how to start a startup: a practical guide

Have a business idea you want to test or dreaming of starting your own company? Read our step-by-step practical guide on how to get started

If you answered yes, you may be an entrepreneur at heart. But you may be wondering how you can launch your own startup and turn your great idea into a thriving business. 

While the startup journey can be a wild ride full of adventure and abundance, it can also be scary and risky to start a new company. For that reason, it's good to get tips, perspectives and inspiration from startup founders who have done it already. 

Estonian entrepreneur Ülane Vilumets founded a travel-based startup and is actively involved in the startup community in Europe, attending hackathons and mentoring startups in accelerator programmes. She also happens to be Head of Business Development at e-Residency, through which she supports e-residents launch their startup journeys in Estonia – one of Europe’s most entrepreneurial nations.

Below are 9 essential and practical steps to start a startup, which includes tips on why doing so in Estonia via e-⁠Residency may be a good option for anyone planning to launch a location independent company.  

9 essential steps to launch a startup

Keep in mind that from Ülane’s experience, to create a successful business one of the most important success factors is to have a team (no matter how small) comprising a range of skills to both develop your business product or service, and focus on growing and scaling your startup. As Ülane says:

Beyond this important initial advice, the below step-by-step guide aims to provide some useful additional considerations that you may not have thought of – including which jurisdiction to launch your startup in and how to access startup funding. 

1. Find a great business idea

The very first step to launching a startup is to pinpoint a business idea that you think will be successful. Typically this happens in response to an identified customer need that either is not being met, or can be solved in another way. This may be in response to growing trends, such as sustainability, or growing markets such as cryptocurrency.

For example, you may identify that there are no zero-waste shops in your city where sustainable living is increasingly popular. You may then have an idea about creating a zero-waste platform to serve this local community. If you’re looking for ideas, consider researching different startup niches that are gaining traction internationally, such as EdTech, FinTech or AI. 

Once you have an idea, you’ll need to first research and test the idea to see whether it’s actually viable. This includes scoping competitors in the market, considering how much demand there is for the product or service, and the ease of doing business in this particular city. You may also want to consider the legal and financial challenges of the idea in that particular city or country and then compare your other options. 

2. Do market research (and get to know and your competitors)

It’s imperative that you understand your target audience, their challenges and needs, and what they are looking for. By taking the time to find out what your potential customers want, what their buying behaviour is like, information about where they live, their interests and their economic status, you can adapt your products, services, and business strategies to be more effective.

Thorough competitor research is also important. You will need to know what your competitors offer, how their offers and pricing compares with your products and services, what their customer care is like, and what the general sentiment is about their brand. 

Comprehensive competitor research can help you identify ways to enhance your products and/or services, and your unique selling points. 

3. Create a robust business strategy

Having a smart strategy for your business helps you envision and plan the growth of your startup by setting actionable milestones to achieve along the way. It also helps you plan ahead how you will manage obstacles and challenges, which staff and roles you will hire, which types of funding you will access, and how you will maintain your cash flow. 

A business plan creates a guide for success based on specific goals that are measurable and achievable, but needs to be continuously adjusted and adapted to current circumstances. It helps you clearly define your product’s unique selling points, your target audience, and your competitors as well as financial predictions in your business plan. 

Through my work as a marketing agency owner at Sendabee, I’ve had first-hand experience with using a business plan to achieve success over time through careful planning. And, as Ülane points out, many government funders require a business plan as part of the funding application process. However, don’t let the business planning step put you off – business plans don’t have to be extensive and oftentimes founders use very rough plans to guide their initial growth.

4. Identify your startup funding options

Startups often require various forms of startup funding to help these businesses to develop their products, to scale the startup and to grow. 

Unless you have oodles of cash stored away, it’s important to plan ahead how you will fund your startup through the various growth phases. You may opt for bootstrapping initially, followed by a combination of venture capital, business loans, angel investors, and support from startup accelerators and incubators. There’s also the possibility of grants and revenue based funding to consider. 

Identifying possible sources of funding and your eligibility can help pave a more predictable pathway, and can help to manage your expectations. In addition, it can also help you tailor your business to ensure eligibility for funding. 

Estonia’s legislative and tax systems provide it with a reputation as being a trusted country for many investors, providing an advantage over some other countries. Moreover, startups in Estonia can access European and Estonian government funding in addition to private funding, which may not be available in other jurisdictions. 

