6 Things You Need to Research Before Starting a New Business
There’s nothing more American than starting a small business. But if you’ve never launched a business before, it’s important that you don’t go into the process blindly. Research is your friend. The more you do, the greater your chances of success.
Ready, Set, Research
In entrepreneurship, as in life, there’s a need for both head knowledge and experiential knowledge. Learning to balance the two and knowing when more of one is needed can be difficult to decipher. But it’s clear that both are integral to long-term success.
As a young entrepreneur, there isn’t a whole lot you can do about experiential knowledge. There are certain skills and lessons you can’t pick up until you’ve been thrown into the fire. However, there’s plenty of head knowledge and lessons you can learn before exposing yourself to the flames. In particular, you should spend some time investigating issues like these:
The competition is one of the first things to research after coming up with a business idea. If you are entering a saturated market, gaining a better understanding of your competitors early is a huge plus. This is where you can take advantage of existing heat mapping software like Maptive to aid you in your competitor analysis. Your team can employ the heat map tool, in conjunction with other tools to help your team quickly gain insight into your competition.
“Just because you have a brilliant idea does not mean other people haven’t also had the same idea,” entrepreneur Ian Wright says. “If you can’t offer something better and/or cheaper than your competitors, you might want to rethink starting a business in that area.”
Who will your potential customers be? How many are there? What are their specific pain points? How much will they pay to solve their pain points.
Customer research is vital to business success. If you start a business with the wrong target audience – or a group of customers who aren’t needy enough to buy into your idea – you’ll ultimately fail.
- Legal and Tax Implications
A business idea may sound attractive inside your mind, but you’d be surprised how many logistical issues, regulations, and industry-specific challenges exist in certain niches. Before launching any type of business, research the legal and tax implications.
For example, the difference between setting up a corporation and an LLC might seem like a small administrative detail, but the implications can be rather significant. Not only will it affect you personally with income tax, but it can also impact the protection of personal and business assets.
- Business Models
Just as there are a variety of legal structures and entities, there are dozens of business models to choose from. The type of product/service you’re selling will narrow down your options, but you’ll still find some freedom of choice. Researching the pros and cons of each option will help you make an educated decision.
In all likelihood, you’ll be starting a business with a very limited amount of cash on hand. But assuming you eventually want to grow and expand, you’ll need to think about funding options.
Financing via credit cards, lines of credit, and personal loans are all options, but larger needs may need to be satisfied via private investments, small business loans, or even equity investments through venture capital firms or angels. Begin familiarizing yourself with all of these terms so that you understand how this aspect of entrepreneurship works.
- Personal Skills and Experience
It’s time to be honest with yourself and dig deep. Not every person is cut out to be an entrepreneur. If you’re looking for stability and predictability, this isn’t it (at least in the short-term). You’ll be tested, tried, and pinned down, which means you’ll need the resolve to keep getting up.
Now’s the time to take inventory of your skills, experiences, personality traits, career goals, and personal goals. You may find that starting a business isn’t right for you at the moment. Or you may feel strongly that it is the right path. But one thing is for sure: You won’t know until you take the time to do your due diligence.
The More You Know
For some entrepreneurs, there’s a real temptation to become so immersed in the acquisition of head knowledge that they never actually take action. If you have a penchant for being super analytical and research-minded, it’s important that you set up some guidelines and eventually take a leap of faith.
Armed with head knowledge on key topics and challenges, you can dive in and begin acquiring experiential knowledge. And it’s at the intersection of these two points that you’ll begin to find success and fulfillment in business.