6 Steps to Creating a Super Startup

Came across this article while browsing CNN Business. Good information to know if you've ever thought about starting your own business.

1. Determine if you're an entrepreneur or just a wannabe.

Starting a successful business requires a unique set of

characteristics. You have to be willing to take calculated risks. In

addition, a mix of optimism, high energy, and an ability to live with

ambiguity are also crucial.

According to a recent study of 1,600

Columbia Business School alumni who started businesses, the desire most

related to success was the inclination to build something.

"They took a long-term view," says Murray Low, director of the Eugene M. Lang Center for Entrepreneurship at Columbia.

Make

sure you're prepared to wear many hats, at least in the beginning. "You

need to be willing to meet with the chairman of the board, then go back

to the office and fix the toilet," says Low.

2. Pinpoint an opportunity.

There are lots of ways to find the right business idea. But for most

people, it's wise to begin with your interests, say small-business

experts.

"You should start with what you know best and are most

passionate about," says Sarah Chiles, director of Programs at NYU

Stern's Berkley Center for Entrepreneurial Studies.

Back in 1999,

Julie Dix started sewing satin tags onto her baby's blankets, after she

discovered the infant liked playing with soft edges. Soon, other

mothers began telling her what a great idea it was. That's when she

teamed with friend Danielle Ayotte and formed Spencer, Mass.-based

Taggies. Today, the company sells the blankets, and dozens of other

products in six countries.

The bottom line: "You have to find an

underlying need that's not being fully met," says Timothy Faley,

managing director of the Samuel Zell & Robert H. Lurie Institute

for Entrepreneurial Studies at the University of Michigan's Ross School

of Business.

3. Make sure there's a market for your idea.

Get out there and talk to as many potential customers, suppliers and

distributors as you can. Trade-show attendees are a particularly good

source of information. And remember: You're not trying to sell anything

yet; you're just exploring the opportunity.

"Everyone will be more willing to talk if they think you're just looking for information," says Faley.

It's

also a good idea to make a prototype of your product, so customers can

test it out. That goes even for low-tech wares. Early on, Dix and

Ayotte made samples and brought them to crafts fairs, as well a local

store. When it sold out in just a few days, they knew they were onto

something.

As you get feedback, good or bad, fine-tune your concept accordingly.

4. Write a business plan.

Any plan needs to answer a few key questions: What is your product or

service? Who is your customer? What need does it address? And, how are

you going to turn your idea into a money-making venture?

The plan "should lay the foundation on which you build your business," says Faley.

Divide

the document into a few sections. First, and perhaps most important, is

the executive summary, detailing in no more than two pages the key

information in your plan.

Next should be a market analysis that

describes the needs you're addressing and any potential competitors; a

discussion of your marketing plans and the management team; and a

financial analysis of the first five years in business, with a sample

income statement and balance sheet.

Be prepared to revisit the plan many times. "It should grow and change along with your company," says Faley.

5. Determine your business structure.

You have four basic choices -- sole proprietorship, partnership, LLC,

or corporation. Each offers different legal protections, tax savings,

and ownership requirements. They also vary in how complicated they are

to set up.

For example, sole proprietorships and partnerships

require little paperwork to establish, but also don't provide the tax

breaks and liability protections of other structures.

With

limited liability companies (LLCs), you are personally protected from

creditors and lawsuits and can have as many owners as you'd like.

Corporations

also shield your personal assets from creditors and provide various tax

breaks. If you incorporate as a C corporation, owners are not

responsible for liabilities, because the corporation is considered to

be a separate legal entity. But there's also a double taxation, on both

earned dividends and profits. An S corporation avoids that problem by

having shareholders report earnings on their personal tax forms. But

there are limitations on who and how many people can be shareholders.

6. Look for funding.

Most entrepreneurs start their businesses by dipping into their

savings, and hitting up friends and family. Perhaps half of all

startups, in fact, are funded initially by the founder's credit cards,

according to Faley.

Getting a bank loan is tough unless you have assets - and that often means using your home as collateral.

Other

likely sources include potential suppliers and even prospective

customers, who might be willing to help out in return for steep

discounts.

What about venture capital? Fact is, VCs rarely invest in startups.