Don’t rush into business before you’ve done everything to give your startup the best possible chance of success.
5 min read
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A great idea is just the beginning of your business. Consider your idea day one of school and making your first dollar graduation day. Bringing your startup to life and setting it up for success requires you to meet a whole slew of course criteria before you can ‘graduate.’
It often makes sense to start with an intense industry analysis to determine whether there is a market for your product, in addition to looking at what potential competitors are doing and how your business can do it better.
You’ll want to determine what your product or service can offer that isn’t already available and then figure out what a sales strategy will look like. Investors will also want to see financial projections, which can be especially difficult for budding entrepreneurs without business or accounting backgrounds.
One of the first players in that realm that helps boost budding entrepreneurs into startup life is Techstars, which has accelerated tech startups for more than a decade. In addition, other companies and organizations have started industry-specific accelerators to provide more specialized support for startups, such as Ameren Accelerator and StartUp Bootcamp.
Accelerators are excellent options, but for budding entrepreneurs in the earliest stages, you may need to iron out some of the details in order for your idea to coalesce into an accelerator-worthy endeavor.
Whether you do so through an incubator program or on your own, be a good student in the following ways, and you’ll be well on the road to starting your business.
1. Don’t skip math class.
When it comes to launching a business, math class is one of the most important courses in school. There are many ways to fund your startup, but they aren’t all created equal. A bank loan or line of credit might get you off the ground, but you’ll probably need to put certain assets up as collateral.
If you can convince others that your idea is a winner, you might secure an advance payment from a future customer, or you could even win venture capital investment if your business shows the potential to scale quickly.
No matter what route you take, you first need to determine what your realistic funding goal and budget should be. It can be helpful to discuss decisions like these with an adviser or mentor.
2. Get a ‘tutor.’
Not having a background in business doesn’t mean you can’t start one, but it does mean that finding the right mentor is even more important. Similar to a tutor in school, the ideal mentor is someone who is familiar with the obstacles that you’re most likely to face.
It’s also important for a mentor to have industry and local knowledge as well as a skill set that fills in any capability gaps you may have, such as a finance expert if your background there is lacking. Having a mentor who knows the landscape will help you avoid costly mistakes that you’re inevitably going to make if you go it alone.
3. Follow the rules.
It’s important to abide by the rules in school, but when starting a business, it’s even more critical. Choosing the legal structure of your business is one of the first steps you’ll need to take. This will have big impact on the tax, liability and other legal aspects of your business. A limited liability company (LLC) is the most common form because of the flexibility it provides, in addition to protecting its owners from personal liability.
It’s also imperative to have a lawyer who specializes in intellectual property take a look at your proposal early on to prevent potentially expensive and troublesome business changes later. Bottom line: You’ll need to jump through legal hoops no matter what business you decide to open, and when it comes to issues of legality, that’s not a task you want to DIY.
4. Study, study, study.
Studying reinforces and creates a stronger foundation for what you learn in class. Likewise, it’s crucial to perform the necessary market research as you create a business plan and pitch to investors. You don’t want to fork over your life savings to start a business only to realize customers don’t want your product or service.
While many people think market research only involves researching demand, there are many more factors involved. Determining the size of the market, how many similar products it contains, and how much people are willing to pay for the various options available are all important to positioning your product or service successfully, according to the U.S. Small Business Administration.
Before you had your business idea, you probably thought coming up with it was the hard part. It turns out the hardest part is yet to come. A study from Statistic Brain Research Institute found that more than half of all U.S. companies will fail after five years. So instead of rushing into business before you’re ready, do your homework to give your startup the best possible chance of success.