5. Decide on your business structure and where to incorporate

Will you start as a sole proprietor, or do you want the legal protection of forming a company that’s registered where you want to operate? Having a plan of what business structure you want to use for your company can help you assess the best legal structure for your startup. Most often this decision is linked with the decision of where to register and incorporate your company. 

For example, even though you may be a US-citizen living in the USA, you could register a company in Estonia and manage it remotely, if access to the EU is more in line with your market strategy. This is possible through the Estonian e-⁠Residency program, which enables startup founders to establish a private limited company (OÜ) in Estonia. All this can be done remotely, without having to leave the US, and the process is very quick and affordable.

It’s helpful to consider your options in terms of which country is best to grow your business in, and then look at the pros and cons of starting a company in these different locations. This exercise should help you to identify the best place to incorporate a company based on a range of factors like ease of doing business, business tax competitiveness, legal protection of your business rights, and access to international markets. 

One of the reasons why so many people choose to register a company in Estonia is that the country’s advanced e-services make it simple to manage the company 100% remotely, Estonia also has one of the most competitive tax rates in the world, and Estonia provides access to the EU marketplace. 

In addition, Ülane explains that some countries do not have as robust regulations and processes of protecting intellectual property rights (IP rights). This is another persuasive reason to choose Estonia as a jurisdiction to base your startup in, particularly if your business is based on an innovation that you are planning to patent. 

6. Organise your finances

In addition to planning the funding of your startup, you’ll need to establish a startup budget and maintain financial accounting and record-keeping. This includes opening a business bank account, managing your cash flow, and making sure that you comply with tax laws and requirements. 

For many startups, this aspect of business management can seem overwhelming. Being able to register your company in a jurisdiction that offers digital banking solutions, can therefore make a positive difference. 

In Estonia, e-residents can take advantage of various digital banking options that make managing a business remotely quite simple. Estonia also has a deferred tax system, which means startups can reinvest profits without paying tax and thus focus on growing in their early years. 

7. Craft an integrated marketing strategy

Once your business starts to operate, you’ll want to kickstart your marketing efforts to promote your brand and your products or services. 

In order to do that, your startup should have an established logo, website, social media channels, and marketing strategy to help coordinate your efforts and provide goals and key performance indicators (KPIs). Using a multichannel approach to marketing can help your startup to reach customers where they are, and help you create unified and coordinated messaging. 

8. Create an MVP and launch your product or service 

Whatever your company may be selling, it's a good idea to first create a prototype or minimum viable product (MPV) of the product that you can demo, sell and test. 

This will allow you to gain valuable insights into how it works, how customers feel about your product, and what your customers actually want. This process can help validate your ideas and provide an opportunity to make refinements. 

Once you’ve reached the stage of launching your product or service, it’s time to start implementing your marketing plan and making sales. At this stage, it’s useful to get feedback from customers across your different marketing channels and points of sale to help fine-tune and improve products, services, and their delivery. 

9. Grow your startup

In the early growth phase of your startup, your focus will likely be in refining systems and processes, making adjustments to your product or services, and growing your customers. 

At this stage, many startups try to reinvest their profits into their companies to help scale growth. And, many startup founders look for opportunities to access funding and grants. For companies operating in Estonia, there is the possibility of accessing EU funding and grants. 

The Estonian e-Residency program has a comprehensive list of European funding opportunities, and funding and mentoring programmes in Estonia. Ülane explains that the e-⁠Residency program also tries to actively connect e-⁠Residency founders with the startup ecosystem in Estonia. 

As your business expands, you might also need to grow your team, so that it has the right mix of skills and experience.

Final Thoughts on Starting a Startup in Estonia

Launching a startup can be daunting, exhilarating, and an incredible journey. For entrepreneurs with a business idea who want to start a startup, countries like Estonia are a popular choice for location-independent businesses. 

Estonia’s e-⁠Residency program can help startups operate and grow by making it simple and affordable to register and manage a company, by providing access to the EU marketplace and EU funding, and through its favourable tax laws and a thriving entrepreneurial culture that offer a nurturing place to grow your network and business. 

This article was written by guest contributor and seasoned digital nomad Andy Stofferis (www.andysto.com).