Today, you’ll see a step-by-step guide to launching a startup from a software delivery company that has been helping entrepreneurs to implement their ideas for almost a decade. Spoiler: it’s not really hard to build a startup. The hardest part is to make it last and bring profit through the years.
So, that will be our focus. This guide will provide a detailed answer on how to build a startup and get into the 10% of businesses that remain afloat.
The 9-step answer to how to build a startup
The path to making a startup generally looks like this:
- Find a problem to solve
- Research the market
- Write a Unique Value Proposition (UVP)
- Tackle the legal side
- Create a business plan
- Get a development team
- Build an MVP
- Get funding
- Start marketing early
Voila! You are a businessperson.
Now let’s get to the details.
Step 1. Find a problem to solve
Not everyone who wants to know how to build a startup ends up running one. Despite being romanticized, this is a challenging task that brings many happy moments but also is intensely demanding. And it often fails. So, is there a surefire way to establish a successful startup?
The major advice we’ve learned from working with startup founders is to find a mission that will drive you regardless of profitability. Of course, profit and growth are the core of sustainability, but understanding the societal impact your business is making is what will guide you through the good and bad times.
Look at the mission statements of the successful startup companies that grew into large businesses:
To check if you have found the problem, solving which can become your startup’s mission, ask yourself:
- Who else has this problem?
- How often does this problem occur?
- Is this problem serious enough for a startup to develop?
Step 2. Research the market
After “how to create a startup?” the next big question is, “will people want to buy my idea?” Market research will help determine how potential customers will receive your product or service, their preferred features, and the pricing strategy.
It is also the first means of proof that your product or service fulfills the market need and is worth investing in. Read on to learn how to conduct market research.
Find your target audience
The lack of market need is the second top reason why startups fail. But how can a startup locate its target audience when it hasn’t yet begun selling? Start by testing assumptions and slowly narrow down your focus.
For example, let’s assume you’re interested in how to build a startup to sell beard oil. Apparently, your primary target market is men. Next, it’s safe to assume that teenagers and seniors will not buy this product regularly, so you can eliminate these groups.
Then again, you can take that your customers either have a beard or want to grow it, further narrowing down the target audience. You can continue this process until you’re ready to create an Ideal Customer Profile (ICP).
Test the hypotheses
Making predictions and testing them is a fast way to determine the direction you should follow in your research. Moreover, data will help you remain objective while you try to figure out how to create a startup and keep you receptive to opportunities.
For example, you may wonder how much your potential customer will be willing to pay for your offer. Your hypothesis could be: “$1,000 for a product containing these features.”
Next, determine what research type will provide you with the most data for your startup process.
- Primary research will give insights into customers’ perceptions of products and services like yours, their satisfaction, loyalty, and more. It involves going directly to the target audience with questions in the form of surveys, polls, interviews, etc.
- Secondary research uses data collected, compiled, and organized by others. From here, you can find out about the market size for your startup, competition, etc.
Once you’ve finished the research, organize and analyze data to identify patterns and trends. Then, outline action items. For instance, if most users reported feeling overwhelmed when using a similar product, your action items might include researching best practices and creating and testing different product versions.
Competitor research will reveal opportunities and risks. There are several competition types that startups face — direct, indirect, potential, future, and replacement competition.
- Direct competitors offer the same products or services you sell or market. You can learn how to build a startup from them and identify your product’s strengths and weaknesses and its actual market value. An easy way to find direct competitors is by googling your product.
- Indirect competitors fight for your digital space by using the same keywords as your startup but not selling the same products or services. Knowing them will help you optimize your advertising strategy. You can identify them using keyword research and paid data.
- Potential competitors sell the same thing as you do but in a different market. They can teach you what works best and can be found using google search and focusing on companies in other parts of the world.
- Future competitors are new companies that will enter your market at some point in the future. You can identify them by researching areas close to your market. Look at their strategies and consider how to outperform them before they steal your customers.
- Replacement competitors solve the problem your startup is trying to solve but with different methods. Find them by researching the problem, then analyze their marketing to outperform.
Tools for market research
Answer The Public is a free tool that shows what people search online on your topic;
Think With Google is a free library of marketing-related facts and figures;
BuzzSumo shows the high-performing content by a given keyword;
Statista gives statistics and forecasts in most industries;
Spyfu is a search engine analytics platform that can show how your competitors attract traffic;
Typeform is a platform for making surveys and interactive forms for conducting primary research;
Dimensions is a search engine for academic publications.
Step 3. Write a UVP
Unique Value Proposition (UVP) is what determines the goal of creating a startup and differentiates it from the competition. It should elaborate on your mission and clearly outline what value customers will get by purchasing your products or services.
