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As a recent college graduate, you have your degree and possibly some experience from an initial job or internship. But now, you’re interested in acting on your entrepreneurial ambitions and starting your own business.
Starting a small business is an increasingly popular option for young people — 17% of college graduates run their own businesses while they’re still in college, and another 43% plan to do so shortly after graduating.
Of course, starting your own business is a lot of work and comes with a huge learning curve. Let’s look at seven tips for starting your own small business as a college graduate.
Related: 11 Steps to Starting a Successful Business in Your 20s
1. Decide what kind of business you want to start
Your first step should be to determine what kind of business you want to start and run. For example, do you want to start a restaurant, offer a service-based business or do something else entirely?
To determine the kind of business you want to start, think about the business ideas you’ve had in the past, and consider the kind of work you like to do. You should also look for current opportunities in the market you can take advantage of. Above all else, consider what skills you have that might provide value to other people.
2. Register your business
Your next major step is to register your business. There’s a lot involved with this step, including:
Deciding on a business name: Your business name must be 100% unique to your state. For the best results, try to come up with a business name that sounds good, is easy to spell and won’t blend in with the crowd.
Apply for an EIN: An employer identification number (EIN) is a unique number assigned by the IRS to businesses operating in the US You’ll need an EIN to open a business bank account and register your business.
Choose your business structure: Next, you’ll need to choose your business structure, like an LLC, corporation or sole proprietorship. The business structure you choose can affect what tax breaks you benefit from and how many employees you can hire.
Register your business: Finally, register with your state’s Secretary of State office. You’ll need to provide all the above information and pay some minor fees.
3. Come up with a business plan
Think of your business plan as the guiding document that outlines what your business is about, how it will achieve its goals and who it serves. A business plan helps guide your business, and it’s necessary if you want to receive financing from investors.
Write a detailed business plan, including cash flow projections, target audience research and your expected marketing strategy. If you’re unsure where to start, you can use a free business plan template to get started.
Related: The 3 Things College Taught Me About Being An Entrepreneur
4. Identify your target audience
At this stage, you need to determine your target audience. This is the group of people most likely to buy from your brand or subscribe to your services. You can do this by researching keywords, doing marketing research and doing competitor analysis.
In any case, you need to know who your target audience is in terms of attributes like gender, age and buying habits. The better you know your target audience, the more effectively you can market directly to those prospective customers.
5. Decide how you’ll finance the business
No business can get off the ground without financing of some kind. Unless you have a nest egg you’ve saved up for this purpose, chances are you’ll need to seek out financing from other sources.
You can do this in a few different ways:
Try applying for a business loan, either from a bank, credit union, the US Small Business Administration or a non-bank lender.
Appeal to venture capital firms and other investors by presenting them with a business plan and details about your company.
Ask friends and family members to pool money together, then promise to pay them back once you start turning a profit.
Consider your finances and how you’ll acquire money before committing to any business idea.
6. Keep your expenses low
Even after acquiring funds, it is unlikely that your business will turn a profit for the first few years of operations. Therefore, it’s wise to keep your expenses low as you start your business. To cut down on costs, you can do things like:
Living with your parents, so you don’t have to pay rent.
Working a side job while diverting most of your effort toward your entrepreneurial endeavour.
Doing a lot of the hard work in your business yourself rather than hiring employees. This isn’t a great long-term strategy, but it may be necessary in the beginning.
Related: Should Entrepreneurial College Students Go Big or Go Small After Graduation?
7. Be ready to pivot
Your initial business idea might not work out as you expect or hope, so you should always be ready to pivot or change your business plan. While it might be difficult or uncomfortable, navigating through hurdles and challenges will allow you to learn valuable lessons on how to run a business and identify mistakes to avoid in the future.
For example, let’s say you have an initial idea to provide one product to your target audience, but you discover that you can produce a better product for less money. It may make sense to switch your business plan and pivot towards the other product. Being flexible and adaptable is a key attribute for all small business owners.
There’s a lot that goes into starting a business, and almost half (47%) of all small businesses won’t last longer than five years. But by coming up with a plan and being strategic and flexible, you’ll increase your likelihood of success, and you can continue your entrepreneurial journey with the confidence to grow to greatness.