How To Actually Start A Startup

You can’t own a successful business if you can’t start one.

Perhaps you want to get out from under your boss’s thumb. Or maybe it’s all the entrepreneurial success stories floating around that have piqued your interest. Whatever your reason, you want to start a startup.

You’ve read countless articles on how to ‘guarantee success’ for your business and you think you have what it takes. But there’s one issue — you don’t actually know where to begin.

What concept are you building a business on? How are you going to turn your idea into a reality? Where’s the funding meant to come from? There are so many questions that need answering if you’re serious about going on your business venture.

So, here are the answers to them. Keep reading to learn how to start a startup…

A forewarning before you begin your journey, starting a startup is not a straightforward, methodical process. Consider the route to establishing your business as a scribble as opposed to a straight line.

That being said, it can be split into five main stages — the ideation stage, the concept, building the prototype, forming the business model, and establishing the company. You’ll likely go back and forth between stages but what needs to be done during each of these stages remains consistent.

We’ll look at each stage individually;

Ideation

The ideation stage is when you come up with the basis for a business — not the concept of the business itself. Think of it more of as exploring your possibilities and potential than a well-defined and constructed idea.

Maybe you and a friend share a passion for fitness and want to get into that industry. You notice that there’s an opportunity to improve sports supplements — they could taste better, be easier to digest, maybe they’re too confusing for the average person. You start brainstorming different ways to improve sports supplements or, in other words, you go through the ideation process.

Basically, the ideation stage involves identifying a problem and trying to figure out ways to solve that problem. The ideas you come up with could be terrible and have no potential for growth or any actual use but that’s unimportant at this stage. What you want to focus on is getting the creative process flowing and identifying your business opportunity.

Concept

Your concept is when it actually matters whether or not you have a good idea. A business concept is a well-defined idea — one that’s underwent testing and has been improved on. Your concept isn’t just an answer to the problem you identified, it’s a good answer, a credible one.

In order to turn your idea into a concept, you need to ask yourself the questions your customers would ask. In doing so you can also identify your target audience — the people who you’re going to seek to approve of your idea.

Returning to the sports supplement example, you and your co-founder friend have come up with the idea to make vitamin-infused protein powders. With the aim to market your idea to the health-conscious consumer, you ask yourself; “How will this product benefit me?”, “What are the other alternatives?”, “Why should I choose this product over similar ones?” Answering these questions you flesh out your idea and go on to distribute a survey amongst some Facebook fitness groups. You use your survey results to further improve your idea to be a concept with market validity.

By answering questions about your product you establish a value proposition for your audience. Through conducting market research on your value proposition you validate that your business idea is, in fact, marketable and has potential. So, knowing that you have a good concept you can start to turn your idea into a reality.

Prototype

Your startup is ready to get physical at the prototype stage. Your prototype is the first draft of your product — the backbone’s there but there needs to be fine-tuning.

Depending on your skillset, this stage can be quite difficult; however, is integral for your business’s future. Your prototype will not only tell you if your product is actually able to be produced but also offers investors an insight into the product’s essence, can be used for intellectual property protection, and is needed in order to test and refine the product.

Your prototype should not only give a visual representation of your product. You should aim to make it as precise as possible in order to receive better responses and feedback from it so that it can be improved. And, if possible, you want it to be functional — even if only at a basic level, you want it to be able to perform its task.

The type of prototype you build is entirely down to what your product is. Say for the protein powder example, the prototype would be the powder itself in its potential packaging. But for something of a larger scale, like a car, a digital prototype might be more suitable. Whatever sort of prototype you have, once it’s completed distribute it amongst your target audience and receive the feedback to improve on it from there.

If you’re completely lost on prototyping and have no idea where to even begin with it, there are a number of apps available to act as a starting point — inVision and Origami Studio, for example. Some of these apps are free and some are going to cost you but at this stage of your startup expect to be investing financially. However, if you really are struggling with your own funding at the prototype stage you can start a Kickstarter campaign or look to other sources of crowdfunding.

Business Model

With a prototype ready to be presented to potential investors you can start to form your business model. A business model represents the structure of the business — how it’s going to operate, make money, achieve its goals. Without one, there is no business and, therefore, nothing for investors to invest in.

There isn’t a one-size-fits-all when it comes to business models but ideally, it should contain the following information;

• Your value proposition. What is your product and why would people want it?
• Your branding and marketing plan. What does your business value? How do you want to be perceived as a company? Who are you selling to?
• Your business mission and goals. What do you aim to achieve in the short run and long run?
• Your methods of distribution. How are you going to get your product to your customers?
• Your product’s market value. How is your product going to be priced? What are the profit margins?
• Your growth opportunities. In what way will the business expand? How are you going to scale your company?
• Your required investment. How much do you need to take the next steps? What are you going to do with your investment?

Once you have your business model complete your business has a structure.

You’ll continuously return to your business model throughout your company’s lifespan in order to re-evaluate strategies and grow your business further. Because of this, it’s wise to put in the time and effort to really plan effectively. Don’t rush this stage — a well researched and strong business model will stand to you in the future. If your business model is underdeveloped chances are you won’t even get the funding in the first place.

Company Formation

Once you’ve your prototype ready and your business model perfected, your startup can finally start — provided you’re successful in finding the funding for it.

Before you start pitching your startup to investors and launching your business you should register as a company. How you do so is different given the type of company you're establishing as and where you’re based. Even the definition of a company varies from country to country. But, in general, you need to register as a company (or ‘business entity’) in order to properly engage in business enterprise.

But once you have the registration process out of the way and your business is operating, you can go out and seek capital investment. You can procure this by seeking angel investors — high net worth individuals who will provide funding in exchange for debt or equity — or through a venture capital firm which is an organisation of multiple angel investors.

The value of your company before any capital investment is based on your seed funding or, in other words, the money you, your business partner or another individual invest before you start operations. Say you have a wealthy relative willing to invest $10,000 for a 20% stake in your company — based on a standard 100,000 issued shares startup, your relative's investment makes your company’s pre-money valuation $50,000.

As your business progresses you can scale up and go through more rounds of the capital investment process, growing and expanding your startup.

Summary

As you can see, starting a startup takes a lot of time and effort. The investment of your energy is just as important and equally as risky as your financial investment.

If you are serious about starting a startup you will have to go through every stage — ideation, concept, prototype, business model, and company formation — potentially multiple times. However, once you’ve planted your seed funding and registered you officially have your own company.

How you progress with your business is another journey altogether but no matter what happens next, by completing the process outlined above, you’ve accomplished what you set out to do — you started a startup.