10 Steps to Convert Your Idea into a Business

10 Steps to Convert Your Idea into a Business

Sona Sulakian
 | 

Are you always devising creative business ideas? Don’t let your ideas fall to the wayside. It takes only 6 days to start a business, according to one study. No wonder about 543,000 new businesses are started each month. 

 

Here’s 10 steps you should take to actualize your idea.

 

1. Identify the purpose of your product

 

The first step is to concentrate on the purpose of your idea. What problem does it solve? Is it a problem experienced by many people, or is it unique to you?

 

2. Identify your target customer

 

Next, figure out who will be your target customer. Think about the demographics of your ideal customer. Then, identify what is important to them and how you intend to find them. 

 

3. Search for competitors

 

There is likely a business out there that addresses a similar problem that you are trying to solve. Once you find your competitors, think about what you are doing to differentiate yourself and establish a market. Specifically, take a look at the factors that influence a customer to purchase a product, such as price and design. In fact, the difference you identify that sets your product apart can be used in marketing campaigns in the future. 

Our lawyers can help you find potential competitors who might try to take you to court over trademark or intellectual property issues.

 

4. Do Market Research

 

Early market research can be one of the most important steps you can take. Use this as an opportunity to identify what direction to take your product in. Even if an idea seems appealing in your head, go talk to people who would be your target audience and get feedback on your product. Ask them whether your product is something they are interested in purchasing and for how much. 

 

5. Name your business

 

Select a simple name, and test it out with family and friends. Customers generally expect the domain name of a company website to match the business name, so conduct a search to see if the domain name is available. 

 

Furthermore, you should search through the U.S. government’s trademark database (a trademark is the sign or name that people use to identify your company, i.e. the checkmark for Nike). If you are creating a brand, you want to make sure no one out there already has a claim on that name, or a close variation of it.

Lawyers can probably do this part of starting a business faster and with more ease than you may.

 

6. Build a Website

 

Build an engaging website alongside a website developer, and make sure that your new website is search engine optimized to show up early in the Google search results. By using key terms and phrases and creating meaningful content, you can improve the search engine rankings for your website. 

 

7. Determine your financials & Secure financing.

 

Determine how much it will cost to produce your product to determine our profit margin. Investors will want to see your financials and the projection of your profits down the line. 

 

Talk to investors. Startups often seek out venture capital firms to provide capital and strategic advice. Find venture capitalists that focus on the industry sector, geography, and even the company stage that aligns with your business. Perfect your elevator pitch to set yourself apart from the bevy of investment opportunities that venture capitalists face everyday. 

 

If you need more money, take out a loan from the bank. You may be able to secure a PPP loan, which began accepting applications the week of January 11, 2021 until March 31, 2021. The entities eligible for a PPP loan include Sole proprietors, independent contractors, self-employed persons, and any small business that meets the SBA’s size standards. 

 

You can even start a Kickstarter campaign to secure some initial funding. 

 

8. Set clear rules with your Co-Founders

 

If you will have co-founders in your new enterprise, make sure to iron out the details of your partnership early in the process. You want to avoid the legal problems faced by Zuckerberg in the early stages of building Facebook that almost shut down the company. 

 

Decide how equity will be divided among founders and a vesting schedule for ownership interest. How will disagreements be decided? Sometimes decisions are necessary and nonaction isn’t an option. For example, what color should the packaging be? You must have packaging so you need some mechanism to solve disagreements between you and your partners in the business.

 

Other questions you want to answer may include: If one founder leaves the company, will the remaining founders have the right to buy him out and at what price? What will each person’s salary be? Can a co-founder be removed from the company and under what conditions?

 

9. Protect your personal assets by forming a Corporation or LLC

 

Starting a business as a sole proprietorship can place your personal assets at risk because creditors of the business can come after your personal assets to fulfill the business’s debts. To avoid this result, consider forming your business as an S corporation, a C corporation, or a limited liability Company (LLC). Owners of all three of these business types enjoy limited liability, meaning their personal assets are not at risk. 

 

The S corporation allows the owners of the corporation to pay tax on the business’s profits on their personal tax returns, avoiding the double taxation on dividends in a C corporation. The LLC combines the flexibility in management of a partnership with the limited liability of a corporation. S corporations can easily be converted into C corporations in the future as additional investors are brought into the enterprise. 

 

However, the act of incorporation doesn’t always protect you from personal liability, so make sure you always use the corporation’s name when you sign any paperwork and make sure to note that you are signing on behalf of the corporation, not as an individual. Also, make sure to follow all corporate formalities, such as keeping your personal funds separate from the corporate funds (avoiding “commingling” of funds). 

 

10. Get an EIN Number

 

You will next want to get an EIN for your company, which is basically a Social Security number for your business. The Employer Identification Number (EIN) is a nine-digit number issued by the IRS to identify a business entity and keep track of a business’s tax reporting. 

 

You’ll need an EIN number to:

  • To open a business bank account for the company

  • To file Federal and State taxes

  • To hire employees

 

After forming your LCC, you can get an EIN from the IRS for free online.

 

Finally, it may be helpful to hire a lawyer. Acquiring an experienced startup attorney early in the process and helping you avoid making costly errors later on. Attorneys can also help you protect your ideas and inventions (through copyright, patent, non-disclosure agreements), incorporate, draft contracts between co-founders, prepare offer letters for new employees, and avoid unnecessary legal liabilities. Lawyers also know many entrepreneurs and venture capitalists, and may be able to help you secure early investors. 

 

LawChamps can connect you with a qualified attorney to help you convert your idea into reality. 

 

This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.

 
Sona Sulakian

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