An artisanal bakery, a book shop, a restaurant, or perhaps a craft store—most of us have dreamt of “having our own little business” at some point in time.
As many as 1,67,000 businesses were set up in India in FY22, a 7.5% increase from the previous year. Entrepreneurship is now being seen as a viable career opportunity.
However, with so many different ideas and opinions, it can get overwhelming to begin an entrepreneurial journey. How to fill paperwork, how to raise capital and what are the legalities of running a business? Here’s your how-to guide to know everything related to starting your own business.
Find your idea:
The first step to starting a business is knowing what to start. Business ideas are dime-a-dozen, and you need to find one that aligns with your interests. If you are unclear about what to start, you can choose from different industries and see if any of them piques your entrepreneurial curiosity.
If you are educated in a particular field, see for business ideas from that niche. The fact that you have knowledge in the field will help you immensely. Check for franchises in your niche. Instead of starting from the ground up, you can open a franchise if you have the initial capital.
- Validate your business idea:
Validating your idea might seem daunting, but it isn’t. It is finding whether customers will be willing to pay for your product. It saves you the effort, time, and money invested if people aren’t gung-ho about your products. Google Glass is an example of an idea that needed to be validated. With a price tag of $1500, even the benefits were not clear for its target market— no wonder the product tanked.
Here are simple steps to validate your idea:
● Set up a simple online store to take preorders; even an Instagram page might do (based on your audience and the product you are selling).
● Interview prospective customers to understand their willingness to pay for your product.
● Use crowdfunding platforms like Kickstarter, Indiegogo, and WeFunder.
● A/B testing different versions of your advertising campaigns.
● Use Google Trends and Google Keyword Planner to see the search volume.
● Search on Amazon. If the keyword you input has several related products, it is proof that your business idea has a market.
Get the legal aspects sorted:
Getting your legal requirements up to date is of prime importance. Let’s look at each of them.
- Registering your business:
Registering your company as a legal entity increases your credibility and protects you from personal liability. There are six business entities that you can choose from.
- Sole Proprietorship.
- One Person Company.
- Partnership Firm.
- Private Limited Company.
- Public Limited Company.
2. Founder’s Agreement:
It contains details regarding the founding members and establishes the founders’ and company’s rights, obligations, ownership, dispute resolution, and other aspects.
3. Get your documents ready:
The authorisation to do business comes in the form of legal documents. Let us see what it entails.
● Income tax registration
● Goods and Services Tax (GST) registration
● Permanent Account Number (PAN)
● Bank Account
● ESIC registration
● ROC registration
● Professional registration
● FSSAI license- If you are starting a food business.
● IEC code- If you are starting an import and export business.
● Kosher and Halal registration- If you are dealing with kosher/halal goods.
● Shop and Establishments license- If you want to set up a physical shop.
Some other required documents are a Director Identification Number, MCA portal registration, Commencement of Business Certificate, Certificate of Incorporation, and Digital Signature Certificate.
4. Registering the trademarks:
Even though it isn’t mandatory, trademark registration is a recommended legal requirement if you are starting an online business. Trademark registrations deter others from infringing it.
5. Set up your accounting and taxation system:
Central, state and local taxes may be applicable for certain businesses. The Startup India initiative has introduced several exemptions and tax holidays for new companies and startups. Maintain a proper book of accounts and adhere to relevant accounting and taxation rules.
Work on the business plan:
Your business plan provides a roadmap for structuring and growing your business. The primary objective of your business plan is to establish your plans for the future. It shows the milestones and goals you need to achieve to determine your growth.
A well-researched business plan is something that investors want to check out too. Your financial projections and how you aim to receive returns for your investors should be spelled out in the business plan. It is a major driving factor for investors to put money into your business. The business plan can be in the form of a document or a slideshow or even both.
It should contain the following:
● Title page and contents: It helps keep the entire document organized for easy reading.
● Statement of Purpose: Here, you summarize your products, market, and business operations.
● Offerings: You should talk about your products/services in this slide. It tells how the customers will benefit from your offerings.
