how to start a startup

There are many entrepreneurs who want to start a startup but have no idea how to start a startup. Before knowing how to start a startup, you need to know what a startup is.

A startup is a new company where entrepreneurs start a business with a new product or service. It is basically a small business venture of one or few people. This is the initial stage of any business. Usually people start a startup with their personal investment.

The easier it is to start a startup, the harder it is to survive there. One statistic shows that 71% of startups shut down within 10 years of establishment. Every year 4 to 5 thousand startups start their journey but most of it fails.

Startup failure rate

However, the rate of failure varies from sector to sector. As you can see in the picture, Insurance & Real Estate sector’s failure rate is the lowest and Retail and Construction sector’s failure rate is the highest .

How to Start a Startup

There are nine steps to start a startup

  1. Generate a Business Idea
  2. Write a Business Plan
  3. Identify the Source of Finance
  4. Make Decision About Your Business Structure
  5. Register Your Business
  6. Find a Location for Your Office
  7. Recruit Employees
  8. Make a Marketing Plan
  9. Start Your Business Operation

how to start a startup

Generate a Business Idea

How to start a startup? I would say the first step to starting a startup is to generate business ideas. You have to think about what kind of business you want to start.

Many people ask me what kind of business is good for them.

I say you can commence a business that you have passion and very good knowledge. But before starting a business, you must analyze the respective market.

How do you analyze the market? All you need to do is to read the market report of your industry and analyze the regional performance of your competitors. Do segmentation of their performance. Try to figure out where they are performing better and where are worse. Do research on region-based performance variations.

Do a research on how to capture the market in areas where their sales are low. And try to find out whether your product is able to compete with them in areas where your competitors are more influential.

You must follow industry trends to comprehend the market sentiment better. Regularly read industry related articles and follow the activities of industry influencers.

Many start-ups fail simply because they do not identify their real customers. So the target customer must be specified before starting business. You have to conscious about the demand of your customers. In this case social media is a very effective medium where you can get a good idea about the behavior and needs of the customers. Or you can arrange a Q & A session to know directly from your customers.

There is a secret formula to come up with good startup ideas. You will notice that people in your area are facing some problems or they are being deprived of the high quality services. Your job is to solve those problems and turn it into a business. Many large start-ups have been established using this formula.

Related Article: How to Become an Entrepreneur With no Experience 

Write a Business Plan

A business plan is a written document that contains a detailed description of a business organization’s activities, objectives, and future goals. This plan includes various topics such as company description, market analysis data, organization and management, company service or product description, marketing and sales strategy, funding sources and financial projections.

A business plan is one of the major keys to an organization’s success. Without a business plan you cannot manage the organization properly. Without a business plan your business will grow less and you will have less chance of getting a loan.

how to start a startup

Tim Berry recently conducted a survey on the business owners who have business plan and who have no business plan.

Out of 2877 traders, 995 had business plans out of which 297 (36%) were able to get loans, 260 (36%) were able to secure investment capital, and 499 (74%) had business growth. On the other hand, 1556 people had no business plan. Of these, 222 (18%) were able to get loans, 219(18%) secured investment capital and 501 (43%) had business growth.

So if you want to start a start-up, you have to create a business plan to accelerate the growth of your business. If you can’t create it yourself, you can hire a freelance expert.

Related Article:  How to start an ECommerce business (Step-by-Step Guide)

Identify the Source of Finance

The main obstacle to starting any business is lack of funds. It is very easy for you to start a business if you have enough funds. But startup funding is very difficult for those who do not have enough savings.

So before starting your start-up company, you must be sure about the sources of finance. This is because many start-ups fail to conduct daily operation of business due to lack of adequate funds.

How much money does it cost to start a business? That will depend on your business industry. The average starting cost of a startup in the United States is $78,406. However, the amount of expenditure varies from country to country. Costs are more or less based on the availability of raw materials, staff salaries, infrastructure costs, etc. If you want to produce a product whose raw material is not available in your area then you have to import from another place. This will boost your production costs. And if those raw materials were readily available in your area, your production costs would be lower.