To start writing a UVP:
- Consider all the positives of your offer and write down everything that makes it impressive;
- Explain how it works and any innovative processes it uses;
- Ask yourself how your idea will change the world and write it down.
Don’t forget about your competitor’s research results and try to mitigate all the negatives they might have in your offer. Further, think about your target customer’s pain points and expectations and address those, too.
Finally, go through your list and highlight everything different from your competitors, e.g., what makes your startup unique. Then go through your customers’ pains and gains and rank them in order of relevance to your idea. Choose the top three to keep in your UVP.
Step 4. Tackle the legal aspect
Your startup should comply with legal requirements to function safely. We recommend consulting with local authorities to learn how to build a startup properly. However, there are some universal aspects:
- Business structure
- Intellectual property
- Trade license
- Tax responsibilities
- Employee agreements
- Labor laws
You should also choose the name for your business and ensure no other business uses the trademark you’d like to use.
Choose the legal structure
Your business’s legal structure will determine your taxes, liabilities, and registration and can impact fundraising. To pick the proper structure, consider the scope of your business and the number of partners. You’ll also want to check on the compliances and taxes to know how to build a startup with the most beneficial structure.
- Sole proprietorship means one person owns and runs a business, and the government doesn’t make a difference between the owner and the business itself. It’s the easiest and least expensive way to start a business, as the owner personally undertakes all the obligations.
- Partnership is a business where several people share ownership and equally contribute to all business aspects. This structure gives you access to more skillsets and expertise. At the same time, each partner is responsible for their own actions and their partners’.
- Limited liability company (LLC) is a hybrid structure that protects the partners from personal liability for the business’ faults while allowing earnings and losses to pass through as income on their personal tax returns. However, the initial costs may be higher.
- Corporation is an entity separate from its owners. It can sue, be sued, buy and sell property, etc. There are several types of corporations, but all of them protect the owners’ and investors’ personal assets. On the other hand, corporations usually have higher administrative fees due to their complex structure.
Know your taxes
The amount of business taxes is determined by the government of the country you register your business and your business legal structure. Thus, in the USA, you will pay either of the three tax types as a startup:
- Self-employment tax (SE Tax) if you work for yourself;
- Employment tax if you have employees;
- Excise tax applies to certain goods or when using specific equipment such as trucks, fishing equipment, etc.
Additionally, any US business needs an Employer Identification Number (EIN).
As a business owner in the EU, you’ll have to pay:
- Trade tax;
- Health insurance;
- Value Added Tax (VAT);
- Income tax.
There might be additional taxes depending on the country.
To build a startup in the UK, you’ll need to:
- Register with HMRC or Companies House;
- File a tax return;
- Pay corporation tax;
- Pay VAT.
Step 5. Create a business plan
A formalized business plan outlines your ideas and strategies regarding how to build a startup, manage it, and also exit. Additionally, it determines your target customers and how to reach them through marketing. A good business plan explains:
- What is your business
- Why does your company exist
- How will it make money
- What are your long-term business goals.
While you don’t have to follow an exact structure, ensure that your business plan includes the sections below.
It is a brief positive synopsis of your business that lets the reader quickly grasp the key elements and entices them to take an interest in your idea.
Here’s what to include:
- The name of the business and its location;
- Your value proposition;
- The market needs your business is meeting with evidence;
- Your advantages over the competition;
- Your target audience;
- An overview of your company’s management team;
- A financial summary with projected sales and profits;
- Major milestones and long-term goals;
- The specific amount you need in funding or the percentage stake for investors;
- An outline of sales and marketing strategy;
- Revenue sources;
- Implementation plan.
Also, spell out exactly how your company’s ownership is divided.
A product description describes all the products and services you offer. It should also highlight their benefits and how you plan to create a startup that’s better than what’s already on the market. Make sure to include the following:
- An outline of your product’s features;
- Comparison to the competition;
- Price and the reasoning behind it;
- Any certifications, trademarks, patents, or copyrights;
- Product life cycle;
- Sales plans;
- Manufacturing requirements;
- Future expansion opportunities;
- Visual representation of your product.
Outline your organizational structure
Tell how you plan to build a startup, structure and run it, and explain roles and responsibilities. It would help if you also outlined what makes every person suitable for their position. This section is vital if you have a partnership or an LLC. Include the following:
- Team size and composition;
- Each member’s experience;
- Skills that will benefit the business;
- How their skills and expertise will complement each other;
- People hierarchy;
- Percentage of ownership of each team member;
- The extent of involvement;
- How they will be paid.
