Thinking about starting a business but not sure where to start? (PHASE I)
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Thinking about starting a business but not sure where to start? Over the next few weeks I will be sharing a three-phase framework to offer some direction.
PHASE I: THE FOUNDATION
A profitable and enduring business must rest on a sound legal foundation attuned to commercial realities. Phase I focuses on five key, overlapping areas to help set a solid foundation. It is grounded in the lean start-up methodology, which prioritises continuous testing, learning, and refinement over traditional intuition-based business approaches.
1) Unique Selling Point (USP) & Value Proposition
Your USP defines what sets your business apart from the competition. It is your signature. That distinct quality, approach, or offering that only you bring to the table. Your value proposition builds on this by explaining why that difference matters to your ideal customer. It articulates the specific outcome, benefit, or transformation they expect from choosing you.
Clarify your core concept: What are you offering?
Identify your USP: What sets your offering apart? (e.g. price, quality, speed, expertise, design, or market gaps). Consider Porter’s Five Forces to help you further analyse the competitive environment around your USP.
Shape your value proposition: What problem do you solve? What value or result do you deliver? Click HERE to get a Free Value Proposition Canvas template from Strategyzer.
Tip: Ensure all marketing claims are accurate and not misleading. Exaggerated or false claims can attract liability. A lawyer can help review your messaging to ensure legal compliance and reduce reputational risk.
2) Business Model
Your business model defines how you generate revenue. It sets out how you create, deliver and capture value. Key components include:
Revenue Streams: Who pays you, for what, and how?
Pricing Strategy: Will you use value-based, cost-plus, subscription, or another model? Is it aligned with your USP and market expectations?
Resources and Activities: What people, technology, and processes are essential?
Customer Channels: How will you reach and serve your customers?
Cost Structure: What are your main expenses? Will you self-fund or seek financing? Consider profitability vs liabilities.
Use a Business Model Canvas to document your business model, and apply the SWOT analysis (integrating PESTLE for the external factors) to critically evaluate each component. This approach supports action, iteration, and strategic clarity. Click HERE to get a Free Business Model Canvas template from Strategyzer.
Tip: Your pricing and revenue arrangements must be legally compliant. A lawyer can help draft or review terms that protect your rights and reduce exposure.
3) Demand Validation
A sound USP, value proposition, and business model must be tested against actual market demand.
Conduct evidence-based testing with your ideal customers before formalising your business setup.
Use feedback to refine accordingly.
Tip: Protect your ideas during early conversations. A lawyer can help draft non-disclosure agreements (NDAs) for potential partners, collaborators, and customers.
4) Legal Structure & Ownership
The business structure you choose (sole trader, partnership, or company) affects your liability, tax exposure, access to capital, profit sharing, and decision-making authority. Key considerations include:
Liability: Who bears the legal and financial risk?
Equity and Control: Who owns what? Will any financier hold a stake?
Decision-Making: Are you the only person who decides? If not, what decisions require unanimity, majority, or board-level approval?
Profit Distribution: Will profits be reinvested or distributed?
Exit Provisions: What happens if the owner or a partner exits, sells or dies?
Tip: Your legal structure should align with your growth strategy and appetite for risk. A lawyer can help you choose the right structure.
5) Legal Compliance
Register your business, whether as sole trader, partnership, or company, in accordance with the relevant laws.
Where relevant, ensure governing documents (e.g. partnership agreements or articles of incorporation) are prepared properly.
Put in place essential operational documents: Service Agreements, Licences, NDAs, Employment or Consultancy Contracts etc.
Tip: Legal compliance signals credibility to investors, partners, and customers. A lawyer can help ensure your documents are enforceable, aligned with your commercial goals, and tailored to the regulatory landscape in which you operate.
Some may find this five-step approach lengthy or tedious. However, given the passion, time, money, and energy invested in starting a business, it is essential to lay a proper foundation. This includes taking the time to seek external support from business strategists, accountants, and lawyers, who can help you avoid costly mistakes and save you significant trouble in the long run. After all, a true leader recognises the value of seeking guidance from those with deeper expertise in their respective fields.
Phase II will be about putting the right structures and systems in place so you can scale with purpose, clarity, and control.