Mark Cuban's 5 rules for starting a business

Mark Cuban shares his few specific rules on how to launch a start-up.
David Paul Morris | Bloomberg | Getty Images

It is an exciting time for anyone who's ever dreamed of being their own boss. Across the U.S., new start-up hubs are growing and a variety of policies are making it easier to start a business.

But the reality is many start-ups don't survive their first year.

Earlier this year on the private messaging app Cyber Dust, billionaire entrepreneur and "Shark Tank" investor Mark Cuban shared five rules every entrepreneur should follow to avoid failure.

These rules transcend sector and location, he said. In fact, Cuban credits much of his personal success to following them.

1. Do your research

Before starting a business, Cuban does extensive research on an industry to see whether the opportunity is compelling and potentially profitable.

"It really does involve knowing an industry well, which is why I avoid investing in industries I don't know," Cuban said.

"You need to turn over every rock and open every door to learn your industry. This process never ends."

2. Make your business plan flexible

If you think your business plan is set in stone, think again. Cuban stressed the importance of leaving business plans "open for change."

Mark Cuban's 3 tips for success
Mark Cuban's 3 tips for success

3. Rethink your funding strategy

Getting cash for your business is essential, but there's a right way to do it.

"You should do everything possible to not raise funds," he said. "Sweat equity is the best equity. I would turn to crowdfunding [sites] like Kickstarter before I would look for investors."

4. Be better than the competition

"You execute better than they can," Cuban wrote. "Do a better job and have a compelling differentiation that you always build on."

You need to turn over every rock and open every door to learn your industry.
Mark Cuban
billionaire entrepreneur and "Shark Tank" investor

5. Stay away from over-crowded sectors

Entrepreneurs shouldn't start a business in an industry that's already crowded, Cuban said. Instead, they should look for gaps in the market where they can add unique value.

Of course, once you've got your business up and running, it's time to step up and be a leader. Check out Cuban's advice on what not to do if you want to be a great boss.

This is an updated version of a previous article. Disclosure: CNBC owns the exclusive off-network cable rights to Cuban's "Shark Tank."