By Azrin Rahman
How can I start a business that scales? How do I make sure it makes revenue? Where do I start? Azrin Rahman outlines 7 steps to start up.
Starting a business can seem scary to anyone, but part of being an entrepreneur is acknowledging risks and taking them anyway for potential success. This success is more likely to be achieved if the entrepreneur has done research on his ideas and how they will put them into motion. Luckily, enough have already done this to provide some “hacks” about launching a startup.
1. Find a problem
One of the first steps that should be taken in creating a startup is to find a problem to solve! The best problems to pick are ones you may experience yourself or are passionate about. Even if these problems already have solutions, think about how these solutions may be improved. Is there a way to make it more accessible, cheaper, or available in another region? The more interested you are in the problem, the more likely you are to spend time fixing it!
After you find a problem you want to solve, make sure others have the same problem too, after all, you don’t want to be your business’ only client! This can be done by interviewing people by asking open ended questions, be careful not to “feed” them with the answers you want to hear.
3. Create a solution
Once your problem is validated, you can start thinking of ways you would like to solve it, be creative! Maybe a solution already exists, but you can make it cheaper by sourcing a new type of material. Remember, improving solutions is how great ideas such as the smartphone and electric car were made!
4. Prototype and test
Now that you have thought of a solution, create a simple prototype that outlines the features of it. If it is an online application, you can create a free website on weebly or wix. If its a physical product or service, try to create it with easily sourced and low cost materials. This will help others understand your solution the way you see it.
Do some testing with your prototype! Hand them out to those you interviewed that face the problem you are solving and see what they say, when asked open ended questions. In this testing, feel free to ask how much (if any) they would pay for this solution so you can get a feel for how much you can price it. They will provide valuable feedback and may address points you would not have thought of. It is especially important to consider all possible perspective as they may represent the same thoughts of your future consumers! With this feedback, you can pick and choose how you will adjust your solution to fit more people’s needs.
5. Your Business Model
It is now time to start thinking about the logistics of your business. You have a great idea to fix a problem, now how will you profit from it? Many factors go into a business’ financials, such as pricing strategies, cost of goods sold, selling, general, and administrative fees, estimated revenues, and startup costs.
The first calculation usually made is the cost of goods sold (COGS). This is how much it will cost your business to create its solution. It is typically calculated per unit of your product (ex: 10 cups in 1 pack is one unit of the product). These costs will be similar to that of your prototype, but may be adjusted to include improvements. Try to find your materials in bulk so the per unit price decreases.
Now that you know how much it will cost you to create a unit of your product, you can decide how much you will sell it for to make profit. Common strategies such as anchor pricing, value based pricing, cost plus pricing, and penetration pricing are used, sometimes in combination, to set a price for the product. If you asked about appropriate prices in your solution interviews, those will also be helpful to factor in.
These are per unit costs and profits, but what about the long run? Businesses usually need fees to simply operate, and more to do so efficiently and to help maximize sales. Here come the selling, general, and administrative costs (SG&A). These can include legal fees, marketing, salaries, and other costs that will be present each year. Unlike your COGS, they will not necessarily increase as you create more of your product, but should scale up accordingly to fit needs.
To estimate revenues, take into consideration different factors that may influence your consumers in buying your product. Will it be more popular around certain times of the year? Record the amounts you feel you can earn annually. Then, subtract the COGS, SG&A, and other costs from the number. This new value is your revenue.
6. Track Your Performance (KPI)
To track your business’s success, you will need to set key metrics, or performance indicators. These can be the number of likes per post, followers on accounts, number of orders, etc. You should choose indicators that can reflect specifically on your business; sometimes the number of emails on a contact list are more important than the number of sales. Then, set goals for these indicators to plan how you business will grow overtime.
7. Market, market, market!
One of the most important parts of growing your business is marketing. Market, Market, Market! Without it, word of your product will never travel far. Try to spread news of your product through magazines, television, or whichever is most suitable to your product. In today’s age, the most important type of marketing is often social media marketing. Your brand’s social media is what will give people the first impression of your brand, so it should look as close to perfect as possible!
The most important part of your business is to make sure you are trying your best and enjoying the process. Remember to make ethical decisions that you think will benefit your company the most. And do not be afraid to take risks or fail!
Photography by: Lenah Hafez.
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