are wondering how to register an LLC in PA search for a local consulting firm.
Build your team carefully
Know it is time to build your workforce. Build a custom team for your enterprise. Yes, you can read and learn all the standard company structures, but in the end you must tailor a team specific to your needs. Make a good foundation and allow it to grow. Start with core team of the best people you can find, and as your company grows they will become dearment heads.
Start small. That is not just good advice for the team, it is the best strategy for opening up a tech company. Start with essentials, and plan ahead your expansion gradually. Many business “gurus” will advise that you go all in, go big or go home. But in most cases, this is a recipe for failure, especially if you don’t have a huge capital to waste.
Build a MVP
Building a good MVP (minimum viable product) is a crucial step in developing a strong company. There are multiple benefits of doing the MVP correctly.
- You will test your product in action (see what works, and what needs improvement
- It will start your cash flow, and your company will be more or less self-sufficient
- Successful MVP will attract a lot of attention from potential investors and startup founders.
The first big validation of your work and the first milestone of every tech company is to get funded. If you consider all the steps above and work hard your are on the road to not only getting funded but also building a long lasting company