Business Startup Checklist

Most startups fail, but we can mitigate those reasons with proper planning and following a checklist. We've outlined the fundamental steps to take before you start throwing a ton of money at your venture.
Written by
Jennifer Chu
Published on
March 27, 2024

Founders Beware

Thinking of starting a business? Why would you ever!? The odds are stacked against you. The majority of startups fail. There might be a huge opportunity cost — you may forego years of salary while building your business, waiting to turn a profit. You may have to invest a ton of your own capital which you might never get back.  And, there’s the intangible but significant toll that starting a company takes on your family and relationships.

Set Yourself Up for Success

Starting a business requires unwavering faith that things will work out.  Many founders will keep plowing money into their business, beyond what they had planned for (if they had planned at all).  The costs can become irrational without boundaries, and so the losses can be very large.

There are steps you can and should take ahead of time to better set yourself up for success and limit the extent of failures.  It’s up to you to do the due diligence and preparation so you can both protect and empower yourself.

This guide is designed to arm you with the essential steps that we’ve learned, based on our own startup failures and tribulations.  Brace yourself — it’s a long list of action items, but nothing compared to the long, arduous path of starting up.

The Startup Checklist

Research

Before you roll up your sleeves and start crafting that product or service, it's crucial to lay a solid foundation for your business. This phase is all about due diligence.

1. Conduct Market Research

Begin by identifying what the market (your target audience) needs or wants. Your business idea should be a solution to a problem (painkiller) or an improvement over another solution (vitamin). Putting the customer at the center of your ideation process will help ensure that there's a demand for what you plan to offer.

2. Analyze the Competition

Do a thorough analysis of your competitors to see what they're doing right and where they're falling short. How will you differentiate your product? This intel will not only inform your value proposition but could also reveal gaps in the market that your business can fill.

3. Validate Product-Market Fit

Top reasons startups fail
Source: CB Insights

Product-market fit is the alignment between what your product or service offers and the demands of the market. Achieving product-market fit means that you have successfully identified a significant problem or need in the market and created a solution that a sizable number of people are willing to pay for.

It’s an important concept and the number two reason startups fail.

35% of startups fail because of a lack of product-market fit1

The good news is that you can preemptively avoid falling into this category by first validating that you have product-market fit.  How do you do that when you haven’t don’t have something to sell yet? You can test your ideas through surveys, focus groups or pilot tests. You can throw up small ads on Facebook or Google using click-through-rates (CTRs) or form submissions as a gauge for interest.  You could also create a waitlist.

It’s worth investing the time and a small budget to do this. The knowledge you gain is valuable, because it informs you of your decision outcomes.

At best case, you get a strong response giving you more assurance to commit to this venture. At worst, you may find out the demand is low - not the best news, but you would save a lot of effort  money and time. You could pivot to a different idea and try that.

4. Build a Business Plan

A business plan is your blueprint for success. It should outline the following:

  • Mission statement - why are you doing this?
  • Business model - how will you make money?
  • Business goals - what are your revenue or profit goals? What are the milestones?
  • Target audience - who are your customers?
  • Unique Selling Proposition (USP) - what makes your product or service unique?
  • Marketing plan - how will you get customers? what channels and at what cost?
  • ffinancial plan - what will your financial needs be, and how will you fund those needs?

A business plan forces founders to think through the details of their business idea.  It doesn’t have to be a 40-page document. It can be a slide deck, a notion page, or other format that works for you. But it should be something that is easy to access and edit, because it will change as you learn more.

Financial Planning

Running out of cash is the #1 reason startups fail1.

38% of startups run out of money

Every business requires investment of capital, both to start the business and to fund operations and marketing. It's essential to know what your financial needs are so you can plan for those costs and procure the needed funding.

5. Estimate Costs (One-Time and Ongoing Operations)

Jot down all the one-time costs such as equipment, initial inventory, setup fees, research costs (eg validating product-market fit), prototypes. Then, project your ongoing costs like monthly rent, software tools, insurance, and salaries.

If you are starting a consulting business and work from home, your startup costs may be relatively low. You probably won’t have inventory that you have to produce or purchase, and you might not need office space.  But you should factor in costs for office equipment (computer if you don’t have one already, printer), business entity setup fees, website design and hosting, CRM and/email  software to manage your client and leads list, etc.

6. Set Realistic Financial Milestones

Understand what it will take to break even, when you need to generate a profit, and how you will keep the lights on until you reach that point.

For startups looking to raise VC funding, your milestones will also include the events that help you raise your next round — building a prototype, proving out product-market-fit, demonstrating user or revenue growth, securing partnerships, etc.

