How to Start a Business - A Step-by-Step Guide

Instead of getting confused between directions, follow these tried and tested steps explaining how to start a business. 

If you want to learn how to start your own business, follow this step-by-step guide to transform your business idea into a real entity. 

Define Your Business Idea

Setting up a business and running it successfully takes a considerable amount of energy and time. So, it’s essential that you are passionate about your business idea. Your business idea will be the foundation to build a successful enterprise.

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Taking some inspiration is not an issue, but the challenge is determining whether it is a good idea for assured success. Requesting feedback from people is crucial. Ask yourself the following questions when defining your business idea:

• Does your idea solve any problem that people generally face?
• Will your target customers pay for it?
• What's your price point, and can you deliver it at a lower price than your competitors?
• Does your business idea have a sizeable niche market?
• Are you passionate about the business idea?
• What do your friends and family have to say about your idea?
• Are you open to feedback and advice?
• Are you realistic about your goals?

Are you yet to decide on a business idea? You need inspiration to light that idea bulb above your head. Studying the path of successful entrepreneurs will let you know where to go. Read success stories of successful people in various industries and learn what inspired them to start their businesses. 

Also, Read: 15 Zero Investment Business Ideas In India 2023

Conduct Competitors and Market Research

Whatever your business idea, conducting competitors and market research is vital for any business idea. It helps you understand how to serve your customers, what channels to use, and which is the most accessible client base. 

Primary Research

Primary research involves creating and gathering your data. It helps identify customer problems, gather insights through surveys or direct communication, and guides starting a business that satisfies their needs.

Secondary Research

Secondary research involves using existing data, such as online sources, public domains, research centers, and paid materials like journals and newspapers, to study analyzed information.

SWOT Analysis

SWOT analysis identifies a business's Strengths, Weaknesses, Opportunities, and Threats, helping assess internal and external factors affecting strategic decisions. It aids business owners in evaluating products, projects, and initiatives, enabling a deeper understanding of their company's potential and industry positioning.

Create a Business Plan

The business plan is a useful document that describes your company's objectives and goals. Moreover, it communicates the finances, methods, and timelines for achieving them.

Here is a stepwise guide to defining each element of the business plan:

• Executive Summary: The section describes your company’s mission, vision, short and long-term goals, etc.
• Business Description: It defines your venture's scope, intent, and realm while clearly describing its business nature and activities. 
• Market Analysis: This section provides evidence of your current marketplace, including your customer value and target customers.
• Competitive Analysis: It is a competitive version demonstrating the company's pricing, features, and integrations. It helps identify your competition, strengths and weaknesses, and unique value proposition.
• Organisational Management: The section includes an overview of your key personnel and team members, including their roles, responsibilities, team structure, and hierarchy.
• Products or Services: It clearly defines your products or services and the resources and efforts you invest in their production. Your product strength largely determines your business success.
• Marketing Plan: In this sеction includes your targеt markеt, channеls for rеaching customеrs, rеquirеd rеsourcеs, rеsourcе accеssibility, succеss mеasurеmеnt, еstimatеd budgеt, and timеlinе.  
• Sales Plan: This sеction dеfinе your salеs stratеgy, including goals, tactics, obstaclеs, and succеss mеtrics, offеring a high-lеvеl ovеrviеw of your plan. 
• Funding Details: In a businеss plan, if you are applying for a Business Loan or asking for financial help from investors. thе crucial sеction is capital, funding, physical rеquirеmеnts, constraints, and tеam growth, vital for loans or invеstor support. 
• Financial Projections: Apart from analysing your fundraising, investors and lenders want to see your future financial projections as well. Depending on your business stage and scope, it may range from one to five years.

Choose Your Business Structure

Before learning how to start a company and register it, you must decide its entity type. Your legal business structure affects various aspects, including your tax filing and personal liabilities, if anything goes haywire. You may establish your business as any of the following:

• Sole Proprietorship: You may register the business as a sole proprietorship if you independently own the company and take responsibility for all obligations and debts. Remember, if anything goes wrong, this business structure will directly impact your personal credit.
• Partnership: As its name implies, this type of business structure makes two or more people personally liable for obligations. If you can find an individual with similar skills and passion as your own, you may add them to your business structure to help the company flourish.
• Corporation: Establishing a business as a corporation separates your personal liabilities from the company’s. Although S and C corporations have different guidelines, they generally make your business a separate entity. As a corporation, you can own property, pay taxes, assume liabilities, and enter contracts.
• Limited Liability Company: LLC is a common business structure among small businesses. It is a hybrid structure with legal protections like a corporation and tax benefits like a partnership.

Ultimately, determine a structure type based on your future business objectives and current requirements. 

Also, Read: How to Start an Online Business from Home?

Register Your Business

Company Registration is the first step for business success. The Indian government constantly tries to ensure a seamless and unified process. Here, you will learn the intricate details about how to start a business and register it in India.

Choose Your Business Name

After determining your business structure, choose a name that reflects your brand values, conveys the products or services you sell, and resonates with your identity on social media and advertising platforms. Search your state's database to ensure your selected name is available for registration.

