Well, that’s a gnarly question as there’s no such thing as an average time to build a business. It’s really a function of your market niche, your target market, the nature of competition in your industry, the economy, and many other factors. Suffice it to say that a business isn’t built in a day. In fact, they usually aren’t built in a year either. If it’s your resolution this year to get a business off the ground, you might have a long slog ahead of you! But how long does it really take to build a business in the modern world? Let’s go through three big factors in building a business into a successful, profit-making machine.
Steps involved in building a business
Sure, you could go out tomorrow and start your business. And, many new entrepreneurs do that. You might even succeed, especially if you have the luxury of using your business to supplement your income rather than replace it. Other times, you simply fall into a business almost by accident. A friend asks you to design their logo. Other entrepreneurs see your design and ask you to do one for them Before you know it, you’re in business.
These are the exceptions. In most cases, efforts to build a business involve a series of steps. Below are the steps involved in building a business, according to Forbes:
- Refine your business idea: Consider your business concept and balance it with reality. Do you have the necessary skills or team with the skills to build a business like the one you’re thinking about? If not, work toward building the skills or team necessary for success. Also, talk to folks who already work in this industry. Is this something you will enjoy over the long run? If you’re not passionate about your idea, the long hours will stretch endlessly until you give up on the project.
- Conduct market research: Gather data about your potential customers through surveys, focus groups, and interviews. Study the industry and economy. Are these favorable to the type of business you want to start? A crowded industry doesn’t offer much space for new businesses and the same goes for a sluggish economy.
- Write a business plan: Include an executive summary, company description, market analysis, management and organization outline, products and services, customer segmentation, marketing plan, and logistics and operations plan. You can learn more about building a business plan here.
- Choose your business structure: Select a legal business structure. Starting out, you might choose to operate as a solo entrepreneur. Forming a corporation at this stage offers little in the form of benefits for the cost involved. Later, you must choose the right business structure and you should consult an attorney and/or financial advisor to help determine which structure is right for you and when to consider changing the structure as your situation changes.
- Register your business: Register your business name (if you use your legal name, you don’t need to do this), get federal and state tax IDs (if you operate as a solo entrepreneur, you can file taxes using your existing social security number), and apply for licenses and permits. Requirements for these legal aspects of your business vary by country and region. In the US, the SBA (Small Business Administration) can answer your questions about legal requirements without charge. They also offer counseling through the SBDC (Small Business Development Center) to get you started. Research available URLs (domain names) as you’ll need to build a website for your business regardless of other considerations. You want your URL to match your business name.
- Get your finances in order: Fund your business and consider securing funding or capital. Unfortunately, many folks wanting to start a small business start here. Instead, accomplish these tasks in order. You stand a better chance of receiving funds when you know what you’re using the funds for and can demonstrate that the funds invested (borrowed) can produce revenue. Funds to finance a new business are scarce and hard to come by. Consider alternatives that don’t require outside financial resources by scaling back your plans.
- Protect your business: Apply for business insurance
- Develop a brand strategy and identity: Pick your business location and build your website. These decisions greatly impact the brand image you build, which, in turn, impacts your ability to attract customers to your business. Your brand should match your target market and convey positive associations for them.
- Market and grow your business. You have a much better chance of building a successful business if you did the prior steps right and you’ll find it nearly impossible to market your way out if you’ve done the prior steps wrong.
It’s often a year before you launch
It’s true! You can come up with an idea and it might still take 12 to 18 months to turn that idea into something real and functional. After all, you need to do a thorough job with the steps necessary to build a business, as outlined above, before you can consider launching a new business. And you should never launch a business before it’s ready to go. You don’t want to make a bad impression on your customers, as it’s challenging to overcome a bad first impression.
I once worked as a CMO for a tech startup. We were building an app and spent a year building our business plan and creating a prototype on paper because we did it the right way. We built the initial functionality and then did proof of concept tests with prospective users. After a few iterations, we took the proof of concept and built the user interface (again on paper). Using a tool that converts your paper UI (user interface) into a clickable version, we tested the interface with prospective users, iterating several times until we had it right. Then, came the expensive and time-consuming process of coding the app, testing, and fixing the bugs within our team. We then tested the finished MVP (minimum viable product) with folks willing to try it out with us standing there to record how well the app performed the tasks they wanted. Finally, we were ready for our public launch.
You should take your time here, and gather as many resources and contacts as you can before you open up shop. A good launch has something to celebrate, a bad launch is one packed with worry. Make sure you’re on the side of the former rather than the latter!
It can take two to four years to build a team
For anything more than a small project, it’s hard to get anything done when you’re on your own. That’s one of the biggest things a new business suffers from; when you’re the only one focused on turning a company into a success, you’re going to run out of hours in the day. Being unable to deliver because you don’t have the human capital to accomplish everything your customers want can cause a lot of trouble when you’re trying to form something out of your company in as fast a time as possible. You’ve only got one pair of hands, and this is where you may start to learn your own boundaries within a working culture. You need to take a break from time to time or you’re going to suffer from burnout!
However, building a team is a two-edged sword. You don’t have revenue in the beginning, so you can’t hire the talent you need to get things done, and you can’t get enough done by yourself to generate enough revenue to grow the business. Think outside the box here. Consider adding a partner who brings in needed skills and will defer income for a piece of the business; counting on the success to earn more over time. A partner also works harder because they have a vested interest in the business’s success.
You can also add gig workers using platforms like Fiverr to get work done. Or, outsource activities that don’t require a full-time hire. When we built the app, we contracted with another small business to code the app since we only needed the work of a team of developers for the initial work. Over time, we would hire an internal development team when we decided that more frequent updates were needed. Hiring expert third parties brings needed expertise without the high cost of hiring skilled workers.
It’s usually around three years before you make a profit
You’ve secured funding through the help of services like My Finance Business and you’re ready to start making the money back – you’re all good to go, right? However, that’s not how it tends to work in the modern business sphere. Indeed, it’s often around 3 years before you even start seeing your cash flow moving into the green.
For some businesses, this process takes over five years, and for some, it could take a decade before you’re comfortably making enough money to support yourself and grow the business. It’s not a nice thing to think about, but it is a reality you need to consider the amount of effort and risk (below, you can see the failure rate for small businesses). Sticking it out for the long haul becomes a lot easier when you know just how much work there is ahead.
If you want to build a business, you’re going to need to be patient. It takes time and a lot of effort to turn a profit, but you’re also going to need time to hire and create the workplace culture you’ve always hoped for. You can start a business in no time, but building success? That’s much harder.
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