Detail your financial model
This section aims to convince the reader that you know how to create a startup that’s viable and will bring profits. It comprises four financial statements: the expenses statement, the income statement, the cash flow projection, and the balance sheet.
For the expenses statement, sum up the cost of starting and operating your business. A rule of thumb is calculating a six-month operating cost for a ballpark estimate of total startup costs.
The income statement should show your forecast revenues, expenses, and profits. Explain your projections and match them to your funding figures.
A cash flow projection predicts how much money you will have in the bank over a given period. For a realistic forecast, analyze potential issues that can impact your runway.
A balance sheet shows what your business owns, owes, and the value of the owner’s investment. To create it, sum up the value of all assets in the company, then calculate the total liabilities and compare the two numbers.
Step 6. Get a development team
Once you’ve determined how to build a startup, hire a software development team to turn your idea into a working product and make it available to the end user. Its composition depends on the complexity of your project, your knowledge and involvement, and available resources.
Most often, startups hire the following specialists:
- Product manager
- Business analyst
- Software architect
- UI/UX designers
- QA engineers
Next, you should decide whether to build an in-house team or outsource the startup development to remote specialists. Both variants have their pros and cons, which we’ll consider later.
Finally, you should know where to look. Popular hiring sources include
- Meetups and conferences;
- Social media (LinkedIn, Reddit, etc.);
- Online job portals (Upwork, Guru, Glassdoor);
- Communities (Github, Angelist).
It gives you complete control over the hiring and training process, simplifies communication as you have direct access to all your team members, and ensures the cultural fit.
On the other hand, it takes time to find potential candidates, interview them, and make an informed decision. You also have to ensure that your in-house employees know how to build a startup, have the necessary equipment, and their skills remain updated with the changing company’s needs. Moreover, you’re limited to people that live in your area or are willing to relocate.
The most significant advantage of working with an outsourcing partner is the easy scaling of your team. You can change the number of employees working on your project anytime you need it without losing time or damaging your reputation as an employer. You also don’t have to worry about equipment and workspace and are not responsible for training.
Outsourcing also gives you access to a worldwide talent pool. Another benefit of hiring someone from another time zone is that it might be up to three times less expensive than recruiting locally.
However, you must ensure that your vendor has an effective communication process established, so there is little chance of misunderstanding. Also, you share sensitive information risking your security which can be mitigated by signing an NDA agreement.
|In-house team||Outsourced team|
Easy to switch
Global talent pool
|Cons||Long-term recurring expenses|
Requires HR skills
Limited talent pool
|Risk of communication issues|
Less control over development
Step 7. Build an MVP
A minimum viable product (MVP) is a product version that only contains core features to attract users and encourage them to provide feedback. It is a proven way to ensure the product has a market without spending much time and money. Sometimes MVP development may even be cheaper than conducting in-depth research.
But don’t think of an MVP as an unfinished product; it’s a core part of a fully functional app. Hence, the steps for a startup MVP creation are the same as in the traditional web development process:
- Business and market research;
- Mapping out user flow and visual design;
- Maintenance and feedback analysis
Select a tech stack
The tech stack you choose for an MVP will affect its architecture and design. That’s why you should have a long-term strategy determining how to build a startup to ensure that the selected tech stack won’t hinder your product’s scalability and performance.
Of course, you can use a different tech stack for your product than the one used for the MVP. However, it may entail searching for and hiring new specialists and more research and prototyping.
Choose MVP features
An MVP should impress early adopters, so its features must clearly demonstrate the unique benefits of your product. At the same time, these should be the core features, and they must not take long to develop or be costly.
Here’s how to create a startup MVP:
- Think of the ultimate goal of your software product;
- Think about what actions users should take to reach that goal;
- Ask yourself how exactly the user should do each action and write down the features;
- Determine what features are crucial for your product to work;
- Determine features that would differentiate your product from the others;
- Consider your budget.
For example, let’s see how to build a startup MVP for a tourist app. Its ultimate goal is to book a hotel. The user’s actions can involve typing in the destination, reviewing a list of hotels, picking a hotel, submitting user details, making payments, rating the hotel, etc. Now, you should prioritize these features by their significance.
For instance, the opportunity to pick a hotel is more critical for completing a user’s goal than rating, so it goes higher on the list. Further, hotel recognition by photo might not be an essential feature, but it makes you unique, so it also goes on the top features.
Successful MVP examples
Here are examples of companies that knew how to build a startup and succeed. They also started as MVPs:
- Amazon started as an online book store with a simple search engine, an opportunity to review books, and automated email notifications for new books and order-related updates. Its unique feature was a door-to-door delivery and a million-title catalog.
