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As a recent college graduate, you have your degree and maybe some experience from an entry-level job or internship. But now you are interested in realizing your entrepreneurial ambitions and starting your own business.
Starting a small business is an increasingly popular option for young people — 17% of college graduates start their own business while still in college, and another 43% plan to do so soon after graduation.
Of course, starting your own business is a lot of work and involves a big learning curve. Let’s take a look at seven tips for starting your own small business as a graduate student.
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 type of business you want to start and run. For example, do you want to open a restaurant, offer a service business or do something completely different?
To determine the type of business you want to start, think about business ideas you’ve had in the past and think about the type of work you like to do. You should also look for current market opportunities that you can take advantage of. Above all, think about what skills you have that might be valuable to other people.
2. Register your company
Your next big step is registering your company. There is a lot involved in this step, including:
Deciding on a company name: Your company name must be 100% unique for your country. For 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 companies doing business in the US. You will 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, such as an LLC, corporation, or sole proprietorship. The business structure you choose can affect which tax breaks you benefit from and how many employees you can hire.
Register your company: Finally, register with your state’s secretary of state. You will need to provide all of the above information and pay some minor fees.
3. Create a business plan
Think of your business plan as a guiding document that outlines what your business is, how it will achieve its goals, and who it serves. A business plan helps guide your business and is essential if you want to receive funding from investors.
Write a detailed business plan, including cash flow projections, target audience research and anticipated marketing strategy. If you’re not sure where to start, you can use a free business plan template to get started.
Related: 3 Things I Learned in College About Being an Entrepreneur
4. Determine 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 doing keyword research, conducting marketing research, and analyzing your competition.
In any case, you need to know who your target audience is in terms of attributes such as gender, age and purchasing habits. The better you know your target audience, the more effectively you will be able to market directly to those potential customers.
5. Decide how you will finance the business
No business can start without some kind of financing. Unless you have enough money for this purpose, you will probably have to look for financing from other sources.
You can do this in several different ways:
Try applying for a business loan, whether from a bank, credit union, US Small Business Administration or non-bank lender.
Approach venture capital firms and other investors by presenting your business plan and company details.
Ask friends and family members to pool money together, then promise to pay them back when you start earning.
Consider your finances and how you will get the money before committing to any business idea.
6. Keep your costs low
Even after raising funds, your company is unlikely to turn a profit in the first few years of operation. Therefore, it is wise to keep your costs low when starting your business. To reduce costs, you can do the following:
You live with your parents, so you don’t have to pay rent.
Work a side job while directing most of your efforts toward your entrepreneurial venture.
You do a lot of the hard work yourself in your business instead of hiring employees. This is not a good long-term strategy, but it may be necessary in the beginning.
Related: Should Business College Students Go Big or Small After Graduation?
7. Be ready to turn
Your initial business idea may not work out as you expect or hope, so you should always be ready to pivot or change your business plan. Although it might be difficult or uncomfortable, navigating obstacles and challenges will allow you to learn valuable lessons about how to run a business and identify mistakes you should avoid in the future.
For example, let’s say you have an initial idea to offer one product to your target audience, but you discover that you can produce a better product for a lower price. It might make sense to change your business plan and turn to a different product. Being flexible and adaptable are key attributes of all small business owners.
It takes a lot to start a business, and almost half (47%) of all small businesses won’t last more than five years. But by coming up with a plan and being strategic and flexible, you increase the likelihood of success and can continue your entrepreneurial journey with the confidence to grow to greatness.