7 Fundamentals You Need Before Starting a Business

Entrepreneurship is demanding. But even so, anybody can be an entrepreneur—that is, as long as they have the right credentials and resources needed for starting a business. These fundamental prerequisites are things you may already have or may still need—but either way, they’re relatively easy to obtain, so if you’re willing to make the effort, they’re all within your grasp.

Some of them are personal milestones, some of them are financial structures, and some of them are manifestations of your business idea—but all of them are necessary before you can start making any forward progress.

Make sure you have all seven before moving forward:

1. A good, unique idea

Don’t underestimate the value, importance, or difficulty of achieving this. Countless prospective entrepreneurs have tried to force a good idea, never finding anything, while others stumble upon game changers that redefine an entire industry.

There are two things to remember here. First, there’s no surefire formula for success—even a theoretically good idea can’t guarantee a good business. Second, there’s always room for adjustment. Most ideas are inherently bad at first, it takes time to refine them, change them, and adapt them to new circumstances. Only then do they start to take on a more meaningful, practical form.

2. Experience

You don’t need to have already owned a business in order to become an entrepreneur—otherwise, we’d eventually run out of businesses. However, being an entrepreneur is a trying position, and you’ll need relevant experience if you want to survive.

For example, you need to be able to manage people, time, and priorities—and juggle them quickly as situations change. You’ll need a fleeting familiarity with company finances (more on that later), and you need to be used to a high-pressure environment. Many jobs naturally offer elements of these kinds of experience; it’s up to you to find one that does and learn from it.

3. Good financial standing

Before you can start making money, you'll need a reasonable amount of financial literacy and preparedness in your life. For example, if you’re overwhelmed with debt, it’s unlikely that a private investor or a bank will offer you funding for a much larger, more complex business.

Plus, when you first start a business, it’s unlikely you’ll be making a steady profit (or a steady paycheck). Your personal finances need to be steady enough to support you over the first major challenges of your business’s growth. You don’t need to be rich—only stable.

4. A financial model

How is your business going to make money? How are you going to stay cash positive during your first few years of operation? How are you going to keep track of all your revenues and expenses? You might already be able to answer some of these questions on your own, but don’t hesitate to reach out to a financial advisor for more help.

There are some complicated financial relationships you may not be able to discern or manage on your own. Even so, you need to be invested in and aware of your business’s financial model—after all, it’s what’s going to keep your business alive.

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5. A business plan

Your financial model serves as a nice segue into your full-fledged business plan. Far more than just a business idea, your business plan will fully encompass and describe all the elements of your business’s operations. This includes your profitability model, how you’re going to grow over time, competitive threats, opportunities, key marketing strategies, and the logistics of hiring and managing the actual business.

It takes many hours of research to put a proper business plan together, but once you have it, you can use it as the foundation for your enterprise.

6. Legal knowledge about starting a business

There are lots of legal requirements and stipulations involved in creating and running a business. You’ll need to decide on a legal structure for your business, withhold taxes from employees’ paychecks, and manage your copyrights, for starters. Again, it pays to seek out help here; don’t be afraid to ask an attorney for counsel.

It may cost you a few hundred to a few thousand dollars to get all your questions answered, but it’s far less expensive than trying to deal with a lawsuit after the fact. There are a number of questions specific to your industry you’ll want to ask here—every business is different and has different legal requirements.

ALSO READ: 15 Major Legal Mistakes Made by Startups

7. Registrations and permits

You’ll also need to formally register your business and obtain any necessary permits to begin operations. For some businesses, this is as simple as registering the name of your business with your state and federal government; for others, this is a complicated, back-and-forth process of application, review, and adjustment. It all depends on what industry you’re in and the demands of your local district.

Other factors

There are other factors besides these that will help you become a better entrepreneur and improve your chances of success once your business is off the ground; however, these are the true fundamentals that you need to start making your business plan a reality. If you don’t have anything of these yet, don’t worry—it doesn’t mean you can’t be an entrepreneur. It just means you need to do a little more work before you can get your venture up and running.

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