September 30, 2022

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Supportive Business Potential

How to Start a Business from Scratch (Step-By-Step Process)

Building anything from scratch is a worthwhile challenge.

Baking bread, assembling a bookcase, shaping your career, forming a family—all start with next-to-nothing and end in marvelous works of art. It’s not easy to create something from scratch, but it’s oh-so rewarding.

Building a business is no different. You start with diddly-squat, throw in a bit of hard work and ingenuity, and bring a life-changing idea to existence.

But, where do you begin?

Ah, that’s a good question. Fortunately, you’ve come to the right place. Our CEO Nathan Chan built Foundr from the ground up years ago, so we know a little something-something about building a successful startup with nothing but a seed of an idea and perspiration.

Below, we’ll walk you step by step through how to start a business from scratch. While it’s possible just to wing it and stumble upon success, we believe following a proven roadmap will lead to better odds of triumph—there’s a reason 90% of startups fail.

You won’t be part of that statistic, though, because you’re going to do things the right way. And we’re going to help.

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How to Start a Business from Scratch: 10-Step Process

10 steps might sound like a bit much to learn how to start a business from scratch but bear with us. You’ll already know some of this information, and other parts will be brand-new. Feel free to skip around or take it step by step.

We link out to other robust pieces of content (blog posts, videos, and podcasts) to help you learn and absorb everything you need to know to get started. Consider this the go-to resource center for starting your business—we’ll direct you to every tool, lesson, and best practice you need, regardless of where you are in the process.

Use the table of contents below to jump to the right resources faster. Plus, bookmark this article so you can find what you need (when you need it) every step of the way.

Table of Contents

1. Find a Need

Most businesses fail because they start with a product, service, or brilliant idea. Scratch that and take a step back.

Forget about any innovative solutions or game-changing notions. First, you need to find a problem. It could be your problem, a neighbor’s problem, or a near-and-dear community’s problem. Find it.

Try out these 4 strategies to find inspiration for your business idea:

  1. Write Down Your Current Problems and Interests: What issues and concerns keep you up at night? What would you pay good money to have someone else fix for you?
  2. Check Out Product Review Blogs: Have you noticed an under-performing product with potential? What are customers complaining (and praising) about the product? Could you create something better?
  3. Explore Niche Communities on Reddit: Reddit is a gold mine of customer research. Browse around niche subreddits to see what’s generating hype. Notice any trends?
  4. Browse Consumer Marketplaces: Best-selling products on Amazon, Etsy, and eBay made it to the top spot for a reason. Analyze what they’re doing right, identify gaps, and see where you might fit in.

These are all just starting points. You’ll still need to validate these ideas to ensure they solve problems for a larger customer base and that they’re willing to pay for a solution. Once you’ve zeroed in on the problem, start brainstorming a product or service that solves it.

Here are a few characteristics of product ideas (that don’t suck):

  • Provides a Strong USP: Your product’s unique selling proposition (USP) makes it stand apart from the competition.
  • Delivers Profit Potential: A product idea isn’t good if it can’t be scaled for profit. Think about pricing, expenses, supply and demand, and your audience to determine your product’s long-term profitability.
  • Makes Customers Pay: Not every seemingly good idea is worth paying for—Snapchat Spectacles, anyone?
  • Satisfies Demand: Some problems aren’t worth solving.
  • Doesn’t Confuse Customers: If you can’t explain it to your mom in 60 seconds, it probably needs to go back to the drawing board.

2. Validate Your Idea

Now that you have a solid business idea, it’s time to justify it. You’re going to be spending a lot of time, money, and energy on your business—it’s best to ensure it has a chance from the get-go before you invest too many resources.

Fortunately, validation isn’t too tricky. The hardest part is listening to feedback and analyzing your business idea objectively. Do that, and you’ll be fine.

Use the following methods to validate your idea. You don’t need to use all of them. Find one that works best for you, your industry, and your situation:

  • Foundr’s 3-Step Validation Process: First, launch a survey to your target audience to ask them a few questions. Second, analyze the responses and look for trends and pain points. Lastly, pre-sell your product or service at a discounted rate to see if customers will put their money where their mouth is.
  • Smoke Test: We use this method to validate all our online course ideas. Set up a landing page and drive traffic (using social media, email marketing, and pay-per-click (PPC) advertisements). You don’t even need a completed product yet—just market your idea and see how many people click the big red “Buy Now” button.
  • Harry’s Consumer Research: Jeff Raider and Andy Katz-Mayfield used insights research, focus groups, customer surveys, dummy brands, and live testing to validate Harry’s razors.
  • Digital Tools: While these tools are used to validate blog post ideas, they can also substantiate your business. Post ideas on Quora, Instagram, and Reddit to see if there’s an appetite. If no one is interested in an idea, there’ll probably be crickets when you launch the actual product, too.

3. Identify Your Target Market

Your target market is the lifeblood of your business. You can’t succeed if you don’t come to know every teeny-tiny aspect of their wants, needs, fears, desires, problems, and aspirations.

How do they spend their day? Do they have kids? Are they lactose intolerant? Do they ride a bike or drive a car to work?

Use our Guide to Defining Your Target Market to help establish your audience and learn more about them. Here’s the TLDR:

  • Start Specific, Then Broaden: Instead of starting broad with “Who is my target market,” begin narrow with “Who will be drawn to this product or service?”
  • Analyze the Overall Market: Identify what’s trending and what might hurt or help your business. Other market factors will impact your target market, so it’s best to get ahead of the curve.
  • Reference Your Competitors: Who are your competitors targeting? How do they approach their marketing? Have they left out any key niches?
  • Use Your Social Media Data: Social media platforms (for better or worse) already collect tons of data about your followers. Reference this data to learn about their demographics and psychographics.

