6 Steps for Building a Successful Start-up
Entrepreneurship is the ultimate professional goal for many people – a chance to build something of your own. Running a start-up can be a highly rewarding, engaging and exhilarating experience, but it can also be a huge challenge. According to one report, more than 90% of Indian start-ups fail within the first five years[1].
May 2023
7 mins read
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However, if you understand the risks involved, and follow these six entrepreneurship steps, you may be able to maximise your chances of success and create a lasting legacy:
1. Find the Big Idea
The first step of any entrepreneurial journey is identifying a profitable start-up idea. Here are some tips that can help you find your eureka moment:
- Think of what frustrates you and the people around you
To succeed, your start-up needs to resolve a frustration or problem facing you and others around you. Think carefully about the kind of problems that people might be willing to pay to get solved. For instance, Ritesh Agarwal, an avid traveller, struggled to find affordable quality hotels on his trips, which encouraged him to launch OYO[2]. - Take inspiration from other start-ups
Observe what other entrepreneurs are doing and note their successes as well as their mistakes. This way, you can launch an improved or cheaper version of their products or services. - Stay on top of market trends
The demands and expectations of consumers change with time. You must follow them closely, as changing market trends could also be an opportunity. For instance, if price comparison is increasingly sought-after, your start-up could create an app for subscription, that helps people compare food prices across different food aggregators and delivery services.
2. Start prototyping
Once you’ve found an idea, around which you’d like to build your start-up, move to the prototyping phase. A prototype is an unfinished test version of the final product or service. It is one of the most practical ways for testing and developing ideas. There are two key steps:
- Analysing your idea in the real world to see if the concept product or service can actually be developed on a mass scale
- Comparing the product or services with those already available in the market to know its relative standing
Once the prototype is ready, several start-ups follow the Alpha and Beta release cycles. The Alpha version is where the team developing the product uses it to see whether it meets the expectations. In the Beta phase, the required changes are made to the product and it is then distributed among a small group of people to get their feedback.
3. Strengthen your personal finances
An often-overlooked aspect of running a start-up is managing personal finances. Even in the best-case scenario, your start-up might not be able to generate profits for a few months or years. This could put a lot of strain on your personal finances and distract you from the task at hand.
Investing and building a personal finance corpus is thus essential if you are serious about becoming an entrepreneur. Focus on investment options that are flexible, easy to manage and do not require a lot of involvement. For instance, you could consider investing a lump sum amount in mutual funds of your choice, or start a SIP in a few different funds to build a corpus that you can fall back on while your start-up is in the development phase.
4. Register your start-up
Once your start-up is ready, you must register it. India has a thriving start-up ecosystem, and the government has launched several initiatives to encourage start-ups. Here’s how the process works:
- Incorporate your business as a Limited Liability Partnership, Partnership Firm or Private Limited Company
- Register on the Start-Up India website to apply for various mentorship/ incubator and accelerator programs and to access resources on government schemes, learning and development programs, state policies and more
- Get DPIIT (Department for Promotion of Industry and Internal Trade) recognition to access a range of exclusive start-up benefits
5. Refine your business plan
Your business plan is a formal document with detailed information about your vision, your business objectives and your strategy to achieve them. The plan could include your start-up’s budget, marketing strategies, financial projections and milestones. It will play a critical role in guiding your operations and communicating your strategy to investors as you seek funding. It serves a blueprint for growth and success in the long run.
6. Keep looking out for funding
A key challenge for every start-up is accessing finance. The lack of cash flow, security and experience often makes it difficult for start-ups to find investors. But if you’ve got a compelling product or service idea, and your business plan looks viable, you might be able to find a willing investor or group of investors, provided you pitch it right.
The most common funding sources are private equity, debt financing and grants. Here is a handy ready reckoner for these sources:
| Equity Financing | Debt Financing | Grants | |
| How it works | Selling company stake to investors for working capital | Borrowing money and returning it with interest | A financial award is given to a start-up for facilitating an objective |
| Risk faced by each party | Financer: Zero investment guarantee
Start-up: A portion of ownership is given to the investor/s | Financer: Zero control over business operations
Start-up: A collateral or business asset is required for debt financing | Financer: The start-up might fail to achieve the objective
Start-up: Risk of not receiving the entire grant if the milestones are not achieved |
| Returns to the financer | Capital growth | Interest | Zero returns |
| Involvement of financer | Investors are generally involved in the start-up’s decision-making | Minimal involvement | Zero direct involvement |
| Funding Source | Self-financing, angel investors, venture capitalists, incubators/ accelerators, crowdfunding | Financial institutions like banks and NBFCs, government loans | State government, central government, grant programmes |
Giving wings to your start-up dream
The journey towards becoming an entrepreneur may seem daunting, but it can be enriching too. While you might think the odds are stacked against you, it is definitely worth a shot. You never know, your future start-up might join the exclusive unicorn club someday! Take inspiration from leading start-up founders, keep learning and believe in yourself, as the journey will test your resolve to see whether you really have what it takes to be an entrepreneur.
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Sources
1. https://in.newsroom.ibm.com/2017-05-18-IBM-Study-Innovation-Key-to-Start-up-Success-in-India
2. https://www.theceo.in/success-stories/ritesh-agarwal-success-story
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All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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