Start-ups

Starting a business means putting professional self-employment into practice. It is also referred to as founding a company or setting up a firm.

A company should never be founded without a well-thought-out business idea and a precise business plan. These two pillars are the basic framework of a successful start-up and should already be finished before the actual founding takes place.

Two ways of starting a business

The wish to found a company can have two different motivations.

• You have your own business idea (a unique selling point, USP, or unique selling proposition) that sets you apart from your competitors.
• You want to become self-employed but do not have a precise business model, and you decide to start out as a franchisee in your sector.

From the business idea to the start-up

You want to become self-employed and you have a business idea. Put it into words. That helps you to reach the goals you have set for your new business and to stay on track. In doing so, you should ask yourself the following four questions:

1. What is the unique selling point of my products/services?
2. How can I make money from it?
3. What benefit do I bring my customers?
4. What do the market and my competitors look like?

Because one thing is certain: at the end of the day, once the company has been founded, it is its profitability that decides whether the business model survives.

Info: low product costs are not a sufficient USP. Start-ups based on that are in most cases doomed to fail.

Franchising, the other way of founding a company

If you do not have a specific business idea but want to become self-employed, franchising suggests itself as a business model. In Germany there are more than 1,000 franchise concepts that can be set up in all kinds of sectors – from motor vehicles to real estate or trades, right through to marketing or retail.

Franchising involves a business plan already written by the franchisor, with which you become a company founder from one day to the next. Even so, before starting up you should check whether the concept in question also has potential for success at your location and whether the market can hardly wait for your new business. (See the next point: a business plan for starting a business.)

Advantages of franchising

The franchisor speeds up your establishment on the market, because the brand or the business idea is already known and does not still have to make a name for itself. At some banks this business model is also regarded as more creditworthy, which helps when starting a business.

Disadvantages of franchising

Before you can start, you first have to acquire a licence that makes opening possible. Within a franchise you have to bear in mind that part of the proceeds must be handed over to the franchisor. Likewise, you have to comply with certain requirements on which you cannot decide freely.

The business plan – the basic framework of starting a business

One thing is clear: you need a business plan before you become self-employed. In it you should write down your ideas and corporate goals, but also your financial plan. The business plan is the guide that helps you start your business.

In order to master starting a business successfully, a business plan is a must!

Because at the latest when you are at the bank applying for a loan, you will have to present it. The better you can sell yourself in the process, the better your chances.

What the business plan should definitely contain:

1. The business idea
2. A market analysis
3. Financial planning
4. Marketing measures
5. Location analysis

How do you draw up a business plan for starting a business?

At this point it should be mentioned that you should write your business plan yourself. In Germany there are many institutions that help you do so by providing a start-up coach.

These points should be covered:

• If you want to involve external partners, which ones?
• How do you reach these partners or obtain other funds?
• A detailed financial plan that shows how much money you need and what it is needed for.
• What does the phase before the business is founded look like?
• Which steps have to be taken for the business to come into being?
• How should the first financial years after the start-up go?
• Which operational measures have to be taken to make the new business a success?

Tip: before starting your business, make use of the advisory services and checklists on setting up a business provided by the German Federal Ministry for Economic Affairs and Energy (BMWi)

Start-up grants – the lift to your new business

Funding for founding a company can come from various funding bodies. As mentioned, the financial plan should already describe the sources from which you intend to obtain grants.

Which sources of funding are there for starting a business?

Very few founders can fall back on sufficient equity when starting a business. In order to have enough funds available, these can be obtained or requested from banks and other funding bodies if certain conditions are met.

Start-up grant: you have to be self-employed as your main occupation and thus end your unemployment.

• EXIST start-up scholarship: this funding for young entrepreneurs is for all those who have either just left university (at most 5 years ago) or have already completed half of their studies.
• Then there is the classic loan from your house bank.
• In the case of start-ups or new businesses with a high risk factor, business angels or venture capital can also be brought in as equity providers.

Winning customers after starting your business

In order to generate revenue at the end of the day, you need customers who make use of your services or products. When it comes to financial planning, the acquisition of new customers and the associated costs are often disregarded. Even though marketing costs a fair amount of money, you must not forget the revenue and the visibility that result from it.

5 tips for starting a business

1. The business idea: Keep refining it until it is fully thought through.

2. The business plan: Planning is everything. It allows you to overcome hurdles, because they have already been factored into the plan.

3. Support when starting a business: Before you really get going, it is advisable to get external support. A start-up coach, for example.

4. The meeting at the bank: Even if your business and financial plan seem perfectly worked out, do not take the meeting at your house bank lightly. It determines whether your company gets off the ground.

5. A business account In order to keep a clear overview of your finances at all times, it is advisable to open a separate business account when founding your company and to keep it “clean”.

Conclusion on founding a company

According to KfW’s 2019 start-up monitor, around 30 per cent of all founders give up their new business after just three years. The KfW start-up monitor has been observing this development for several years now.

As mentioned several times before, well-thought-out planning is crucial when founding a company in order to ensure the new business survives.

With the recommendations described in this article and the 5 tips for starting a business, you should be well prepared for founding your company. Nothing then stands in the way of a successful start.

Credits: Photo from pixabay, by augustfinster