There are several sources of start-up funds such as:

Sources of startup funds

Personal investment This is the most common finance source. Most startups start their business with personal investment. Because most lenders usually lend to established businesses or those with very good credit ratings.

Friends & Family One of the main sources of funding for startups is Friends & Family. The advantage of raising funds from siblings, friends, parents and relatives is that it is less risky and there is no problem even if you pay late.

Venture capital If your startup idea has the potential for long-term growth different financial institutions will want to invest in your business. This is called venture capital.

Angels Fund can also be raised from wealthy individuals or executives of companies. Such funds are a boon for any business as these individuals will not only provide funding but also technical and management support from their experience.

Government grants and subsidies You can get grants and subsidies from government agencies. However, the amount of these funds is usually small.

Bank or Non-bank loans Banks and other financial institutions are the most common source of financing. You will need Collateral to get these loans.  Good credit score is a another big factor to get loans from banks or non-bank financial institutions. In this case I would suggest to choose a small bank. Big banks are very selective when it comes to lending to small businesses. On the other hand, Small community banks are more cooperative, they want to build a personal relationship with the business owners on the basis of the profile and characteristics of the merchants. So you will get much more cooperative behavior from them.

Crowd Funding This will allow you to raise a small amount of funds from many people.

Related Article: What is Dropshipping? How Does This Business Model Work?

Make Decision About Your Business Structure

Before registering your company, you need to determine the structure of your business. Because depending on the structure of your business you have to submit necessary documents and go through the legal process.

There are four main types of business structures:

Sole proprietorship If you want to start a business alone, register for sole proprietorship. The advantage of sole proprietorship is that you can enjoy all the benefits alone. And the problem is that you have to bear all the liability and loss of the company alone.

Partnership If you plan to start a business with two or more partners, register for a partnership business. The profit, liability and loss of the business will be borne by the partners in proportion to the shares so you do not have to incur losses alone. It is best to start a startup with a partner because you will not only get their capital support but also their advice and technical support.

Corporation This is a legal framework where personal liability is separated from company liability. By forming a company the business is separated from its owner. There are certain legal procedures for forming a company that you need to follow thoroughly.

Limited liability Company (LLC) It is a hybrid structure where the owner does not personally bear the liability of the company. LLC has combine characteristics of corporations and partnership or sole proprietorship.

Related Article: 30 Creative Small Business Ideas You Can Start With Little Capital

Register Your Business

In order to start any business, you must register your business. It is a legal matter. This will give your business legal legitimacy. If you apply for a corporation or LLC, you must submit your company’s articles of incorporation. Articles of incorporation are a set of formal documents that mentions the purpose, mission, vision, address and ownership of the company. If you want to start a sole proprietorship or partnership business, you need to register your business name which is known as DBA (Doing business as).

Then you need to register your business with IRS to get Employer Identification number (EIN) number. This is like your Social Security number which will be required for tax filing.

After completing all the federal registration, your business needs to be registered with the state or local government. After these steps you will apply for licenses to start your startup.

Find a Location for Your Office

Your startup company needs a physical address. It is also true that there are many startups today which are running their business operations without a physical office or retail shops. But a physical office will help increase your work ethic. In addition, you can manage your staff easily.

If you wish, you can purchase office space or lease it. However, leasing will cost more than buying in the long run. So it is better to buy than to lease a space. And if you are a small investor then you can rent office space.

Recruit Employees

Skilled and experienced employees play a key role in the success of an organization. Again one of the main reasons behind the failure of the startup is the lack of good staff. So recruiting an employee is very important step for a startup.

There are a number of factors to consider when selecting staff. E.g.