- Airbnb was once a website offering nothing more but three airbeds in its creators’ apartment.
- Facebook began as a chatroom for Harvard students, and now it’s the biggest global social network;
- Foursquare initially had one feature. It allowed people to check in at different locations and earn badges.
- Groupon spawned from a failed attempt to simplify fundraising. At first, its creators manually reached out to vendors for the deals and only got profit if a certain amount of people purchased.
But how can you tell if an MVP is flourishing and you can move on to developing a complete product? Look for these indicators:
- Increase in your website traffic;
- Positive comments (you have to ask for feedback);
- Raising the percentage of active users;
- Reducing client acquisition cost (CAC);
- Unchanging or reducing churn rate;
- Increasing number of visitors who convert into paying customers (CR).
Step 8. Get funding
How to build a startup without taking a bank loan? There are several ways to fund a startup, including borrowing from friends and family. But today, we’ll focus on the most popular ones: bootstrapping and fundraising.
Bootstrapping is financing your startup from your own pocket. You can use your savings, keep your daily job, and invest your salary to grow a business. This practice allows you to stay in control of your business and avoid paying interest on loans. You also don’t have to meet the investors’ needs and are free to experiment and innovate.
On the other hand, fundraising involves getting capital from a third party. This way, you get financial freedom to attract top talent and fast start your business. Moreover, investors can add value to your startup by sharing valuable expertise.
To determine which method is right for you, ask yourself these questions:
- How much risk am I willing to take?
- How much control do I want over my business?
You choose priorities
Huge creativity driver
No returns for a while
Step 9. Start marketing early
What can marketing do before a product is ready to go into the market? Capture leads, keep them warm, build an online following, form distribution partnerships, open access to events, and test communications on different levels.
Like in startup development, the key to successful marketing lies in planning. Ensure your marketing plan includes:
- Your business purpose;
- Your target customers;
- Your promotion strategy.
Below are some ideas on how to create a startup promotion strategy.
Sending emails can attract customers to your startup for little to no cost. It can also help raise engagement, obtain valuable feedback and drive sales. However, to reap the benefits of this method, you must collect your prospects’ emails first.
If you have a website or a landing page, consider placing a newsletter signup form on it. Of course, that would mean you’d additionally produce content for newsletters. Alternatively, you can ask for emails directly in exchange for something valuable, like a discount.
Newsletters, blogs, podcasts, and videos are powerful strategies to generate exposure for your startup. With content, you can position yourself as an expert source of information in your niche and attract organic traffic.
The trick is to publish content that your audience is interested in. It also requires SEO knowledge to rank high in search engines so your audience can find it.
Social media marketing
Your business’s presence on social media will help it look approachable and spread awareness among your target audience. Yet, to make it happen, you should invest in relevant, engaging content and advertising and always be ready to answer comments and messages.
Paid search advertising
You can get targeted traffic to your startup’s website with paid search. If your keyword choice is correct, you’ll reach the audience that needs your product or service and actively searches for it. It is also cost-effective, as you only pay for clicks.
On the other hand, you’ll still have to put effort into converting leads into paying customers. Also, the risk of choosing too broad keywords and thus failing the campaign is high.
Challenges startups often face
There are no two identical businesses; hence you will likely encounter unique challenges on your way. However, we’ve collected the top issues most startup founders face and provided ideas on how to create a startup strategy to avoid them altogether.
Lack of demand
The lack of market need buries 42% of new businesses. The primary reason it happens is poor market research, leading to misunderstanding the real market needs. As a result, entrepreneurs build products no one cares about.
But how to create a startup that will get a market share? Unfortunately, finding the right solution may still be hard after establishing the market need. That’s why idea validation is a must-do for startups that want to save money and time. You may start with pre-sales and proceed to MVP development after gaining some traction. Otherwise, iterate and get market feedback until you get a satisfactory result.
Not getting enough customers is often tied to ineffective marketing. Indeed, it’s easy to run out of road chasing trends and spend lots of money without yielding the desired results.
To avoid it, create a marketing plan and learn how to build a startup using low-cost marketing methods and tactics. Next, determine which metrics will provide the most precise picture of your business’s current position regarding your goals.
Inability to scale
Sometimes the revenue grows exponentially but so do expenses leaving the profit margin stale. It often happens when a business owner rushes the startup building process and doesn’t plan properly. Another reason is the lack of funding to invest in technology or highly experienced management.
Both can be avoided by taking a steady approach to market research and idea validation. Also, growing a business and fundraising simultaneously is a real challenge. So, you should secure funding before starting the startup development process.
