This is part 2 of my guide on starting your own business. In the first part (see the link at the end of this article) I talked about the preliminary investigation that must go into this decision. In this article I will talk about how to actually go about setting up your company. In the points I outline below, I will therefore assume that the reader has already carried out the preliminary analyses and concluded that his business idea is indeed viable.
How to Start Your Own Company: Part 2 of 2
This is the second part of my guide to starting your own company.
1 - How to start your own company: Determine your marketing mix
You need to determine your specific marketing mix. This refers to the set of marketing initiatives that you believe will best suit your business. A lot of the groundwork would already have been done as part of the considerations in part 1. Now its time to put it all together and complete your marketing mix. A simple and useful model for this is the four Ps:
Product: This refers to all the issues directly related to your product (or service). Issues include design, branding (or lack thereof), warranties, return policy, features, level of quality, and so on.
Price: This includes the actual cost, any discounts, the payment methods accepted, etc.
Place: This includes issues like location, distribution channels, transport, and so on.
Promotion: This refers to your advertising, public relations, sales force, etc.
A key factor to determining your marketing strategy is deciding how you will compete. If, for example, your main selling point is price, then you will have very different requirements than a company which competes with a high quality product. Michael Porter, one of the leading gurus within business, indicates that a company should really only compete on one of these two dimensions:
1. Cost leadership strategy: Here the company competes on price. This works best when you have very cost-sensitive consumers and it requires that your costs are low relative to your competitors.
2. Differentiation strategy: This is when a company competes on quality, features, customization, or anything else that sets them apart from the competition (other than price). Some markets are far less price conscious than others (e.g. luxury goods). Other markets may have segments that are not being catered to. Examples of differentiation strategies include: a car manufacturer which launches a safer family sedan, a computer manufacturer which produces powerful gamer computers, a cleaning company which offers a wider range of services, and so on.
Although this is not gospel, and it is possible for a company to achieve success in both areas, often companies which attempt to do this risk failing at both. So pick your marketing mix carefully.
Books on starting a business
2 - How to start your own company: Acquiring funding, skills, and equipment
Before the company can be established, you need to resources necessary to make your business idea a reality. In part 1, I listed your ability to acquire these things as a prerequisite for getting this far.
Funding can be acquired from:
Bank loans: these can either be taken in your name or in your company's name after you have registered it. However, banks generally expect you to have your finances in order and not to owe substantial sums of money. They usually prefer established businesses, but if you already have customers lined up it will improve your chances. These kinds of loan may also require collateral but, on the up side, you will be in full control and ownership of your business. A good business plan is essential.
Partners/investors: You can use your personal and professional network to loan the money. Be careful though, since this can quickly turn ugly. It is a good idea to have all such arrangements (even those with close friends) in writing.
Grants: This refers to money that certain organizations are willing to give out to promote certain types of enterprises. A very common type of grant is for technologically-intensive organizations/projects. Other types support minority groups. The advantage with grants is that you are essentially given this money (with strict restrictions on how to use it). The downside is that grants are extremely hard to get even if you find one that fits your business.
Venture capital funds: There are some options for acquiring venture capital, however projects that are normally considered are quite large, requiring in excess of 250,000$, and should have the potential for high growth. Typically, venture capital firms also prefer established companies, but it is still possible to apply particularly if you or your management comes with impressive credentials. The down side is that you will lose some of the control/ownership of your business. This is an enormous subject, well beyond the scope of this article. Check out the Wikipedia entry for more on this http://en.wikipedia.org/wiki/Venture_capital_financing.
Acquiring skills is usually simply a matter of hiring someone. However, the success of the business will typically, to begin with, depend to a large degree on the founders' knowledge. Apart from knowing your area, you have to know enough about the jobs you hire people to do.
3 - How to start your own company: Get all your papers & permits in order
Apart from the forms that you need to register the type of company you have chosen, you also need to consider if you require any special permits and/or licenses to carry out your business. Since this kind of thing varies from business to business as well as from country to country, further discussion is beyond the scope of this article.
4 - How to start your own company: Set-up your physical and/or virtual company
Again, this is a very broad category. General things to consider are:
Location: Where will you best be able to reach your target market?
Type: What kind of location do you need? Do you require to keep inventory? Do you require specialised equipment? Can some of the business be run from elsewhere?
Appearance/ message: What image are you trying to convey? Even the colour choice says something about you to your potential customers. For example yellow is typically associated with low cost.
Promotion/advertising: How will you let customers know you exist? Are you going to use flyers, newspaper ads, promotional offers, brochures, email marketing, telemarketing etc.? Which of these will best reach your target group?
Cost: All of these factors need to be weighed in against the actual cost of implementing them.
For online business, the following considerations apply:
Website design:Your site reflects your company in the same way as a physical location. Converting visitors into customers depends very much on having a website that looks "right", runs smoothly, does not confuse users, and so on. If you are interested to learn more about this, check out the video and the article on this page on conversion optimization.
Website marketing: Promoting yourself online is in some ways similar and in other ways very different from regular marketing. You can use paid advertising on search engines or on specific sites (e.g. banner ads or text ads) or you can get yourself to rank higher in search engine results using search engine optimization. Similarly, you can also use social media to promote your site. To read on this topic see this guide to internet marketing.
Website content: This includes written content but also things that improve the customer's experience, e.g. price calculators, video tutorials, currency conversion widgets, you name it.
5 - How to start your own business: Network, network, network!
At this stage, we have the basic groundwork and the building blocks for your newly established company. The final stage is to build a professional network.
Business networks can be both formal and informal, and they can be physical or virtual. Depending on your business, look to attend events (such as seminars, conventions, etc.), join relevant clubs, and so on. Make sure you mingle and have your business cards ready. For online networking consider social media platforms, in particular Facebook, Twitter, and Linkedin (and possibly also Google+). You can also participate on specialized forums, groups, wikis, etc. No matter what you choose, the key is regular participation and contribution.