Once you’ve narrowed down your target market, it’s time to do additional segmentation. For example, if your audience is male soccer players, you’ll want to break that group down into smaller subsections. You might have:

  • Recreational male soccer players
  • High school male soccer players
  • Competitive male soccer players
  • Male soccer players who watch more than they play
  • Male soccer players who coach

Your target market isn’t one homogenous blob. These segmented groups would likely respond to different marketing and sales approaches. The further you segment your audience, the more equipped you’ll be to create personalized messaging.

4. Build Your Audience

OK, now you have a validated idea and a framed portrait of your target market—that’s a great start! Next, you need to begin building an audience.

Your audience comprises social media followers, email subscribers, podcast listeners, phone numbers, blog readers, and interested shoppers—basically, anyone familiar with your brand that’s primed and ready to convert when your product launches.

Let’s start with building brand awareness. 8 Foolproof Strategies to Increase Brand Awareness in 2022 walks you through plenty of budget-friendly ways to make your brand recognizable. Here are a few highlights:

  1. Tell a Story: People don’t remember products—they remember stories. Make your brand larger than life by making it about more than just money, products, and features.
  2. Solve a Problem: Solutions market themselves better than products. Your customer should be daydreaming about how your brand could improve their lives.
  3. Win the Right Keywords: Make your brand show up wherever your audience spends their digital time.

Check out the following guides for more channel-specific audience building:

5. Launch an MVP

Time to make your idea a reality. Instead of spending months or years polishing the perfect product, launch fast and light with a minimum viable product (MVP).

An MVP is the most basic version of your product that a customer can use. Take Facebook, for example. Facebook’s MVP was the original dumbed-down version that didn’t have a marketplace, groups, video, stories, gaming, or news—it was just a rudimentary social media network with friends and updates (imagine that).

Here are 3 ways to launch better MVPs:

  1. Shift to an MLP Mindset: MLP stands for minimum loveable product. Don’t just launch a product that works—launch something your customers love.
  2. Go Live with a Soft Launch: You don’t need a press release and fireworks when you first roll out your product. Keep things light and casual at first.
  3. Test Your Ideas First: Your MVP isn’t the validation. You should have already validated your idea before producing the product.

6. Create a Business Plan

Writing a business plan might feel old-school and outdated, but it has a few data-backed benefits for businesses, including:

  • Higher average annual growth
  • Greater chances of success
  • Improved business performance

Get out a pencil and some notepad and get to work. A business plan will keep you on track and ensure you’re headed in the right direction. It outlines your processes, goals, budgets, market research, financing strategy, and more.

Include these 6 essential elements in your business plan:

  1. Executive Summary: Summarizes your entire plan in a concise one-pager.
  2. Business Overview: Outlines the business details: structure, ownership, location, products, and mission statement.
  3. Products and Services: Breaks down your solutions in minute detail.
  4. Market Analysis: Describes the state of the market and key opportunities (and threats).
  5. Competitive Analysis: Analyzes competitors’ strengths and weaknesses.
  6. Financial Strategy: Explains projected revenue, expenses, profits (or losses), and financing strategies.

7. Market Your Product

Finally, we’ve made it to the marketing portion. For many entrepreneurs, this is the best part—and it’s a heck of a lot better than the next stage: selling.

Marketing includes the strategies and tactics (not the same, by the way) you use to get your brand in front of potential buyers. It includes elements like content marketing, advertising, social media marketing, video marketing, and ecommerce marketing.

Before you get too into the weeds, take a step back and approach your marketing strategy step by step with our guide: How to Create a Marketing Plan In 2022 (Outline + Examples). It’ll help you focus and ensure your strategy is cohesive and goal-driven.

Once you’ve identified the channels you want to use, check out the following guides and interviews to put your plan into action:

8. Sell Like a Boss

Sales. Would-be entrepreneurs, don’t panic. You can do this.

Validating your idea, finding your niche, producing your product, and building brand awareness means nothing in the end if you can’t make money. Fortunately, selling your product doesn’t have to feel like an awkward encounter with a door-to-door solar panel representative.

Don’t worry—we hate cringe-worthy sales tactics, too. Check out these resources to help you monetize everything from your email list to your Instagram following (without selling your soul):

9. Scale Efficiently

Once you’ve started making money, it’s time to scale your business. Scale looks different for everyone based on their goals, expectations, and bandwidth.

Scale for one entrepreneur could be launching new products, while scale for another might be reducing costs and maximizing profits for existing goods.

Remember why you wanted to start your business from scratch. Did you want to make more money, or did you want more free time? Did you want to control your career, or did you want to help your community with a problem?

At Foundr, we’re all about empowering would-be-business owners with scalable strategies. Here’s how our podcast interviewees and students scaled their businesses:

10. Outsource the Minutiae

It’s easy to get caught micro-managing every nitty-gritty component of your business, but you have bigger fish to fry. Outsource your trivial to-do list (invoicing, calendaring, procurement, and the like) to a full-time hire or a freelancer.

Whether you’re building out a team or looking for a contract writer, here are our top resources to get you started:

Free Training to Help Launch Your Business

Congratulations! If you follow the 10-step process above, you’ll start a business from scratch that’s ready to join the 10% of startups that don’t fail.

Don’t worry—we’re still here to help. We won’t throw you into the deep end and expect you to figure everything out on your own.

That’s why we built a massive catalog of free training classes to teach you everything you need to start and grow your business—whether you need to finance your startup, grow your Instagram following, or launch a profitable ecommerce store.

Get started with an exclusive class now. It’s free, so you have nothing to lose.

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