Small Business Startup Basics
There are numerous advantages associated with starting and operating your own business. For instance, you manage your own schedule, you answer to yourself, and you get enjoy all the profits from the business, among other benefits of entrepreneurship. However, owning and starting your own business is also challenging and takes a large amount of consistent motivation and self-discipline. The success or failure of your business rests entirely on your shoulders and can be impacted by how you establish it. With that in mind, before you venture towards starting your own business, you must evaluate whether you possess the characteristics of a successful entrepreneur as well as ensure that your business is set up for success. Let’s dive into some of the major first steps in forming your own business, beginning first and foremost with qualifying yourself as an entrepreneur.
Step 1: Examine Your Entrepreneurial Skills
The first step towards establishing a successful business is to determine whether or not you are fit to operate your own business. To do this you have to ask yourself, do you have the ability to take and handle risks? Any business venture is a risk all by itself. When you are your own boss, you are investing your hard-earned money to certain activities that will either earn you money or potentially cause you to lose all of it. As such, if you are the kind of person who typically shies away from taking risks, you may want to reevaluate.
If you are able to handle risks, the next question you should ask yourself is whether you are able to think and work independently. As a solo entrepreneur, you have to make decisions all by yourself. From the type of business to start, the mode of operation, and even whether or not to hire employees are all dependent on your decision and yours alone. Therefore if you find that you are always second-guessing your own judgment and you do not trust your instincts, running a business alone may not be the best fit for you.
In addition to these two critical characteristics, you must be able to think creatively. If you are starting a new business, chances are that the kind of business you have in mind is already in existence. Thus, you must be able to think of new and innovative ways to differentiate your product or service offering in the market you serve. It is only through this creativity that your business will be able to survive competition and enable you to take advantage of new business opportunities with ease.
Step 2: Write a Business Plan
The heart and soul of any business its business plan. Just like any other undertaking in life, you must have a plan of how your business will be run — from its structure, goals and objectives to marketing and financial plans. Though it seems like a chore and you may be tempted to skip this step and dive in, it is a critical part of your business. There is no standard length required for your plan. It can be comprised of just a few pages that take care of the essential details with sections that allow you to pitch to lenders and investors when it comes to financing the venture. Some of the sections that should be included in the business plan are: the overview of the business, industrial backThere are numerous advantages associated with starting and operating your own business. For instance, you manage your own schedule, you answer to yourself, and you get enjoy all the profits from the business, among other benefits of entrepreneurship. However, owning and starting your own business is also challenging and takes a large amount of consistent motivation and self-discipline. The success or failure of your business rests entirely on your shoulders and can be impacted by how you establish it. With that in mind, before you venture towards starting your own business, you must evaluate whether you possess the characteristics of a successful entrepreneur as well as ensure that your business is set up for success. Let’s dive into some of the major first steps in forming your own business, beginning first and foremost with qualifying yourself as an entrepreneur.ground, service or product being sold, business model, marketing strategy, organizational structure of the business, and financial plan. The following details each of these sections for you.
Overview of the business
The business overview is comprised of both the executive summary and the business/company description. Your executive summary should be composed of a short summary of the content of the business plan that outlines the business profile and its goals. With the business description section, here you are required to provide a detailed description of what your business aims to fulfill and its differentiators that make it unique when compared to similar businesses. It is in this section that you will define your target market.
A business does not operate in an island of isolation. It operates in a certain industry with industry-specific trends, challenges and most importantly, competitors. In this section, which can also be referred to as the market analysis, you should do research on the industry within which your business is seeking to establish itself. Find answers to questions such as: what major trends are found? What level of competition currently exists? Who are your specific competitors? What are the barriers of entry to that business? Are there other issues currently affecting that particular industry?
Service or product being sold
A business either offers products or services to its customers. You need to identify and define the particular line of products or services you plan to offer. Additionally, you should describe their respective benefits to the customer. What problem or need does your offering address?
A business thrives from the profits generated by the sale of its products and services. As such, in this section, give a clear description of how you plan to market your business to your previously identified target market. Define your lead generation goals and strategy, along with marketing tactics that map to each of those goals. Describe how you plan to implement each of these different tactics in a way that insures you will be continually generating leads and opportunities to present your offering to your target market.
Each business has its own unique management structure. The bigger the business, the more complex and detailed its structure. The business structure shows who is responsible for what within your organization. In this section, if you will have multiple employees you may want to visually map out the hierarchical structure and clearly define the duties and responsibilities assigned to each role.
If you are planning to seek outside funding for your business, reasonably defined financial projections are a must in your business plan. It is the one section in which you should include all of your sources of capital as well as projected income for the next financial year.
