Starting a business is an exciting and rewarding venture that can be one of the best decisions of your life. However, without a solid foundation and proper planning, anything that can go wrong, will. Making the most of your business’s inception phase will propel you and your business venture to success.
In this article, we will go over what the business inception phase is, why it’s important, as well as how to optimize this phase for future success.
Table of Contents
What is the business inception phase?
The business inception phase, also known as the pre-seed stage, is before a business is technically started. It is a stage in which entrepreneurs begin to bring their ideas to fruition. During the inception stage, the business is planned, analyzed, and scrutinized to lay out the path to success. This sets the groundwork for future growth and management.
Why is this phase important?
But why is this phase important? The business inception phase lays the foundation for a successful business by providing it with the necessary support to thrive. It is a time when entrepreneurs analyze critical aspects of their business, address potential challenges, as well as establish a solid framework that the business can operate with as it grows. The business inception phase sets the tone for the business in its subsequent years, strongly influencing the success of the business.
How to optimize your business inception phase
The business inception stage begins with two things: the idea and the mindset. These are both key aspects of starting a business that will increase the likelihood of success. Finding an innovative idea for starting a business is especially crucial as it drives everything about the company, and will determine how your business will operate and be structured.
To ensure that your business idea is sound, first make sure that it contains value by either solving a problem or catering to a real need. Additionally, it should have predetermined demand (there are exceptions to this, such as when the idea would create an entirely new market) based upon market research and user feedback. Your business idea should have the potential for profitability and scalability.
As for the mindset, aspiring entrepreneurs should cultivate an entrepreneurial mindset to prepare themselves for the road ahead. This will equip you with the necessary qualities, such as being open-minded and able to identify new opportunities, to start your business venture.
Once these two things have been properly addressed, you can begin to optimize your business inception phase by focusing on and planning the various components of starting a business.
1. Create a business plan
A business plan, typically in the form of a written document, is an outline for a business’s goals and growth strategies, as well as how it will achieve them. Business plans benefit both the business as well as partners and investors. It acts as a guide for a business’s growth and helps them stay on track to their goals. Additionally, a business plan can be used to attract potential investors and collaborators to invest in and form partnerships with the company.
There are many templates for creating a business plan online, but the methodology you use for creating a business plan is entirely up to you. However, there are numerous aspects that are necessary when creating one. These include:
- A detailed description of the business and its product/service
- Market analysis
- An overview of management and how the business is being run
- Financial overview/projections
- An appendix to provide additional information
Of course, depending on your business this may be subject to change. Nevertheless, these are key aspects of a sound business plan that will come off as more enticing to potential collaborators.
2. Choose a legal structure
A business legal structure, also known as a business entity, is essentially the makeup or government classification of your business that will determine how it will be regulated. This primarily affects your business’s taxes, structure, and personal liability. You can set up your business’s legal structure by registering with the relevant government agency, most likely the state government that the business will be set up in. There may be additional licenses and certifications that your business will need to acquire.
The most common legal business structures are:
- Limited-liability-company (LLC)
- Sole proprietorship
- Partnership
- Corporation (C corp and S corp)
- Cooperative
- Nonprofit
3. Financial planning and funding
The next step of the business inception phase, and one that should not be skipped over, is financial planning and funding. Financial planning should consist of explaining and managing the business’s finances, as well as create a strategy of allocating resources. It should paint a clear picture of the business’s current financial standing, establish financial goals, and outline how it will obtain these goals.
A staggering 29% of small businesses fail because they run out of funding. This highlights the importance of securing funding to keep your business afloat, especially in the early stages. To secure funding for your business, you must first determine how much funding your business will need. This means analyzing business expenses and aspects of the business that will influence the amount needed, such as the payroll of employees and startup costs.
New businesses secure funding from venture capital, angel investors, family and friends, crowdfunding, loans, and other methods. Before looking to external funding, determine if self-funding is financially viable.
4. Market research
Before starting your business, you should understand what you’re getting into. The best way to do so is market research. Market research is the process of evaluating your target market and gathering information and data on it, typically pertaining to your product. This process utilizes consumer behavior, customer feedback, as well as industry trends to develop strategies to acquire new customers and effectively market a product.
There are many methods of conducting market research, including:
- SWOT analysis
- Competitive analysis
- Gather user data (surveys, focus groups, etc.)
- Release a minimum viable product (MVP)
5. Product development
A product should be tried, tested, and improved upon before it is released to the market so that it is fit for customer consumption. This process is known as product development, and involves taking a product from an idea to the market. It consists of identifying market needs, conceptualizing the product, creating a strategy to optimize the product, and launching the product.
Companies have different ways of going about product development. Two popular types of product development is product validation and product iteration, which involve testing a product and implementing changes based upon user feedback.
6. Build a team
One of the most crucial aspects of any business is the people behind it. Without a fit team, the business is doomed to fail. Thus, building a strong team is vital to a business’s success. How effective your team is and your ability to find fit candidates boils down to how you, the entrepreneur, displays yourself and interacts with others. You can be an effective leader by:
- Caring about the actual person, not just the employee
- Having emotional intelligence
- Possessing desirable qualities for others to emulate
- Establish company culture
- Being open-minded
Entrepreneurs should look for individuals who share a similar vision, want to be active in the business, and operate in their role effectively. Remember to be patient, and not get desperate when hiring.
7. Networking
Networking is often forgotten among entrepreneurs. However, the importance of networking should not go unnoticed. Networking is simply the process of building and maintaining strategic partnerships. This may be with other business owners, talented individuals, people in power, or mentors.
Successful networking can be accomplished through social media platforms (LinkedIn), business networking events, and offering services to other businesses.
Ultimately, the business inception phase is arguably the most important stage of any business, and should not be overlooked or rushed. It is a critical period when ideas are transformed into reality and plans realized, paving a path for entrepreneurs to follow to success.
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