After recognizing your desire to start a business, the next step is to begin planning the initial steps you must take in order to build your business from the ground up.
Developing and nurturing your innovative ideas is what will set you apart from your competition. Our Minnesota Northland SBDC business consultants will help you develop a plan, map out goals and strategies. We will advise you on how to implement your ideas and goals to launch your business.
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how to Start a Business in Minnesota
While understanding finances may be complex, here are a few questions to get you started. For more help on your financial situation, receive a no-cost consultation with the Northland SBDC after signing up for services.
- How much will it cost to start your business?
- How much will your monthly operating costs be?
- What are your salary requirements?
- What will you charge for your product or service?
- How much will you make on each sale?
- Why will someone buy what you are selling?
While planning your business, evaluating your market is essential in providing the bare-basics of your potential standings and will aid in discovering exactly who your customers may be.
Answering these questions will allow you to get a better understanding of your market:
- Demand
Is there an existing desire for your product or service? - Market Size
Approximately how many people would be interested? - Economic Indicators
What are the income range and employment rate?
- Location
Where are your customers located and where can your business reach? - Market Saturation
Are there similar options already in the market? - Pricing
What price are potential customers willing to pay for your offering?
Determining your competitors helps determine what aspects of your business will set you apart from them and succeed in your business.
Assessing the following characteristics of the competitive landscape will allow you to get a better understanding of your competition:
- Market share
- Your opportunity to enter the market
- Indirect or secondary competitors who may impact your success
- Strengths and weaknesses
- The importance of your target market to your competitors
- Any barriers that may hinder you as you enter the market
There are two popular models that can help best set up your competitive landscape.
SWOT Analysis
A SWOT Analysis provides a clear, easy-to-read roadmap of internal and external factors that may help or harm a project. Start by looking at your business as an external observer and list your business’s specific strengths, weaknesses, opportunities, and threats. A proper SWOT clearly shows the chances for success, given present environmental factors.
Porter’s Five Forces Analysis
Identify important industry factors in five specific factors to help determine if a business will be profitable.
- Consider the intensity of the competition in your market. When rival competition is high, advertising and marketing prices can run high and hurt your bottom line.
- Asses your bargaining power over a supplier. If there are multiple suppliers for your product you have the upper hand.
- Asses the bargaining power of your customer. If there are a multitude of options it is easy for the customer to choose based on demand or price.
- The threat of a competitor joining the market. The easier it is to establish a new business in your field, the more of a risk it is for market depletion.
- The threat of a customer switching to a competitor’s product or service by examining a competitor’s price and quality against your own.
The good news is, there are countless free sources that are readily available that can be used to gain insight on market data and competitive landscapes. The SBA has compiled resources that may help you better comprehend your current standings.
Without a doubt, in order to best plan for the future of your business, a solid business plan must be prepared. Essentially, your business plan will be the foundation of your business and will help guide you in managing and expanding your business.
At Northland SBDC, we have a talented team of consultants who will work alongside you to ensure that a sound business plan has been developed that will aid in your overall growth and strengthen your business as a whole.
There are two basic formats of business plans: traditional and lean startup. However you choose to format your plan, just know that there is no right or wrong way to go about it. What matters is that you have developed a roadmap that is thorough and easy to understand for you and potential investors.
Traditional Business Plans
The most common format, this plan encourages detailed descriptions throughout each step. Lenders and investors commonly request this type of plan due to its comprehensiveness.
Traditional Business Plans typically consist of the following:
- Executive summary
- Company description
- Market analysis
- Structure of your organization and management description
- Product/Service description
- Marketing strategy
- Funding requests
- Financial projections
Lean Startup Business Plans
A shorter and more brief business plan, this plan is high-level and contains key elements only. In the case of writing this type of business plan, some lenders and/or investors may request more information.
Lean Startup Business Plans typically consist of the following:
- Key partnerships
- Key activities
- Key resources
- Value proposition
- Customer relationships
- Customer segments
- Channels
- Cost structures
- Revenue streams
As anyone can imagine, it takes quite a bit of money to startup a business! Collecting funding is one of the most important steps to kickstarting your business and how you choose to fund your business can ultimately affect the structure of your business.
How much funding will you need?
Funding is not “one size fits all.” No matter the size of your business, funding can act as the fuel to get your business’ engine running. Once you analyze your personal financial standings and the needs of your business, you must decide how you’ll go about collecting funds. Will you be self-funding? Do you have interested investors? Or, will a loan from the bank suffice?
Self and Personal Funding
While arguably the riskiest form of funding, by leveraging your own financial resources, self-funding allows you to have complete control over your business. Self-funding can present itself in many ways, whether it’s dipping into your personal savings or gaining capital from friends/family, there are many ways to personally fund your business.
Crowdfunding
A newer and popular way to get a business started. Crowdfunding is typically online and raises small amounts of money from a large audience through Kickstarter, GoFundMe, Indiegogo, etc.
Venture Capital from Investors
Another way to collect funding is through the support of investors in the form of venture capital investments. Typically, these investments are offered in exchange for partial ownership of your business.
With this type of investment, it’s important to recognize that many investors will want at least some semblance of control of your business. So, be prepared to give up some portion of both control and ownership of your company in exchange for funding.
Small Business Loan
A small business loan allows you to retain complete control of your business, even when you lack the funds to start up your business. With this type of loan, the bank will provide you with funding to kickstart your business. Keep in mind you will typically need a good credit score, collateral, and investment money if that is personal or third-party.
Non-Bank Lenders
There is a multitude of non-bank lenders in Minnesota and across the country who can assist businesses with funding.
- Arrowhead Regional Development Commission (ARDC)
- Economic Development Authority (EDA) in your City or County
- Entrepreneur Fund
- Farm Loans
- Northland Foundation
- MN DEED Emerging Entrepreneur Loan Program
- MN Department of Iron Range Resources & Rehabilitation
- Minnesota Business Finance Corporation (MBFC)
- Small Business Administration (SBA)
- SPEDCO
- United States Department of Agriculture
Keep in mind
Having a complete, traditional business plan and expense sheets can further help your chances of securing a loan from the bank. By having these tools on hand, you’ll know what your business is in need of and these tools will help the bank better understand your ultimate goals and financial standings. With the guidance of the Northland SBDC, we can help you navigate funding opportunities.
We all know that starting a business from the ground up can be very challenging. An alternative to starting a business from scratch is to buy an existing business or franchise.
Understand the Difference Between Franchising and Buying a Business:
Buying
Buying an existing business is exactly what it sounds like. The buyer typically takes over full ownership of the business. The largest advantage is having an existing blueprint that can include important factors like an established customer base, defined operating expenses, and fully-trained employees.
Franchise
A franchise is a business model where a business owner (the “franchisor”) sells the rights to their business logo, name, and model to an independent entrepreneur (the “franchisee”). Restaurants, hotels, and service-oriented businesses are commonly franchised.
Planning A Business
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