Step 3: Get Appropriate Business Training and Assistance
Having a solid educational and experienced background in your business field are key ingredients that will enable you to operate your business both successfully and confidently. With each passing day, there will be new challenges and opportunities that present themselves. As an entrepreneur, you must consistently arm yourself with education related to your industry. You can do this through the use of online classes, reading news and blogs by other industry experts, and attending webinars, tradeshows, and conferences, to name a few. Actively participating in ongoing education will serve to sharpen your business acumen and prepare you to gracefully address business opportunities and challenges.
Step 4: Select the Most Appropriate Business Location
Depending on your industry and focus, the location of your business can greatly influence its operation. Your business location should be strategically selected to enable you to easily and naturally reach your target market, while keeping in mind that it should not create financial strain for your business. So, before you settle on a particular location, take some time to do thorough research of the area, taking into consideration access to transportation and parking, the area’s demographics, the amount of competition, the availability of labor, security, plans for future expansion, and even state laws and taxes levied in that particular area.
Whether you are starting a small business or a large enterprise, you should look for a location that has low overhead. This will allow you greater financial flexibility and enable you to spend your often limited funds on business growth. Contact your local government and councils to inquire about possible incentives your area may be giving to businesses established in certain parts of town, and also to find out if there are different tax rates in different locations. It is only with this and other information that you can confidently determine an ideal location to begin establishing your business presence.
Step 5: Determine the Legal Structure and Register Your Business
There are various formats in which you can legally establish your business. The three basic forms are a sole proprietorship, partnership, and corporation. There are also several hybrid forms that contain attributes of two or more of the basic forms. Those include a limited partnership, S corporation, limited liability company, and limited liability partnership. The legal structure of each of these different forms of business has its own characteristics and requirements that need to be satisfied to be registered by the state in which you plan to do business. Business taxation is often viewed as the most critical element when selecting the form of business organization. Other significant factors to consider are the cost of creating the organization, the continuity or stability of the organization, the control of decisions, and the personal liability of the owners.
Step 6: Registration
Once you have determined the legal structure of your company, the next step in the process is registering it with the appropriate government authorities. The name that you give your business is its brand that will last for a very long time. Therefore, you should choose a name that reflects your brand identity and ensure it is properly registered for long term protection. You should also look to see if a web domain is available under that name and determine the availability of social media profiles.
Step 7: Finance Your Business
The amount of capital invested determines the scope of operation of any business. Before you can start operating your business, conduct a detailed analysis of the amount of capital you would require to successfully operate your business without strain for at least one year. If you find that you cannot raise the required amount by yourself, there are other ways through which you can finance your operation. Here are some of the ways to finance your business.
There are various types of loans that you can take out to finance your operations. You can apply for small business loans, micro-loans, or even equipment loans from mainstream financial institutions to finance the acquisition of fixed assets. Depending on your needs and your existing assets and financial standing, you may be able to secure a traditional loan in the exact amount needed.
Grants and gifts
Another way to acquire start-up capital is through grants and financial gifts from people in your personal and business networks. If you have a strong network, you can ask them to help you in starting up of your business through financial gifts.
Sale of business shares
Shares are units of ownership. If you plan to sell your business or take it public, you can raise money for your operation by subdividing the ownership of your business through shares that will eventually be publicly traded in the stock market.
Step 8: Apply for a Tax Identification Number
Each and every individual and business is obligated to pay a certain type and amount of tax to the state and the federal government. Due to this requirement, after determining your source of capital, the next thing you should do is obtain an Employer Identification Number (EIN) that will be used to identify your business entity. It is through this tax identification number that you will pay your business’s required amount of tax. To get an EIN, you can either go to local state offices or apply for it online.
Step 9: Register for Local and State Taxes
Once you have received the EIN for your business, you have to acquire knowledge about the type and amount of anticipated taxes. Registering and having knowledge of your state and local tax obligations will allow you to start putting money away for them to avoid future financial problems, and save you from expensive lawsuits due to negligence or nonpayment. Some of the taxes that you are required to be aware of and pay include income tax and employment tax, among others.
Step 10: Obtain Necessary Permits and Business Licenses
A business cannot operate legally without the necessary trade licenses and permits. Once you have all aforementioned requirements lined up, the last step is acquiring business licenses and permits. Since each business is unique, the type of business license or permit required varies to a certain degree. For instance, if you are planning to start a liquor store, you may have to get special health and liquor license, in addition to other mandatory permits. Due to the fact that each state has its own set of requirements, make sure that you visit your local state office and inquire about the type of license required for your particular situation.
As you can see, there are many considerations involved in just the basic setup of a small business. Yes, they can be tedious, but well worth it to get started on the right foot! For further reading, here are some additional resources to get you going. Here’s to your success!