Doing Business As (DBA)

Every business has a legal name. For a partnership or sole proprietorship, it is the business owner's name. For a corporation or LLC, it is a legal name mentioned on its formation document. DBA stands for 'Doing Business As', usually a fictitious business name, assumed name, or trade name. The purpose of DBA registration is to notify that a particular business entity will conduct business under a name different from its legal name. Registering a DBA is mandatory, as it lets the public know the actual business owner they are dealing with.

Employer Identification Number (EIN)

Employer Identification Number or EIN is a unique identifier the Internal Revenue Service uses to identify your entity. Made up of nine digits, you will need one if you have employees, file tax returns, operate as a partnership or corporation, or withhold taxes. All business types must apply for an EIN, including sole proprietorships, S corporations, estates, trusts, partnerships, LLCs, NPOs, and government agencies.

Income Tax Forms

Every company must file annual income tax returns if their GTI (Gross Total Income) exceeds Rs 3 Lakh. Various ITR forms are available, which you must choose according to your business type and structure. Identifying and submitting the right ITR forms to the Income Tax Department is necessary for Business Loan applications, refund claims, transaction evidence, legal compliance, tax benefits, etc.

Apply for Federal, State, and Local Licenses and Permits 

Every small business needs a combination of permits and licenses from both state and federal agencies. The fees and requirements vary based on your government rules, business location, and activities. Apply for the relevant ones to start operating your business without legal complications.

Examine Your Finances

The ultimate goal of any business is to generate revenue. That means cash flow is an integral part of business operations. Below, you will learn how to set up a company with the finances in order and scale them to grow.

Conduct Your Break-Even Analysis

Break-even analysis calculates when a business covers its costs. It shows the point when sales match expenses, resulting in no profit or loss. It helps determine startup capital needs, assess the need for a business loan, and evaluate risks like innovation, new products, or hiring.

The formula to calculate the break-even point is:

BEP = Fixed costs ÷ (Sale Price Per Unit – Variable Costs Per Unit)

Usually, a break-even window of 6-18 months is acceptable. If your break-even point (BEP) takes longer, you might need to modify your business plan to increase pricing or reduce costs. Basically, you must use this analysis whenever you want to add costs to your operations, especially under these scenarios:

• Business Expansion: A break-even point will help you evaluate how long it might take for your investment to earn profit. For instance, it may help calculate the minimum sales requirement to cover the costs of entering a new market or opening a new branch.
• Price Reduction: Sometimes, you may need to reduce your pricing to beat your competitors in a particular market product or segment. So, when lowering your pricing strategy, you must determine the number of more unit sales required to make up for the price reduction. 
• Changing Business Scenarios: You must make various complicated decisions when changing business scenarios. With BEP analysis, you can narrow down your decision-making to a series of questions with yes or no answers.

Open a Business Bank Account 

From the beginning, keep your personal and business finances separate. By opening a business bank account, you can achieve that goal successfully. To open a business bank account, provide your business name and TIN (Tax Identification Number). You can use this account for various business-related transactions, including supplier payments, customer invoices, etc.

Fund Your Business

Business funding options include internal and external sources. Internal sources include personal savings, funds from family and friends, credit cards, asset liquidation, etc. External sources of finance include Business Loans and grants, angel investors, crowdfunding, venture capital, etc. You may use a combination of different sources to fund your business.

Consider how much money you require, how long you will need to repay it, and the amount of risk you are ready to take. Some common funding ideas include unsecured SME loans, invoice factoring, bill discounting, and secured loans like Loan Against Property.

Once you finalize a loan provider, visit their website or download their app to follow their application procedure. Use an eligibility calculator to determine a suitable funding amount, and create a solid repayment plan to repay the debt on time to fund your business and build credit over time.

Apply for a Business Insurance Policy

It might slip your mind among all the intricacies of setting up a business. Dealing with unforeseen incidents like theft, customer lawsuits, and property damage can be expensive, and insurance can properly protect you during such circumstances.

There are several types of insurance plans for business enterprises, including property insurance, liability insurance, cyber insurance, general liability insurance, business income insurance, etc. However, purchasing unemployment and workers' compensation insurance is necessary if your company has employees. If you provide a service, professional liability insurance is helpful as it covers if something goes wrong during the project.

Also, Read: Top 10 Service Business Ideas for 2023

Choose the Right Business Tools

When starting a business, you will need various tools to run your business efficiently. These tools can save you time and effort by automating manual tasks. Choose the right business tools to streamline your business operations:

• Credit Card Processor: If you are setting up a retail business, you will need a credit card processor to accept customer payments by credit card, making payments easier and increasing your sales.
• Point of Sale (POS) System: A POS system allows payment processing more easily and conveniently. Look for a CRM and account software with in-built POS features. 
• Accounting Software: An efficient accounting software program will let you track your business expenses and income, file taxes, and prepare financial statements to handle the accounting department.
• Project Management Software: After setting up your business, you must plan, track, and execute various projects. A project management software program will make projects easier to manage with minimal human intervention.
• CRM Software: CRM stands for Customer Relationship Management. CRM software manages customer relationships, automates tasks like customer care and follow-ups, and tracks marketing and sales data. 
• VPN: A Virtual Private Network provides a private, secure connection between the internet and your computer. It is extremely important if your business handles sensitive information. 
• Email Hosting: Using an email hosting platform, you can create professional email addresses for yourself and your employees with your business name as the domain name. 

