Starting a new business can be exciting and stressful at the same time. There are a lot of loose ends to be tied, approvals to be applied and sanctioned, etc. Then there are factors regarding finance, legal structure and other resources that are necessary for a business to commence operations.
However, it is important to understand that every successful business would have passed through this stage at one or the other point in time. Little planning and perseverance will hold you through the difficult stage of getting your business venture off the ground.
Here are some pointers to consider before you start a new business
1. Do Your Research Well
You might be excited about starting a business and have tons of ideas and dreams about the way you would like your business to shape up. However, all your ideas and methods of implementation require solid research and facts to support. Make sure you spend enough time doing this part.
Once you have an idea in place, spend some time testing your idea. It may involve talking to your future customers, conducting surveys, testing your hypotheses, etc. It is important to understand the industry that you operate in, the laws and regulations involved. You must also be able to foresee the kind of demand your product or service may have in the future.
2. Decide on the Legal Structure of the Business
A business venture could have different types of legal structures. Each of them has its own advantages and disadvantages. Some of the available legal structures for a business venture are Sole proprietorship, Partnership Concern, Limited Liability Partnership or a Private Company.
Each of the models of ownership comes with its own structure for taxation, paperwork and decides the liability that will be assumed by the owner/founder in future.
Further, the business will have to get itself registered with various government organizations like the Registrar of Companies, obtain PAN and TAN(if applicable) and various other licenses required for commencing the operations of the business.
Proper legal documents like Article of Association and other required documents will have to be drawn up, maybe with the assistance of a lawyer and a Chartered Accountant. These are important steps which may take up a significant amount of time and effort. So, it is a must that you pay enough attention to these points.
3. Tie up Your Finances
Finance is an important factor that needs to be in place before you start a business. Draw up a plan to gauge how much finance you may require over the next 6-12 months or till your revenue flow comes in.
There may be different types of expenses to be catered to, right from expenses for incorporation, drawing up of documents, obtaining approvals or licenses, setting up an office space, if required, purchase of machinery for the manufacture of products, etc.
The decision on the mode of financing the requirements is again an important one. Various modes of financing are available depending upon the need of an entrepreneur. The venture may be bootstrapped by the funds of the entrepreneur, his friends and family, go in for funding by a venture capitalist or angel investor, apply for a business loan from banks or NBFCs or avail an easy personal loan.
It is important to measure the pros and cons of each of the modes of financing and choose one that suits your requirements the best.
4. Pay Attention to Your People Force
Even though you may wish to handle all the responsibilities of running your enterprise on your own, it may not be humanly possible. Therefore, you should look at hiring the right kind of people to work on important areas of the business and delegate tasks to them.
You could also consider outsourcing non-core activities like accounting, human resources, data processing, etc.
You should aim for the right balance between outsourcing, hiring and the cost involved in both these activities. At the same time, ensure that your business activities are not negatively affected by these decisions.
5. Have a Clear Understanding of the Risk Involved
The term risks in a commercial business mean any situation that does not allow the business to make adequate or no profits. Any business is affected by various factors, both internal and external that affect its performance.
This could be due to a variety of risks like change in preferences of customers, obsolescence of the products offered, change in government rules and regulations, change in general economic conditions in the country or globally.
While at times you may be able to recover from the risks, sometimes it may affect your business negatively.
6. Think of a Plan B as Well
Despite all the planning, your best plans may go wrong and may not allow you to start your business in the way you had planned. Therefore, it is important that you have a plan B in place even before you start executing your Plan A. This way you can avoid disappointments from the beginning and ensure your business commences as and when you wished.
Starting a business is not an easy affair. However, a little bit of planning and being prepared for eventualities can set you through