For so many of us, becoming our own boss is the ultimate dream. We crave the creative control, flexible hours, and freedom that come with being an entrepreneur.
But there’s a lot of work involved behind the scenes, and much of becoming an entrepreneur is about planning strategy and dedicated execution. If you’ve always wanted to get into the game but haven’t been sure how we’ve created this resource as a jumping-off point.
We’ll walk you through some of the essential steps you need to take to become an entrepreneur, figuring out such things as what you’ll sell and how you’ll create inventory.
1. Find a profitable business idea
The product category you choose is at the core of your online business and will be one of the most important decisions you’ll make.
Although the “perfect” product may not exist, there are definitely ways to minimize risk by choosing a product and niche that have more working for it than against it. Use the criteria below as a guideline that can help you better understand the pros and cons of the product you’re considering—and hopefully, increase your overall chances of success.
- Does your product serve a passion or solve a problem?
It’s always an advantage to sell products that serve a passion or solve a problem. An additional benefit is that when you sell products that satisfy one of these requirements, your marketing costs tend to be lower since new customers are actively seeking out a solution as opposed to you having to heavily market your product to find them.
It’s always an advantage to sell products that serve a passion or solve a problem.
- Is this a trend, fad, or growing product category?
Riding a fad can be dangerous. A trend can be lucrative. Stable markets are safe and growing markets are ideal. Understanding where your product and niche lay can play a huge role in your success or failure.
A fad is something that grows in popularity for a very short period of time and fades out just as quickly. A fad can be lucrative if your entry and exit into the target market are timed perfectly, but this can be difficult to predict and a recipe for disaster—it’s better to build your business on a more solid foundation. Remember fidget spinners? The handheld spinning toys were all the rage in 2017, peaked in popularity, and then became irrelevant almost overnight.
A trend is a longer term direction that the market for a product appears to be taking. It doesn’t grow as quickly as a fad, it lasts longer, and it generally it doesn’t decline nearly as quickly.
Trending products can sometimes also develop into long-term growing markets, although this can be difficult to predict. There have been several trends that have popped up during the pandemic: with the amount of time we’re all spending at home, household items like kitchen towels and storage containers have become increasingly popular.
A stable market is one that generally is immune to shocks and bumps. It is neither declining nor growing but maintains itself over long periods of time. Teapots, for example, have maintained a stable level of popularity for the past 15 years.
A growing market is one that has seen consistent growth and shows signs of a long-term or permanent market shift. The athleisure market has been growing since the end of 2014, but the pandemic seemingly added to its growth. Now, the market (and the demand for it) is so big that it’s not likely to go anywhere anytime soon.
- What does the competitive landscape look like?
What does the competitive landscape look like for your selected product and niche? Are you first to market? Are there already a few competitors or is the market saturated with people selling the same product or targeting the same niche?
If you’re first to market, you’ll want to do a lot of market research to determine that there is in fact a market interested in your product. If there are a few competitors already in the space and they seem to be doing relatively well, this could be a good sign that the market has been validated.
If there are many competitors in the market, it’s also a sign that the market has been validated. However, you’ll likely have to determine how you can differentiate your brand and products from the sea of competitors in order to carve out your own spot.
2. Get your product developed
Once you decide what you’ll sell, there are several options for product development. You can make your own products by hand, like the artisans at Heath Ceramics. You can find a manufacturing partner who will develop your product idea to your specifications like the team at West Path does for their Mexican blankets.
There’s also the option to buy your product wholesale, which means you’ll purchase pre-developed items from a wholesale marketplace.
If you’d rather not hold inventory, you can look into dropshipping. Dropshipping is when a customer purchases an item from you and you, in turn, buy that item from a third party. The third party then ships the item directly to the customer so you never have to store, handle, or ship any products.
If you create your own designs for t-shirts, art prints, mugs, etc., a similar option is to offer printing on demand. Printing on demand is where you partner with a supplier to print your own designs on white-labeled items that are only created when a customer purchases them. This way you sell only as much inventory as there is demand for and never have to store or ship the products yourself.
