How to start a startup: Tips for entrepreneurs from idea to launch

5 min read

Every mother’s son calls themself an entrepreneur these days. Instagram’s full of it—get-rich-quick experts looking for a quick buck without the hard work. At IE Business School, however, we champion the true entrepreneur. And that’s why you’re here. Some part of you wonders how to start a startup. We salute you. And we’d like to help. 

Read on to see our top tips for entrepreneurs and the secret startup failures you’ll face along the journey.

What is a startup?

First things first, what is a startup? We tend to think of a “startup” as any company in its earliest operations. They’re makeshift enterprises where one or two entrepreneurs are pedaling a hot new product for niche demand. A startup takes a lot of money to launch and doesn’t usually bring in much money. As such, startups have to look to angel investors and venture capitalists to get off the ground. It’s risky business. In fact, we feel obligated to give you a grim statistic.

There. Here’s the reference link, change your pants and let’s move on. In fact, let’s focus on the positives: AirBnB, Instagram, Pinterest, Pandora, Uber. Recognize these names? They were all startups once upon a time. Now Uber has generated over $37 billion in revenue. So—the odds may not be in your favor, but fortune favors the brave.

How to create a startup?

So, it’s all very exciting in theory. But how to start a small business from idea to operations? Here are a few tips that will really make a difference as you throw you hat in the ring. The last part may surprise you.

Plan for change

When learning how to create a startup company, it’s paramount that you stay adaptable. Stay adaptable by listening to feedback and keeping up with industry trends. Businesses that evolve with customer needs are more likely to thrive in the long term.

Make a great idea your starting point

To start, identify a problem and offer a solution. Your idea doesn’t have to be completely new; improving existing products, like Apple does with regular updates, can lead to success. From there, create a solid business plan covering products, market analysis, finances, and operations—this is crucial for securing funding.

Put the work in

Now it’s time to put the work in. Get funding wherever you can. Loans, investors, friends and family. Make sure your cost estimates are solid, as this tends to be where most startups fail. Get a team of advisors, lawyers and accountants together that you trust. Then, finally, apply for a business license, get it registered and set up your contracts. With a digital or in-person location secured, you’re ready to go.

You’d be surprised. Some think a business plan is essential, others think it slows things down. But research shows businesses with a plan grow 30% faster and have better chances of success. A plan doesn’t equal success. But it does provide you with a roadmap to fall back on when things get turbulent. Potential funders will also feel reassured by your having one. We suggest you keep plans flexible in the early stages and adjust as things change. The main thing is taking action—to which a plan is only a precursor.

How is a startup different from a small business?

It’s a good question. Your startup will require you to work long hours, take risks and chase after rapid growth. A small business isn’t focused on that kind of dynamism. They’re more balanced and have strong foundations in a stable market.

Startups also have a reputation for being playgrounds of innovation and technology. New, disruptive solutions are dreamt up and hopefully presented to the masses. Where a small business is about monetizing the traditional things, startups career towards the future. This is exactly why creating a startup is unpredictable venture—because unpredictable is your business model.

How much money do you need to start a startup?

Money makes the world go around. But don’t let it take your startup off the tracks. Key expenses like rent, legal fees, employee wages and business credit cards can quickly get out of hand. How much money you’ll need will depend on your venture. If it’s low-cost with an online start, you may only need a couple hundred dollars. If you need a physical location, then we’re talking up to hundreds of thousands in rent, equipment and inventory. Microbusinesses tend to cost around $3,000 to get off the ground. Home-based franchises could range from $2,000 to $5,000. Make sure you have enough money ready to cover the first six months of operations without projected income.

Testing your business idea will help with planned costs. It’s cheap and it’s a great way to gauge customer demand and pricing. Remember there are different types of cost: One-time purchases, ongoing expenses, fixed costs and variable costs. Also, keep in mind the extras. That could include the cost of website hosting, insurance, advertising and office space. Whenever you do your plans, always consider the worst-case scenario along with the best. And don’t get tripped up by interest rates on anything you’ve borrowed! Many a smart person has fallen at this hurdle, so get familiar with accounting tools to manage cash flow and track all your expenses.

Now, how can I find funding for my startup? A not-very-sexy option is to hold on to your day job. Sure, it’s not glamorous to be a CEO who still flips burgers (which I too have done, so no judgement). But it does provide financial stability. If you feel that splits your focus, then family and friends can be looped in. However, be mindful of souring relations with your closest network. Never count off additional funding sources like incubators and accelerators, crowdfunding platforms like Kickstarter or Indiegogo, or local contests that offer funding and exposure.

What are the common mistakes to avoid when launching a startup?

So! You’ve got it all sorted out and you’re raring to go. Before you go careering off into the exciting world of entrepreneurship, bear some common mistakes in mind. The first is burning through money. 82% of startups fail here, so prioritize an organized cash flow!

You must also trust your team. Mismatched goals of lacking of experience contribute to 23% of startup failures. Build a culture that lasts with clear communication and a team that’s aligned on its goals.

Finally, bolster your legal defences. Have everyone on contracts. Yes, you’re all on good terms now things are fresh. But secure contracts will keep things in order further down the line when the stakes are higher.

Good luck

That’s all for now. If you liked this information and you want to hone your entrepreneurial craft further, do us and yourself a favor and follow the link below. You’ll be able to browse all of our master’s programs at IE Business School and request information totally free of charge. We can’t wait to hear from you.