● Market study: Share about the competitors in the field, your USP and differentiators, customer expectations and perceptions, sales trends, etc.
● Forecast: Include details about the sales you predict for the next few months. Come up with a five-year plan based on relevant numbers.
- Financing for your business:
There are several ways to get funding for your business. The first step is asking for money from friends and family or dipping into your savings. If bootstrapping is not possible, you need to engage with external entities.
Here’s what you can do:
● Angel investors: They operate individually or are a part of a large investment group. Angels are risk-takers, so the money they offer isn’t like a typical business loan for the startup to repay within a said time. They expect high returns and request equity. Mumbai Angels, Hyderabad Angels, and Indian Angel Network are some prominent ones.
● Crowdfunding: It is like taking a loan, pre-order, or investment from many people at the same time. Your presence on these platforms can also generate a lot of buzz about your product in the market.
● Venture Capitals: These are professionally managed funds. VCs provide funds, expertise, and mentoring. Helion Ventures, Kalaari Capitals, Accel Partners, Blume Ventures, Sequoia Capital, and Nexus Venture Partners are some of the big ones.
● Business Incubators & Accelerators: They are found in major cities and have various programs to help businesses. A few good ones are Khosla Labs, Srijan Capital, PrimeVenturePartners, Startup Village, and SINE.
● Loans from NBFCs: If you don’t qualify for a bank loan, microfinancing providers or NBFCs are becoming increasingly popular.
● Government programmes: Some popular government schemes for funding small and medium businesses are: Pradhan Mantri Mudra Yojana, ATAL Innovation Mission, Startup India Seed Fund (SISF), and Venture Capital Assistance. You can check out more details on the official Startup India page.
- Insure your business:
Protect your business with the right kind of insurance. There is a lot of hard work that goes into building a business. Here are some of the ways to protect your business with the right insurance coverage:
● Commercial Property Insurance: It protects your company’s physical assets.
● Business Liability Insurance: It provides coverage to your employees and customers by providing them insurance for accidents.
● Commercial Auto Insurance: It helps your business and employees from accidents and damages to vehicles during business operations.
● Business Income Insurance: If the business shuts down temporarily, this insurance pays your bills and other business costs.
● Commercial Umbrella Insurance: It offers extra protection beyond your standard policy.
● Accounts Receivable Insurance: When you cannot collect customer payments, this covers you against those losses.
Build the right team:
To take your business to the next level, you need people to who you can delegate tasks. Here are ways to build the right team:
● Communicate your vision and goals clearly.
● Decide the different skillsets that you require. Write a clear JD to attract the right set of people.
● Develop a plan for choosing vendors and manufacturers and hiring freelancers.
● Stay compliant with the local hiring rules.
Develop your product:
You have come from ideation to development. Now that you have money in your bank, you should find ways to create your product.
● Find manufacturers for your product. Aim to build a long-term relationship with them.
● Hire a team of freelancers or full-timers. Make sure you hire specialists and not generalists.
● Install necessary software required for operations.
● Develop policies for quality control and employee safety.
● Test the initial product with beta testers.
● Gather customer feedback.
● Keep making improvements based on the feedback.
● Come up with a pricing plan.
Invest in marketing:
Once you have the product, reaching out to potential customers is next. Where do your potential customers lurk? Reach out to them on the channels they frequent. Write about your USP, and use that to benefit when contacting customers. Here are some ways to spread the word about your business.
● Invest in content marketing. Write content for each type of personas. Appeal to their emotions.
● Spend on Facebook ads, Google ads, Instagram ads, and so on. Use at least three to four channels, wherever your customers are.
● Engage in online forums that are related to your niche.
● Create a lot of free content on Twitter, LinkedIn, and Instagram to attract your target audience.
Plan for business growth:
The next step is to increase your sales by focusing on strategies that will work for your niche.
Here are a few things you can do to plan for the future:
● Stay on top of market trends.
● Keep testing new ideas.
● Never stop studying your competitors.
● Acquire businesses that can help you grow.
● Expand product lines and services gradually.
● Find new markets to expand.