Being your own boss starts with the decision to make the big leap. Congratulations on taking that crucial first step! Now, you’re ready to learn how to start a business from scratch. But where do you begin? Whether you already have a brilliant product idea or you’re just looking to build a future on your own terms, you’re in the right place. This guide will walk you through starting a business from pre-launch marketing to the first sale.
1. Discover your big idea
It all begins with an idea. To narrow in on that idea, it’s important to know what kind of business and lifestyle you want to have. Are you looking to sell existing products as a low-lift side gig? Do you want to go all in on an invention that will change the world? Try fleshing out your idea to see how engaged you are with the idea. You can use a free business plan template to help you. If you’re stuck, start with our big lists of low investment, small business ideas, online business ideas, and popular business opportunities to get inspired. Next, you’ll decide how to bring that new business idea to life: make, manufacture, or resell?
Developing your own product
You may decide to make a product with your own hands or develop one in partnership with a manufacturer, print-on-demand company, or private label partner. Want to sell something that’s ready to go? Jump to: Selling an existing product Products to make or manufacture Mine these lists of unique business ideas to discover items you can make or manufacture from scratch.
Success Story: This 84-Year Old Grandma Taught Cooking Skills to the Masses Nonna Nerina launched her virtual cooking experience when the pandemic all but ended tourism in her Italian village. Her granddaughter shares how Nonna runs a successful business selling a service online. Read Nonna’s story
Jump back to: Table of contents 2. Research your product and audience Now that you have a killer idea, it’s time to validate it! Your product or business idea may excite you, but it’s only worth pursuing if there’s an audience (a.k.a. future customers) looking for it. There are many ways to do your research upfront before you start investing. You can look for gaps in the market, find an underserved audience, run a focus group, and investigate your competition. Finding a target audience Your target audience or target market refers to a group of potential customers for your brand. This is the group you’ll eventually aim all your marketing efforts and dollars toward. As a result, it’s critical to define them as thoroughly as possible. Identifying and getting to know your target audience is important because: It helps you make smart and cost-effective marketing decisions It influences your product development (because you have a direct line of feedback) It can increase revenue (by focusing your efforts on the most promising customers) Building buyer personas is an effective method for drilling down into your ideal customers’ needs. How old are they? What do they love? On which social media platforms do they spend most of their time? What’s important to them?
Success Story: An Art Major Developed a Product to Fill a Market Gap Yelitsa Jean-Charles was dissatisfied by the options for dolls with Black hair. So she designed her own. She built her successful business, Healthy Roots Dolls, to teach a generation to love their curls. Read Yelitsa’s story Conducting market research Market research is the process of gathering data about the potential customers (or “market”) for your brand. It can validate that you’re on the right track or inform you that you need to make a shift. You can conduct market research through surveys, focus groups, and interviews. Market analysis is a similar concept but involves researching the industry as a whole, combining insights you get directly from your target audience with third-party sources like reports and industry publications. Market research tools There are several tools on the market that can help you conduct market research on starting a business. These include data aggregators such as Statista, survey tools like Typeform, social listening tools like Hootsuite, and other free and paid tools. Using a combination of reports and data relevant to your industry, as well as your research through potential customer surveys or focus groups, will give you a more holistic view of the market before you enter it. Understanding market trends Understanding market trends means looking holistically at your industry, competitors, customer preferences, and the general market. Some questions to ask include: What are the long-term consumer trends (i.e., sustainability)? What does search volume look like for your product or service? (Google Trends is a free tool that can show you interest over time.) Within your demographic, what buyer trends are emerging? For example, on which channels does your target customer prefer to shop? On which social channels does your target market hang out? What are the current and emerging trends on those platforms? Are there social and political factors that could impact the market? What trend forecasting is available for your industry to help you understand the direction of the market? Estimating market size To understand the market size, or how many potential customers there are for your business, follow these steps: Define your target audience and determine the total size or total addressable market (TAM). This is the maximum number of customers if you were to have 100% of the market share. Identify a segment of that market that you will focus on. For example, maybe your product is geared toward women or only potential customers in a particular geographical region. This is the serviceable addressable market (SAM). Calculate your market penetration rate within this segment. You can use industry benchmarks to make an estimate. Multiply SAM by the market penetration rate to get your market size.
