Build a business from scratch, entrepreneur guide to establish strong business base for success
You are eager to build a business from scratch. Don't make these two common mistakes.
You make a great effort on a product, invest time and money. Then, discover that the market doesn't want your product. Have you checked validation?
Second, you try to penetrate the whole market. Then, you find out that there are stronger, well- reputed competitors, almost impossible to compete. Have you tried to research what is the best niche for your product?
In this article, you would be granted the answer to these questions. Along the way, you would be received principles and action plan to start your business. It won't be easy but it would guarantee success.
Basic terms important to build a business from scratch
Before jumping into the subject, there are main terms you should know. Hence, you would apprehend this article better.
Business probability
The first term you should know is business probability. It is market analysis allowing you to research if it is worthwhile to develop a product. When checking the business probability, you want to know: how much income you would receive compared to expenses, the size of the market, and its' readiness to buy the product.
MVP
Minimum value proposition. It means that you give the customers the most crucial benefits when using the product. It is exactly what they need to operate the product and receive the best results.
Lean start-up
It is a thin product you develop. You produce and sell what grants the highest value in a minimum cost. You deliver a minimum value proposition (MVP).
Blue and red ocean
This is a phrase that indicates the level of competition. Whereas, blue ocean means low competition, a red ocean means high-volume competition.
Diversity of competitors
The second important term is the diversity of competitors. There are different kinds of competitors mention below.
Direct- you both have a similar product which solves the same customers' problems. Direct competitors can be Instagram and TikTok.
Competitors on the same customers' needs- Your competitors have a product which is distinguished from you but answer the same need. For example: Instagram and Twitter.
Competitors on the same industry- Your competitors have a product that is distinguished and answer on different needs than your product. For instance: Instagram and LinkedIn.
Competition on the customers' wallet- You compete with other industries on your customers' money. It can be Instagram and the local market.
Business plan
The next term is a business plan. It is a combination of market, financial, product, and sales analysis. It being conducted of strategies, targets, milestone and action plans. It directs the business owner on how to manage his business, what are the outcomes expected and when.
Business model
When building your business you would have to show how you are going to earn money. This is called a business model. How you would charge for your business and how much.
Break-even
Another important term is break-even. It is the phase that your income and expenses are the equal. Profits are 0.
Target
It is a primary, numeric goal you set for at least a year or more. Whenever it is a small business, you must put each year a primary goal. When it is a large business, then you can set a primary target for 2 year or even more.
Strategy
It is a general sort of actions that leads to achieving the primary target. It is a framework which defines what specific you should commit inside the execution plan.
Milestones
These are numeric, short-term goals. Mainly set to achieve the primary target. It has to be less than a year: daily, weekly, monthly, etc.
Execution plan
It is the entire specific actions you take to reach the milestones. It can be daily business activities, once a week, a month, a quarter and so on. It must promote the strategy and can't contradict it.
Create a strong business idea
Basically, you need to have an idea to build a business from scratch. For instance: digital marketing business, graphic design freelancing, web developer and the choices are endless.
Think about what kind of problems require solutions and how it would affect the customers' life.
You can start with your daily life, at work or what you hear around you.
However, you should remember that most of the time, you would take an existing product and improve it.
Build a business from scratch, the target audience, competitors and your product improvement
After possessing an idea now you ought to research probability.
These are the steps that you need to track to fully research the market. In the next part, I would elaborate the exact steps you should take to build a business from scratch.
Define your target audience
This phase would determine the success of your business. It is that important!
Decide on 10 niches to penetrate.
In the image below there are concepts of the most profitable niches, you can select from.
Research the size of the industry, niche and its value
Find niche reports that indicate how many potential customers are there and how much each niche is worth estimated.
Research who are your competitors. In this phase, you should focus on direct competitors and the 3 strongest competitors. Prefer niches that have less direct competitors, more blue ocean related.
Second, select niches that the strongest competitors are more general and less niche oriented.
At the end of this process you should stay with 6 niches.
Find your products' penetration spots to the industry and niche
Utilize your business strengths. Meaning what you are good at: your skills, resources, technology, etc. Then, find out what your marketing opportunities are like: marketing trends, laws, less competition, etc. When you do that, examine what business strengths can exploit or meet marketing opportunities.
On the other hand, don't forget to avoid marketing threats and strengthen your business weaknesses when possible.
Concentrate on the most lucrative customers
After you have revealed what is the best means to penetrate the market, it is the time to find out what are the needs and wants of your target audience.
Hence, you can conclude what is the product you should invent, grant or produce. To do that, there are 2 main actions you should commit.
The first is describing your potential customer to each niche. Think of one or two persons for each niche. Look at the example below to apprehend what to focus on.
Second, ask your target niches what their needs, wants, would they make the effort to solve this particular issue, would they pay money for that and what would be the biggest benefit they would look for. If possible, you can also ask your close environment like friends, family, etc. After you have finished, stay with 3-4 niches to concentrate your product.
Build a business from scratch, start the pilot
When you reach this phase, you should set a primary target, strategy and milestones.
The primary target would be numeric and should be: Amount of customers who are using or paying for the product. Less recommended primary target but possible is customers' income. How much would be your total sales.
If you want to sell the product, you should execute a penetration market strategy and a starter business model. How much are you going to charge for your product and in which method? This primary target would probably be allocated to one year or a little more.
Next, you would form a strategy to reach the primary target. If you want to reach 120 users at the end of the year, what would be actions' framework to reach this target.
Lastly, you should put milestones. It would be small numeric goals aimed to reach the primary goal. When you want to have 120 users, you need to acquire 10 (120/12) users a month to reach the main target.
Build a business from scratch, the product validation
As for now, you should have guidelines: who are your potential customers, who are your direct competitors, those who compete with you on the same need or industry, the main needs and wants, your capabilities to address the needs, the niche's predicted growth and revenue.
Next step is to implement the MVP or lean startup method. Meaning, to develop a product that conducts with the minimum target audience value proposition. You grant the customers with the basic and most essential product's features to address their needs.
Along the way, you would analyze how the customers react to your product's operation.
1. What do they like about your product?
2. What do they complain about the product?
3. What is the customers' user experience?
When you know the answers, you apprehend what features you should keep and what need to be shifted.
Define a business model and a budget
Probably after one to two years, you should have a more completed product. This is the time to plan how you would profit from selling. Look at the next example below to find out the best business model for your business. Remember that it can differentiate your product and it should meet the customers needs.
When you recognize and estimate your income growth. Now, you can plan your budget. Keep in mind that your income should be always more than your expenses. Analyze when you could reach the break-even. How long it would take you to equal the income to the monthly expenses.
Protect your business legally and financially
When the customers are eager to close the deal, you would have to send them an agreement. You can use Simply Docs to build your own contract, search on the Internet for excited agreements or rent a lawyer. Don't try to do it by yourself.
You would also have to charge the money. So, you would need a bank account. A way to charge the money like PayPal, Stripe, 2checkout or Payoneer.
You would also have to send invoices. You can try Invoice quick.
Build a business from scratch, measure your progress
The first action you get to take every morning is analyzing your business success. Check how much money you have made, how many customers have acquired your product, average income for each customer, how many up-sales and cross-sales have you sold, compare between the income month before and this month and so on.
Base your business establishment
By now, you should have everything needed to create a business plan. You just need to document the actions you took, the market reaction and to focus on improving numbers.
In parallel, you must form a marketing plan. Meaning, how you would expose your product to the target audience, differentiate your product, and bring added value.
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