3. Validate your product
The next step is to validate your product idea. This is the process where you figure out if you’re selling products that customers really want. Real product validation happens when you make your first few sales. So, before investing too much money or time into your new product line, it’s helpful to do a few low-cost tests.
You can build a coming soon page to drum up excitement. Or set up pre-orders to see if you get any interest. The owners of Jaswant’s Kitchen, a shop that sells natural Indian spices and cooking kits, validated their products by first selling at in-person shows.
Once you make a few sales, you’ll be better able to validate demand for what you’re selling.
4. Write your business plan
With some much-needed product validation, it’s time to write a business plan. A business plan is a document that outlines essentially everything about your business. Core ideas it will include are: who you can reach and market to, your business model, what you’ll charge for each product, the product lines you’ll start with, and your marketing strategy.
Though it may seem exciting to start with the fun stuff like setting up your social media accounts or creating your logo, a business plan ensures that you’ll stay on track and that you have a solid, well-thought-out strategy going forward.
5. Secure the funding you need
Businesses cost money, especially if you plan on selling your own product. While you can reinvest early profits back into your business, many businesses need cash flow of some kind. Here are a few popular options:
- Self funding. If you have the means, you can fund your own business. Just make sure that you’ll be able to shoulder the cost for a while. While some businesses become profitable quickly, depending on the business, it can take some a few years to see a return on investment.
- Take out a business loan. Another option is to take out a small business loan. Shopify Capital is an option for those who qualify, and it’s based on your sales.
- Get money from venture capitalists. Capital investment comes in the form of an angel investor or venture fund. These accredited investors provide funding for startups and early stage companies. In return for their investment, they receive equity ownership or convertible debt, which is a loan that can be converted into equity in the future.
- Float your monthly spend with a credit card. If your supplier requires you to pay cash for all of your inventory, you can maximize how far your money goes every month by using a tool like Plastiq. Plastiq lets you pay vendors that don’t accept credit cards by sending them the funds in the form that works best for them (check, automated clearing house, or wire). That allows you an additional 30 days (or 60 days, depending on your credit card) to pay for inventory.
Shopify research shows that in their first year of business, entrepreneurs spent the most amount of money on product costs (raw materials, inventory, supplier, manufacturing, patents, etc.).
6. Launch your business
Don’t overthink things: you’ll become an entrepreneur through action and hard work. Set up a store launch checklist for opening day. You’ll also want to make sure any launch day marketing activities, like organic social posts, are set up and ready to go. And you should have a plan for customer support or at least an easy way for customers to contact you if they need help.
After that, spend all of your time and energy on getting your first sales. You can expand your acquisition efforts later.
7. Manage your business and keep learning
You’ll learn more about business by managing a business than you will through any business class. But, successful business owners always become students of entrepreneurship.
As Mathilde Collin, CEO and co-founder of Front, wrote:
“Experienced startup leaders generously share their stories in the hopes of pushing the industry forward.… Advice from other founders, investors, and tech leaders has been invaluable to me in my career so far. Their stories and learnings have helped me skip over hurdles where they stumbled and guided me through my own obstacles along the way.”
The more time you dedicate to learning, especially from those who have blazed the trails before you, the more you’ll be able to avoid costly mistakes and innovate where others haven’t. You might choose to work with a mentor, read books for entrepreneurs, take courses, listen to business podcasts, or even subscribe to email newsletters. Choose whatever method works best for you, but just make sure that you never stop learning.
With tons of tech millionaires and billionaires, many people have wild expectations when it comes to entrepreneur salaries. But the reality is that entrepreneurs’ annual salary varies wildly – perhaps more than in any other field. There’s also the very real possibility of a business failing, and that can mean a low salary or no salary at all.
All that being said, plenty of entrepreneurs find success and make well above the national median salary of around $60,000 a year. Successful businesses can also grow, and that means more money each year. This can take a year or two, so there is the possibility of losing money over the first few years before a business becomes successful.
With the population increasing across the country, there will always be a demand for newer and better businesses. Not all fields are the same, though – a restaurant in a dense urban area could see success while the same restaurant in a less populated area could fail. Also, more and more people become entrepreneurs each year. The field that you end up picking to be an entrepreneur in is going to play a large role in both the money you make and the security you have in your position.