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 How to start your own business from scratch

We understand the basics of entrepreneurship. We tell you how to open your own business: where to start, what to pay attention to, how to study the market, analyze competitors and test the idea with minimal costs.

How to start your own business from scratch

Where to start your business

Entrepreneurship should be understood as independent actions that are aimed at systematically making a profit. This may be the sale of goods, the performance of work or the provision of services.

Business is always a risk, there are no 100% guarantees that some algorithm of actions will provide constant income. But there are recommendations based on the experience of other people.

Read next:  How to start a business: a business plan

Conventionally, the whole process can be divided into several stages:

  1. An entrepreneur is looking for a business idea , comes up with it himself, does something on the advice of others or copies, improves an existing one.
  2. Checks the idea for strength, studies demand.
  3. If the idea seems promising, it studies the market, that is, it analyzes the target audience and competitors, selects a niche, a customer segment, thinks over development strategies, draws up a business plan .
  4. Thinks of ways to sell your product.
  5. He calculates how much money he needs to fully launch the business, looking for start-up capital.
  6. Launches a business, analyzes the results and behavior of customers, gradually improves the product, eliminates errors.

The process can be simplified. For example, some entrepreneurs do not even try to launch their online stores, as they rely on marketplaces.


How to find an idea

There are several ways to find business ideas.

Brainstorming . A new idea is born from nothing, thanks to the methods of creative thinking.

For brainstorming, you need to assemble a company of several people, it’s good if they differ from each other in income levels and main activities. Within 2-3 hours, you just need to choose a topic and throw ideas, even the most unrealistic ones. You can build analogies, invent associations.

Then the list of ideas is subjected to critical analysis, the most successful options are selected.

Customization for the client . The idea to open your own business often arises from the desire to work for yourself and use the accumulated experience. Experience is not only knowledge in a particular area, but also an understanding of customer problems, the ability to meet customer demand.  

For example, some delivery services do not tell the client the exact time of arrival of the courier, sometimes they have to wait all day. The manager collects feedback and sees that this causes dissatisfaction among customers. This means that the solution to this problem can become a business idea, a competitive advantage for a new courier service.

Implementation of a common idea. In most cases, the new business is unoriginal - it is geared towards simply solving customer problems. These are hairdressers, grocery stores, flower shops, consumer service points.

Copying someone else's business. An original idea is not always the key to a startup's success. It happens that an entrepreneur uses a trivial idea, but sets up business processes in such a way that he stands out from his competitors according to several criteria at once: price, service, additional bonuses.

How to test a business idea

Testing a business idea is testing a hypothesis. First, some assumption is put forward, and then in practice it is either confirmed or not. It's good when a business idea is tested with minimal resources.

Concept formulation . Any business idea can be constructed by answering the following questions:

  • What need or problem does my business solve? A bakery near the house makes it possible to have a quick and inexpensive meal, a chain store - to buy everything you need in one place, a coffee shop - to spend a comfortable evening.
  • To whom will I offer the product? Who are my clients? It is important not only to describe the socio-demographic characteristics, but also to slightly narrow the audience. For example, the clients of the bakery are residents of the microdistrict, the clients of the website builder are designers, copywriters, and aspiring entrepreneurs.
  • Where will I sell my product? You need to understand in which markets you can organize sales and how much it will cost. For example, trading on the marketplace will be cheaper at the start, but with large volumes, developing your site may be more profitable.
  • How much is it? You need to find out how much customers are spending on solving a problem and set a price for your product.

Interview. We need to find out whether the business idea suits the customers, whether we made a mistake in the analysis of the audience, in the assumptions about the needs. This can be done through interviews with potential buyers.

It is worth being interested not in assumptions, but in studying the experience of people. For example, instead of asking “How do you like the product?” ask questions such as: “You have such and such a problem. Tell us how you solve it? Why did you choose this product? How did you choose - by price, by reviews?

Pre-order. The formulated concept of a business idea can be represented as a list of hypotheses to be tested. For example, we set a price for a product of about 50$. We need to find out if it is acceptable for customers, or to check whether our product is really needed by a certain category of customers.

Asking potential customers about this is useless. They can promise to buy, but when it comes to a real deal, they will find many reasons why right now they are not ready to part with the money.

Therefore, prices and interest in the product are checked using pre-orders. For example, they organize the production of cheese, talk about processes in social networks, accept pre-orders, possibly at a discount. If an entrepreneur makes a small profit even without a real product, one can assume that the price and concept are suitable.

Sales without sales . Let's say we decided that it would be nice to bring cosmetics of a certain brand from Korea. Demand can be checked before ordering a batch:

  • We post information on ad sites with photos of the supplier.
  • We make a small promo page and buy some targeted advertising.
  • We create pages in social networks and publish ads there.
  • When the client calls, we answer that we have already sold out the batch, and we are waiting for the next one in a week or a month.
The goal is to figure out how the advertising channels will work.

How to choose a niche and key segment

After testing all the hypotheses, the entrepreneur has an understanding:

  • How does his idea solve the needs of customers.
  • Who is his target audience, who is ready to buy right away, who needs to think longer.
  • Which niches for his business idea are free, and where there are many competitors.
For example, we decided to sell guitars. With the help of interviews, we found out that an inexpensive tool is mainly of interest to schoolchildren and students. We made an online store on a free constructor, uploaded several ads on Avito and similar services, and tried to trade on Ozone.

After testing, you need to calculate what demand was on each sales channel, how much each sale cost including advertising, and focus primarily on the source that brings more customers at a lower cost:

  • Online guitar store brought 0 applications.
  • Avito turned out to be a profitable channel, but there were only 2 sales there in a month.
  • Ozon managed to sell 10 guitars, despite the modest assortment. True, for each transaction, taking into account marketing and delivery, I had to pay 10% commission.
Conclusion: since Ozon provided the largest sales volume, you need to analyze marketplaces and enter them. "Avito" should be dealt with secondarily.

Where to get money for business

Own savings. Long but reliable way.

Loans. It could be a bank loan. It is important to compare the profitability of the business and the cost of the loan. For example, if a business brings 2-3% per annum, and you need to pay 20% per annum on a loan, most likely this is not a very profitable deal.

Search for an investor . You can try to find a person or company who will be interested in the idea, evaluate the profitability and offer funding. Usually for such help you have to give a share in the business. Before looking for an investor, you need to write a business plan and calculate the financial model, argue why the entrepreneur needs exactly the amount he asks for.

Grant or subsidy. There are several types of business support in Russia. You can receive a grant to open a new company, reimburse part of the costs, or organize a new project on co-financing terms.

Typical beginner mistakes

Copying without taking into account the nuances . If someone's business is successful, this does not mean that its full copy will also make money. It is useful to look around and focus on the best practices, but it is important to take into account the peculiarities of your field, the presence of competitors, the nuances of the product and the audience.

product for yourself . There is a rule in business - you should not consider yourself a reference client, judge by yourself. If an entrepreneur likes a product or service, this does not mean that other people will immediately rush to buy it.

Care only about direct competitors . If we open a bakery, then our direct competitor is the same bakery around the corner. But there are also indirect competitors, that is, businesses that solve similar problems. For example, if a bakery offers a quick lunchtime snack, then it will have to fight for the customer's attention with any fast food nearby.

Excessive savings. Cutting costs is a good practice, but only as long as it doesn't destroy the sales funnel . If customers are mainly driven by targeted advertising, then even in a crisis it is wiser not to reduce the cost of it, but, on the contrary, to increase it.