7. Determine Your Funding Strategy

Will you have enough money to be self-funded? Or will you be seeking investors or applying for a business loan or grant? You’ll need enough runway to hit those financial milestones on your timeline.

Legal and Financial Considerations

Get your legal and financial ducks in a row from the start.

8. Choose a Business Structure

Will you be a sole proprietorship, a partnership, an LLC, or a corporation? There are different costs associated with each, and those costs vary state to state. Each structure also comes with its own set of legal implications and tax obligations.

9. Register Your Business

Obtain the necessary permits and licenses for your specific industry. Choosing a business name and registering it is crucial for brand identity and legal purposes.

10. Get federal and state tax IDs

Your Employer Identification Number (EIN), also known as a federal tax identification number, is necessary for paying federal taxes, hiring employees, opening a business bank account, and applying for business licenses and permits. You can apply for an EIN through the IRS website at no cost.

Similarly, some states require a state tax ID to comply with state tax obligations, which could include income, sales, and payroll taxes. Each state has its own process for getting a state tax ID, so it’s important to check with your state’s tax department or website for specific instructions.

11. Set Up Financial Accounts

Separate your business finances from your personal ones to keep things clear for tax and legal purposes. This means separate bank accounts and credit cards.  Find a really good CPA to set up your books and discuss your unique financial needs. It’s worth the cost and could save you from extra hassle and fees if not done properly.

Branding and Marketing Strategy

Your brand is your promise to your customers, and marketing is how you'll communicate that promise to the world.

Develop a Brand Identity

Your brand is more than just a name and a logo. It's the voice, values, and visuals that will set you apart from the competition. A consistent brand helps build trusted relationships with your audience.  It can be the reason why a customer chooses to transact with your business over another.

It's important to spend some time on this, but know that it will also evolve as you refine your idea, get to know your customers better, and discover use cases for how you will engage with them. There are free or low-cost tools to help you get started with a logo (eg Canva) and colors (Adobe Color) so that you can keep your costs down at the start.

12. Create a Go-To-Market (GTM) Strategy

Your GTM strategy is a detailed plan on how you will launch your product or service in an efficient and scalable way. It’s where you’ll bring together the elements that you’ve thought through in your business plan:

  • Who is your Ideal Customer Profile (ICP)
  • What messaging will resonate with them? How will you address their pain or want?
  • How will you price your product or service? How do you want to position your pricing in the landscape of competitors?
  • How will you get your first customers? Will you have a newsletter, tap into your LinkedIn network, buy ads on FaceBook, sell products on Etsy? Will you partner with another brand or have a sales team to find leads? Identify the key channels to engage your audience, and understand the customer acquisition cost (CAC) of each.

13. Build a Website (or Not)

A website can help you tell your brand story. You can showcase your expertise through case studies, blog content or your portfolio.  As a brick-and-mortar business, a website can also help prospective customers verify that you are a really business before locating and visiting your physical address.

But websites might not be critical, particularly if your brand and content live on LinkedIn, Instagram or another ecosystem. A good way to know if you need a website is to check if it’s required in your GTM plan. Check out our article comparing websites with social media and eCommerce platforms.

Websites are relatively easy to build nowadays, but many founders spend upwards of $1,500 on the initial design. Depending on how you are using your website, you may be able to get away with just putting up a quick, simple website and spending the minimum on this.

Technology and Infrastructure

Set up the technology and physical space you need to run your business efficiently.

14. Choose the Right Technology

From your accounting software to design tools and email marketing provider, choose the technology that will support your business operations and help you scale. There are so many free or low-cost software products available now, that technology has become affordable for startups.

A physical office or shop, on the other hand, can be a significant cost. Do you go for a dedicated space, a shared space or perhaps an on-demand space? Do you really even need a physical space right now? Holding off on securing a space keeps your overhead (fixed costs) low so that you stay nimble and potentially get closer to break-even sooner.

Conclusion

By following this checklist, you'll improve your chances of launching a successful business that you can enjoy running for many years. Remember, planning is essential, but so is action. We’ve talked about some of the largest reasons startups fail, but there is one more:

“Lack of speed is the #1 killer of startups.” - Andrew Yeung

Related Resources

Checklist Manifesto by Atul Gawande - this is a great book about avoidable failures across industries and applications. There are many examples of how a siimple checklist helps individuals and teams navigate complex information and processes while preventing common mistakes. Jack Dorsey also used to give this book to every new employee as part of their welcome package.

Small Business Tax Planning: What to Know Before You Start a Business

Why Good Personal Finance is Necessary for Founders

How to Choose a Color Palette for Your Brand

References

1. CB Insights: https://s3-us-west-2.amazonaws.com/cbi-content/research-reports/The-20-Reasons-Startups-Fail.pdf

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