Promote Your Business

Even the best business entity with honest owners and top-quality products or services may go unnoticed if it cannot reach its target audience. So, here are a few steps to promote your business in the right manner:

Create a Brand Identity

Creating a brand identity is a strategic effort that supports your business goals and overall message. It includes your company’s logo, design, style, tone, etc. Use it across your products and social media presence.

Build a Website and Online Presence

Even if you establish a brick-and-mortar business, an online presence is essential these days. Build a user-friendly, easy-to-navigate website that convinces customers of your identity.

Social Media Marketing

In 2023, India has more than 398 million adult social media users, which makes up around 40% of the country's population. So, what better platform can you find than this to promote your business?

Traditional Advertising Method

Traditional advertising methods like newspapers, radio ads, and cable TV ads always stay relevant, especially if you are catering a product or service for customers above 50. Explore these options and utilize them to your benefit.

Grow Your Business

Once your business has started making profits, it's time to scale your company by growing its revenue and customer base. You can successfully achieve that goal by adding products or services to your offerings, expanding your promotional strategies, entering new markets, collaborating with other businesses, etc.

Outsourcing or automating a few tasks is a good strategy for business growth, as it allows you to focus on productivity rather than staying busy with mundane activities. Using technology to automate accounting, lead generation, and social media marketing processes is a good way to focus on other parts of your business.

While growing your business, monitoring your finances and ensuring profitability is crucial. If you are falling short of funds, apply for a Business Loan to cover the costs.

Build Your Team

No matter how fantastic your business idea is, your start-up success will ultimately rest on your team members' shoulders. Here are five steps to build a dream team:

• Depending on your and your partners’ skills, identify positions required to complete the team, including jobs in sales, marketing, SEO, account management, project management, programming, etc.
• Based on your business activities, decide whether you need full-time workers or you can outsource some tasks to freelancers, contractors, or advisers.
• Search for qualified candidates for the required positions to build a winning team.
• Begin the hiring process with an interview and do a quick background check.
• Candidates who pass the test can become your team members. However, try to improve your team over time with career development, training, promotion, and incentives. 

How Does a Business Loan Help You To Start A Business?

Many small entrepreneurs struggle due to a lack of finance. A Business Loan emerges as the most common financial product offering the following benefits:

• No restrictions on the usage of funds
• Easy and convenient access to capital
• Reasonable interest rates than other funding options
• No collateral requirement 
• No profit sharing or loss of control in the company
• Finance to build capital
• Tax benefits under the Income Tax Act of India
• Improved business credit with regular repayments
• Ample loan amount
• Flexible and convenient repayment 
• Hassle-free Business Loan application 

How to Apply for a Business Loan Online?

If you need a Business Loan, you no longer need to wait in long queues to apply for the required funding. At the Hero FinCorp website or loan app, you can submit your Business Loan application online and receive funds after approval. These are the steps to follow:

• Visit the Business Loan application page.
• Fill out an online application form.
• Upload the necessary documents.
• Enter the required loan amount and select a suitable repayment tenure.
• If you qualify for a loan, a representative will contact you for more details if needed. 
• After verifying your details and documents, you will receive a loan offer with the approved loan amount and interest rate.
• If you accept the loan offer, disbursal takes place directly to your bank account.

Conclusion

Congratulations! Now that you have cut the ribbon and officially opened the business, focus on managing the operations and growing the business with time. Whenever you need financial support, Hero FinCorp can assist in the form of an unsecured Business Loan. With an ample loan amount of up to Rs 40 Lakh, you can cover your intended expenses and repay it in a flexible repayment term of up to 60 months. However, your business should have been in operation for at least five years. 

Frequently Asked Questions

1. How can I start a small business with no money?

Borrowing from friends or family or taking a loan against a property are the best ways to start a small business with no money.

2. How can I manage cash flow effectively?

Identifying issues early, making frequent projections, closely monitoring cash flow, understanding basic accounting, leasing rather than buying, and using the right tools are effective ways of managing business cash flow.

3. What is the typical interest rate for startup business loans?

Interest rates for startup business loans can vary widely, depending on factors such as your creditworthiness, the type of loan.

4. What is the importance of networking for a new business owner?

Networking allows new business owners to share insights, receive valuable advice, and learn the latest trends in the market. By identifying new opportunities, it increases the chances of business success.

5. What are the benefits of franchising vs. starting from scratch?

If you take a franchise, you must work under the franchise company’s guidelines and share profits with them. However, franchising gives you access to the company’s resources and expertise that you lack otherwise.