How to start a solid business? 5 Steps to Avoid Failure Explained

• Update:2023/11/14

Some people may be hesitant to embark on entrepreneurship because of the fear that they may fail.

In this article, we will explain how to start a solid business in five steps and give you pointers on how to avoid failure. If you are interested in starting a business but do not want to fail, please read on.

Step 1: Determine the business model

The first important item to consider is what type of business model you will use to start your business. Consider whether you will be selling your own services or outsourcing, whether you will be selling off-sale or recurring billing, whether you will be online or offline, ……, and so on.

Whatever your business model, it is important to keep the following five points in mind.

Market needs

If there is no demand in the market, there is no business. In addition to the needs that already exist, it is also important to pay attention to hidden needs and needs that can be uncovered.

In addition, as a start-up business, it is important to take a long-term perspective and manage risk. Think carefully about whether there are needs that can withstand future changes in society and whether those needs will not diminish in the event of natural disasters or other situations that are difficult to defend against.

Profit ratio

We identify the expected income and expenses and estimate how much profit margin is needed to secure income and make the business viable.

The profit margin is the ratio of profit to sales or sales price, and is calculated by the following formula.
●Profit margin (%) = Net profit/sales x 100
●Net profit = Sales – Cost of sales – Expenses

Depending on the profit margin, the time when profit begins to be generated will differ. Even if sales can be secured, if the profit margin is low and profits cannot be secured, the business will not continue. Think carefully, assuming all possible cases.

Initial cost

Apart from the fixed monthly costs required to run the business, this is the cost of starting the business. Consider this in light of the amount of funding available.

Initial costs vary widely depending on the business model, and choosing a business with a low initial investment should make it easier to turn a profit early on.

Stock availability

Businesses that require inventory have high initial costs because they must purchase products before they can sell them. Some products require warehousing, and especially in urban centers, warehousing costs tend to put pressure on profits.

If the products do not match the changing market needs or sales forecasts are not met, the business may end up with a stockpile of inventory, which can lead to losses.

Availability of stores

While having a physical store has the advantage of allowing you to communicate directly with consumers and have them see your products in person, you will incur monthly rent, utilities, and labor costs in addition to the initial cost of renting the store.

However, in addition to the initial cost of renting a store, there are also monthly expenses for rent, utilities, and labor. We recommend planning a realistic business model that fits your “new lifestyle.

For more information on business models, please refer to the following article.

Step 2 Various notifications and procedures

The procedures for starting a business differ depending on whether the startup is as a “sole proprietorship” or as a “corporation.

Starting a sole proprietorship

If you are starting a business as a sole proprietor, you only need to notify the tax office of the opening of your sole proprietorship. The notification forms can be downloaded from the IRS website or obtained at the tax office.

It is recommended that the notification of business opening be submitted within one month of the start of business. There is no obligation to submit the form, but it is required for those who plan to file a blue return instead of a white return. Blue tax returns are more advantageous in terms of deductions and expenses. If you are starting a business, you should be aware of the advantages and disadvantages of both blue and white tax returns.

To apply for a blue return, submit an “Application for Approval of Blue Return” to the competent district director of the tax office where the tax is paid by March 15 of the current year. For new businesses opening on or after January 16 of the same year, an “Application for Approval of Blue Return” must be submitted to the competent district director of the tax office where the tax payment is made within two months from the date of commencement of business.
Reference:National Tax Agency (Japan)

Corporate start-up

When establishing a company as a corporation, procedures such as preparation of articles of incorporation and corporate registration are required. Although it costs a certain amount of money and time, it is advantageous in terms of social credibility, financing, and securing human resources, and the scope of expenses is wider.

Another option is to start a business as a sole proprietorship first, and then incorporate when the time is right. We recommend that you carefully consider your planned business model and decide whether to start as a sole proprietorship or a corporation, comparing the advantages and disadvantages of both.

Step 3: Prepare your office

Consider where you will start your business and work. There are a variety of options, including serviced offices, shared offices, and home offices, and each business model may or may not be suitable for your business.

At the start, we recommend renting or sharing offices, which are easier to keep fixed costs such as initial expenses and maintenance costs down than renting offices. The advantages and disadvantages of each type of office are explained below.

Office for rent

It is attractive because of its high social credibility and large degree of freedom, but the initial cost is high and equipment and facilities are expensive.

Serviced offices

Office space is rented on a portion of the floor, and in most cases, office furniture is provided. Facilities such as shared meeting rooms, lounges, and copy machines are also available.

Security and information management must be taken into consideration, and may become more expensive as the number of users increases.

Shared Office

These offices use open space and offer free-address or fixed seating. Since it is an open space, security and information management measures will often be required. Also, because network communication is shared, there may be cases where communication speeds are slow.

Home and Office

While it is easier to keep costs down and balance work with housework and childcare, it may also be difficult to get the most out of your work.

For more information about offices, please see the following articles

Step 4 Fundraising

Possible financing methods for starting a business include self-financing, financial institution loans, and public grants and subsidies. Crowdfunding and venture capital are also available, but are not realistic for many.

If you have limited access to funding and cannot raise the ideal initial capital, don’t take chances. Be aware that you should choose a business model that requires less initial investment, or devise ways to keep initial costs low, so that you do not suffer from cash flow difficulties after the start of your business.

Step 5: Determine how to attract customers

The success of a business depends on attracting customers. Even if you have built an ideal business model and prepared excellent products, if you do not attract people, sales will not occur and you will not make a profit.

There are a variety of ways to attract customers, including Web advertising, search engine optimization (SEO), flyers, direct mail, and referrals. What is important is the choice of method to reach the target audience and the expressions used to convey the message to the target audience.

If you want to attract customers on the Internet, Google ads and Facebook ads are relatively easy to use and have a good track record, so even those unfamiliar with online advertising should be able to submit ads on their own.

In particular, the development of Google’s AI is remarkable, and with the Smart Assist Campaign function, AI can automatically optimize ad performance without advanced knowledge or technology. This is especially recommended for beginners.

Summary

There are five major points to avoid entrepreneurial failure and to succeed.

• Business Models
• Opening procedures
• Office
• Capital
• Attracting customers

In your business model, carefully consider “market needs, profit margins, initial costs, inventory, and stores” and make a reasonable plan.

For office space, which greatly affects initial and fixed costs, it is recommended to consider renting an office depending on the nature of the business. It is also important to make sure that your financial plan is reasonable.

In addition, use methods and expressions that reach your target audience to attract customers and secure sales and profits.