– Knowledge about the products of your business

– Industry-relevant skills

– Experience

– Attitudes

Another important issue is the number of employees. Many startups cannot make the right decision in this regard.

how many staff need a startup

In the graph you can see how many employees are needed at different stages of a startup. It is better not to hire too many employees at the beginning of the business. Because in the beginning your investment may be small. So the fewer employees you hire, the lower your costs will be. And there is no guarantee that your startup will be successful so there is no need to bother with hiring more staff. If you observe your startup is growing, you will take the initiative to increase the staff.

Make a Marketing Plan

At this stage you need to create a marketing plan to let people know about your startup. This is a very important step. Because the growth of your startup will depend on the success of this step.

In order to promote your business, first of all need a website that will contain your business profile and a detailed description of the products or services. This website must be professional and have a corporate look so that customers will be attracted to your organization.

The most effective means of marketing products is digital marketing. There are different techniques of digital marketing, e.g.

  • Search engine marketing (SEM)
  • Content marketing
  • Pay-per-click advertising (PPC)
  • Referral programs
  • Email marketing
  • Search engine optimization (SEO)
  • Social media marketing (SMM)

You can also use some conventional means to market your product to the local community

  • Print advertising
  • Radio advertisements
  • Television Ads
  • Billboards

Did you know that an established blog is one of the biggest assets of a business? Blogging will help you getting huge amount of subscribers. If you notice, you will see that all the big corporate organizations have blogs where they are posting contents regularly. As a result, they are getting a lot of customers.

However, it is not so easy to get a lot of customers just posting content on a blog. That’s why you have to put a lot of effort and time behind SEO and social media marketing. You have  to use SEO tools like SEMrush. If you do not use these tools, you will not be able to measure your performance.

To build a long term customer relationship you must have regular contact with customers. Customer feedback is very important factor so you have to know their opinion about the products. If they give positive feedback then everything is fine but if they give negative feedback then of course you have to take necessary steps to solve these problems.

Start Your Business Operation

The last step after completing all the process is to launch your startup. After launching Startup you will have to face different situations. The path to success is never straightforward. You have to overcome many obstacles and move forward.

To operate your startup you have manage many things, such as –

  • Equipment management
  • Inventory management
  • Production management
  • Project management
  • Human resource management
  • Customer order management

You have to manage everything efficiently. Your staff and partners will assist you.

To implement your plan you have to take right decision. The right decision at the right time plays a very big role in the success of a startup.

You suddenly get a big opportunity but hesitating to make a decision can ruin that opportunity for you. In an interview, Bill Gates said that the difference between ordinary people and entrepreneurs is that ordinary people lose opportunities due to indecision, but entrepreneurs do not do that.

How Much Does It Cost to Start a Startup?

startup cost

How much money you need to start a startup will depend on your need and requirements. What kind of product or service you want to work with is also a big factor.  According to U.S. Small Business Administration data, starting a micro business costs an average of $3,000, while home-based franchises cost between $2,000 and $5,000.

Common Startup costs includes

  • Licenses and permits cost
  • Registration cost
  • Marketing
  • Salaries
  • Rental space for office
  • Payroll
  • Office furniture
  • Labor
  • Insurance
  • Basic supplies
  • Website maintenance cost

The Top 20 Most Common Reasons Why Startups Fail

There are several reasons why a startup may fail. You can see the reasons in the Infographic below. It is very important for you to know these reasons so that you can take appropriate steps to save your startup from failure.

Startup failure reasons


The Bottom Line 

I hope now you have a good idea of ​​how to start a startup after reading this article. You already know the success and failure rates of startups. Since startup failure rates are very high, you need to be very careful.

Create a business plan before starting a business. Because startups that have a business plan have a relatively high success rate.

Many startups fail due to lack of funds so be sure about the source of funds then start the business. It would be better for you to start a business with your own savings without taking out a loan in the first stage of business, if the business growth is good, consider taking a loan.

Lastly, I want to give an advice on location. Remember that location is a big factor for any business so set up an office or retail shop in a place where it will be easy for you to find your target customer.


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