Failing to deliver a new feature or introduce a new approach by the deadline is a widespread issue even in established businesses. Ensure you include changes and emergencies in your delivery plan and assign deadlines to every task.
Also, remember that the team is your greatest asset, so take your time to find the right hires. You can also get IT consulting services from an experienced software development company to fill knowledge gaps quickly.
The cost to build a startup
Every type of business has its own financing needs. It’s also worth remembering that you should not just think about how to create a startup company but also how to run and grow it. Each task comes with its own expenses, which we’ll outline below.
First, the costs you’ll incur before you even start a business include:
- Business registration – $100-$2,000 in Europe and $40-$1,500 or more in the USA;
- Branding – from $0 for a DIY logo using free tools to $5,000 and more;
- Licenses and permits – from $75-$500 for an online shop to several thousand for a business having physical facilities or manufacturing;
- Insurance – $65-$200 per month;
- Software (to run a business) – from $25-$500 per month to several thousand if you use custom solutions;
- Equipment and supplies – $1,000-$150,000 or more, depending on the industry;
Costs of running a startup:
- Rent: $0-$50 per square meter per month;
- Employee costs: $0-$50,000 or more per employee per month;
- Taxes: 13-30% of income;
- Marketing: 3-5% of projected gross revenue (recommended);
- Storage and shipping (if applicable): $60-$800 per month or more.
Add up all those costs, and you’ll have the total cost of creating a startup company and running it for one month.
How Syndicode can help build a startup
We are a digital transformation and consulting partner who knows how to build a startup from scratch and enter the market with the right solution at the right time.
Among our latest startup projects is SwiftComply, a B2B city services platform that helps restaurants automate their compliance processes across Ireland and the USA. Since we started working, the company has launched several new services and managed to expand up to 450 cities.
Next is HarvestInn, an MVP of a booking platform for campervan travelers in Australia that we made from scratch. The Syndicode team has researched the client’s idea, helped to shape a concept, created a design, and planned the development of a first-mover solution. The platform had over 60 verified hosts offering services one month after launch.
Our other project, Fuzu, gained around 70,000 users the first year after we finished working on it. This job search marketplace collected $6,7M in total funding and kept expanding the range of its services.
Becoming a business owner: summary
Hopefully, this entrepreneur startup guide gave you some ideas on how to build a startup that will live. In short, the key to starting and maintaining a startup business has the proper knowledge. Namely, you should know what you want to achieve, where you currently are, and what you should do to reach your goal.
The primary condition for success is to offer a solution to a common problem that is critical enough for people to pay for. However, many ignore the second part of the previous statement, rushing into implementing their solution and missing proper market research.
However, even having proved your startup’s idea viability, you should plan for market changes. Adopt a strategy that would allow you to make changes while using minimum resources and surround yourself with knowledgeable people.
As an IT consulting and full-cycle delivery company, Syndicode knows how to create a tech startup. We will provide you with the necessary expertise to quickly deliver your solution to the market and ensure its viability. We also offer business analysis services, SEO, and marketing, and we help businesses automate their processes.
Yes, you can be a solo founder and operate a business alone. The sole proprietorship has, in fact, many benefits. Thus, it is usually cheaper to start a startup alone, no one tells you what to do, and you keep all the profits. However, if you wonder how to build a startup solo, we’d say that a single person is incapable of handling everything necessary for disruptive growth. For instance, you have to know how to start a startup from scratch, everything about your domain, keep a close eye on your competition, market your business, raise funding, manage a team of freelancers or outsourced specialists, etc.
To achieve business success, you must devise a solution to a common problem that is critical enough for people to pay for. Moreover, the solution should be more effective than everything else already in the market. Next, you should determine how to build a startup and make customers aware of your solution. Finally, you should be able to act on the customers’ feedback and provide good-quality products and services. That’s it.
About 90% of all startups in all industries eventually fail. 10% of them fail during their first year, and the five-year survival rate is estimated at roughly 50%. The top reasons for failure are the lack of market demand, running out of money, weak team, and inability to withstand competition. As you can see, it’s not enough to know how to found a startup; you should also know how to maintain it.
In short, you have to plan for possible challenges and hire people with the skills to tackle these challenges and who know how to build a startup. It boils down to your startup process and the ability to identify the gaps in your own knowledge and skills. The next important thing to remember is that your startup team is not temporary, and should stay with you through the years to come. That means they should be passionate about your idea, and their values should match yours. At the same time, they should be different enough to allow room for creativity and complement each other’s strengths and weaknesses.