PODCAST: Compound Studios Builds Brands For Unique Target Markets Shane Vitaly says he ignores competition when conducting market research. For his multiple distinct brands, emerging trends are the key to defining the audience for each. Listen Analyzing the competition Understanding the competitive landscape can ensure that you’re setting your brand apart in the industry. This exercise will also help you clearly define your unique selling proposition (USP), which is the benefit that your product offers over that of your competitors. Explore the in-depth resources below to get started. FREE COURSE: Building a Business for a Niche Market In this 12-part course, host Vivian Kaye walks through the steps to launching a niche business, including how to define and target a niche audience for your brand. Register now Jump back to: Table of contents 3. Calculate your startup costs Once you’ve validated that there’s an audience hungry for your product and you’ve nailed your value prop, it’s time to talk money. Your business will be viable if you have the funding to get it off the ground and you can identify a price that’ll turn a profit. Writing a business plan A business plan is a document you can use to help you secure funding from a bank or venture capital (VC) firm. But even if you’re not seeking outside funding, a business plan forces you to answer important questions about how you will run your business. It includes everything from your mission statement to your financials. 7 business plan writing tips: Know your audience. Have a clear goal. Invest time in research. Keep it short and to the point. Keep the tone, style, and voice consistent. Use business plan software. Check out other business plan examples, like the ones here, to inspire your own. Calculating startup costs What does it really cost to start a business? It depends on many factors, such as whether or not you carry inventory or you need to lease space. Much of the money spent in the first year consists of reinvesting profits back into the business, not spending out of pocket. This is called “bootstrapping” and you can learn more about it later in this section. Accounting for all business costs Your startup costs in the first year will help you cover everything from setting up a website to buying inventory to running your first paid ads. Here’s what business owners reported as the breakdown of their spending in the first year: Tip: Don’t forget to consider unexpected costs like business insurance, taxes, legal fees, and shipping costs. Conducting a break-even analysis A break-even analysis is the process of determining at what point your business (or product) becomes profitable. It’s a financial calculation used to determine the number of products you need to sell to cover your production costs. There are several benefits to conducting a break-even analysis: It helps you make smart decisions about product pricing. It can mitigate risk and eliminate surprise. It sets informed targets for your business. It can identify any missing expenses. Determining profit margins A profit margin is the measure of a business’ profitability expressed as a percentage. Your profit margin will depend on the industry you’re in, the retail price ranges set by the market, and your costs. You may have a lower profit margin if you’re selling a high volume of goods (say, selling digital art prints) or a high profit margin if you sell luxury products. FREE TOOL: Profit Margin Calculator Determine selling prices for your products by entering your costs and markup. This handy tool will instantly calculate your retail price, profit amount, and profit margin. Try Profit Margin Calculator Pricing your products Knowing how to price your products can be tricky, but with a few basic calculations, you can confidently set prices that make sense. In a nutshell, there are three steps to setting prices: Add up your variable costs, or the costs that change depending on the amount of product you produce. Add a profit margin. Don’t forget about fixed costs, or the consistent costs to do business that aren’t affected by how much you produce (think office space lease or utilities). As you’re setting your prices, consider common pricing strategies like competitive pricing, value-based pricing, or keystone pricing. Note: Each strategy has its pros and cons and not all will be right for your unique business. Bootstrapping your business Bootstrapping is the process of starting a business with little or no money and investing the profits back into the business as it grows. This method of funding a business may mean slower growth, but it also minimizes risk and debt. Success Story: How These Founders Turned $900 into an 8-Figure Brand Skin care brand Bushbalm launched with a mere $900 investment from its three founders. They then funded their massive growth through crowdfunding and pitching investors. Find out how Looking to grow more quickly? Jump to: Getting funded 2.0 Get access to the funds you need to grow Skip the lengthy paper applications and get quick access to funding to help your business thrive. Access Shopify Capital from your dashboard in a few clicks. Get funded Jump back to: Table of contents 4. Source products By now, you’ve validated your product idea, your business plan is locked, and you’re ready to bring it to life. It’s time to get creative. In this section we’ll take you through the options to make, manufacture, or source your product as you get ready to start a business. Making or manufacturing a product If your product is a handmade item, you can get up and running by setting up an appropriate space in your home, a rented studio or office, or a co-op. Be sure to check the legal requirements for setting up a home-based business, especially if you’re selling food or cosmetic items. There are generally rules around ventilation and other safety protocols. Success Story: Making the Leap to Manufacturing In this guide to starting a skin care line, Meghan Cox discusses the early days of starting her business, Amalie. While she launched on handmade formulations, she eventually made the move to manufacturing—and then opened her own lab. Read Meghan’s story Ensure that you understand any legal requirements for setting up a home-based business. Jump to: Operations If your product is designed to be produced in a third-party facility, you’ll likely need to source a manufacturing partner. A good manufacturer is one who understands your industry, knows packaging and labeling laws specific to your product or market, and can be a true partner in your business. Some manufacturers will be part of the product development process, advising you on best practices to get to your finished product. FREE COURSE: Building a Business for a Niche Market In less than an hour, Jason Wong walks new business owners through the process of developing and manufacturing a product from finding a credible partner to managing shipping and logistics. Register now Finding a supplier If you’ve opted to sell existing products, you’ll need to research suppliers or other brands that you can source them from. Find the business model that applies to you below and click through for a deep dive on how to find products for each, along with some examples: FREE TOOL: Purchase Order Template In 4 simple steps, complete your company and order information to automatically generate a professional purchase order that you can download and print. Try Purchase Order Template Jump back to: Table of contents 5. Figure out your shipping strategy Shipping is often cited by small business owners as one of the most challenging aspects of getting started. Luckily, the tools aimed at simplifying this task keep getting better. Ecommerce platforms like Shopify consolidate rates to help you make informed shipping decisions. And app integrations can solve specific shipping issues or help you more easily manage inventory. Setting up shipping and fulfillment When deciding on a shipping strategy for your business, you’ll first need to decide how you will handle order fulfillment. For many new business owners, that means personally packaging and shipping orders one by one. Unless you choose a dropshipping or print-on-demand model, managing your own fulfillment in the early days helps you better understand all aspects of your business. As you grow, you may decide to outsource shipping and fulfillment to a third-party logistics (3PL) company. Research different fulfillment services to see which is right for your growing business. Shipping cost is often a factor in a customer’s decision to buy from your business. You can decide to offer free shipping and build that cost into retail prices or, if you’re passing on the cost, take steps to keep those costs as low as possible. Ways to reduce shipping costs include: Reducing weight of packages (by, say, using poly mailers instead of cardboard, if applicable) Choosing the right-sized packaging for the product Using flat-rate shipping when possible Using Shopify Shipping to cut carrier costs Knowing when rates change so you can adjust accordingly Offering local delivery or pickup as an alternative for in-town customers Tip: Take advantage of free tools and templates to create a shipping policy, generate shipping labels, and complete a bill of lading form. Success Story: How Pizza Pilgrims Pivoted to Sending Pies by Mail In this episode of Shopify Masters, founders Thom and James Elliot explain how they pivoted during the pandemic. Through trial and error (and “exploding dough”), the two developed a shipping strategy to suit their new pizza kit offerings. Read their story Understanding international shipping If you plan to ship internationally, keep in mind that there are a few more steps involved. First, be sure that your products are legal in their country of destination, that you adhere to labeling and packaging requirements in those places, and that you know how to complete customs paperwork. Duties and taxes are often the responsibility of the customer upon the arrival of the package. You can elect to make those fees transparent at checkout by collecting them upfront. Managing inventory If you’re working with a fulfillment service, or using a dropshipping or print-on-demand model, inventory management is usually handled entirely by this partner. Otherwise, keeping inventory organized ensures that you can make informed decisions about production and stock reorders—and avoid customer disappointment. Here are a few top-rated inventory apps in the Shopify App Store. These apps integrate with your ecommerce store to automate tasks and send low-stock notifications. Forecasting: CartBite Optimization: Realtime Stock Sync & Bundling Tracking: Notify Me! Back in Stock Alert Syncing: Stock Sync Replenishment: SUPLIFUL Stock alerts: Back in Stock – Out of Stock Find your community Access a network of over 900,000 business owners through Shopify Community. Make connections, share learnings, and engage in meaningful conversations. Join Jump back to: Table of contents 6. Develop a brand strategy and brand identity Aside from a unique product or exemplary service, your brand is the driving force behind a customer’s decision to buy from you. Your brand is more than a business name or a logo. It is a guiding set of principles and design specifications that tell your story, create consistency, and build trust. A branding exercise will create the foundation upon which you make creative decisions for your brand as you grow. As you build your brand, be sure to consider all its components: The basics (who you are and what you sell) What you stand for (mission statement, brand values, and brand promise) Your unique selling proposition (why customers should choose you over the competition) Your brand story (sometimes one and the same with your personal story) Brand voice (the tone and language used consistently in brand communication) Your visual brand identity (logo, style guide, and brand name) To develop your brand strategy, answer questions like: How do you want customers to feel when they interact with your brand? What’s important to you (such as giving back, excellent customer service, fair wages for staff)? What colors and design styles appeal to you and represent the mood you’re trying to achieve? The answers to these will help inform the rest of the branding exercise. Next, brainstorm business names and domain names. It’s important that you research any potential business name to see if it is already used (and therefore could cause confusion or legal issues) and if the social handles and domain are available. Once you’ve landed on a name, secure it by setting up social profiles and registering the domain. Tip: If you’re stuck coming up with a name to represent your brand, try these free business name generator and domain name generator tools. PODCAST: How Headphones.com Secured a Priceless Domain Andrew Lissimore started his headphones business after seeing the impressive profit margins in consumer electronics. He negotiated a deal to secure a domain name that would help his business get discovered. Listen Establishing brand voice and story Brand voice is how your business speaks to customers and the world. It incorporates decisions around tone, personality, brand vocabulary, and slang. Defining your distinct brand voice is important as it can: Spark recognition Influence perception Build trust Create connection Ensure consistency (no matter who’s writing brand copy) Create and maintain a style guide, a document that sets out clear dos and don’ts for your brand voice (as well as your visual brand requirements—more on those below). For example: “Our brand voice is confident. Our brand voice is not condescending.” This will ensure that as you hire for or outsource marketing tasks, your brand voice will remain consistent. Success Story: This Skin Care Founder Blended Her Personal Story with Her Brand Charlotte Cho explains how her personal story and that of her culture were critical to building two skin care brands. As a popular beauty blogger first, she was able to build credibility when she eventually
