By Joshua Stowers
January 25, 2023
Source: Business News Daily
Photo Source: Unsplash, Microsoft Edge Starting a new small business? Find out where to begin and how to achieve success.
You should prepare thoroughly before starting a business, but realize that things will almost certainly go awry. To run a successful business, you must adapt to changing situations.
Conducting in-depth market research on your field and the demographics of your potential clientele is an important part of crafting a business plan.
In addition to selling your product or service, you need to build up your brand and get a following of people who are interested in what your business offers.
This article is for entrepreneurs who want to learn the basic steps of starting a new business.
Starting a business can be hard work, but if you break down the process of launching your new company into individual steps you can make it easier. Rather than spinning your wheels and guessing where to start, follow this 10-step checklist to transform your business from a lightbulb above your head into a real entity.
How to start a business 1. Refine your idea. If you’re thinking about starting a business, you likely already have an idea of what you want to sell online, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing and figure out how you can do it better. If you think your business can deliver something other companies don’t (or deliver the same thing, only faster and cheaper), you’ve got a solid idea and are ready to create a business plan.
Define your “why?” In this process, it may be wise to differentiate between [whether] the business serves a personal why or a marketplace why. When your why is focused on meeting a need in the marketplace, the scope of your business will always be larger than a business that is designed to serve a personal need.” Consider franchising. Another option is to open a franchise of an established company. The concept, brand following and business model are already in place; you only need a good location and the means to fund your operation.
Brainstorm your business name. At Shidonna Raven Marketing & Design we suggest a business name that helps you connect your products and services with the correct customers for your business. Often Business names have sentimental value for the customer, while we understand and can appreciate this. Having name that speaks to your customers is more customer-centric. At the end of the day, it is all about the customer. Clarify your target customers. Desaulniers said too often, people jump into launching their business without spending time to think about who their customers will be and why those customers would want to buy from them or hire them.
“You need to clarify why you want to work with these customers — do you have a passion for making people’s lives easier?” Desaulniers said. “Or enjoy creating art to bring color to their world? Identifying these answers helps clarify your mission. Third, you want to define how you will provide this value to your customers and how to communicate that value in a way that they are willing to pay.”
During the ideation phase, you need to iron out the major details. If the idea isn’t something you’re passionate about or if there’s no market for your creation, it might be time to brainstorm other ideas.
Tip: To refine your business idea, identify your “why,” your target customers and your business name.
2. Write a business plan. Once you have your idea in place, you need to ask yourself a few important questions: What is the purpose of your business? Who are you selling to? What are your end goals? How will you finance your startup costs? These questions can be answered in a well-written business plan.
Fledgling business owners can make a lot of mistakes by rushing into things without pondering these aspects of the business. You need to find your target customer base. Who is going to buy your product or service? What would be the point if you can’t find evidence of a demand for your idea?
Free Download: This business plan template can help you launch and grow your business the right way.
Conduct market research. According to Shidonna Raven, there is often confusion between Market Research and Marketing Research. Market research facilities and helps a business best understand how to enter the market such as where there brick and motor should be and how successful might selling coffee be in Florida versus milkshakes.
Marketing Research can be helpful in establishing your business but is a part of your larger business plan that focuses solely on your product or service. While Market Research focuses on your business as a whole within a market live Florida vs Boston and Milkshakes vs Coffee as a product. Completing your Business Plan should include Market Research. Hiring a Marketing & Design Firm such as Shidonna Raven will help you realize your product and service needs, which also have a market i.e. the Milkshakes in Florida.
3. Assess your finances. Starting any business has a price, so you need to determine how you will cover those costs. Do you have the means to fund your startup, or will you need to borrow money? If you’re planning to leave your current job to focus on your business, do you have savings to support yourself until you make a profit? Find out how much your startup costs will be.
Many startups fail because they run out of money before turning a profit. It’s never a bad idea to overestimate the amount of startup capital you need, as it can take time before the business begins to bring in sustainable revenue.
Budget & Be Committed
Steve Jobs started his business in his garage. Bill Gates started in high school writing a software program. Mark Zuckerberg started his business in a dorm room. While they all may enjoy large budgets now in the beginning, they started small and grew into the business that are known around the world today. Commit to your Business and establish a realistic and reasonable budget.
While many people will be vying for your business budget producing your service and product as well as marketing that product and service will be important to your beginning. Elon Musk marketed his first technology to Navteq, who was simply apart of facilitating the software he would later sale. Of course we all know Elon Musk now has Tesla and Space X. Remember funding options do not always mean business loans.
Perform a break-even analysis. One way you can determine how much money you need is to perform a break-even analysis. This essential element of financial planning helps business owners determine when their company, product or service will be profitable. The formula is simple: Fixed Costs ÷ (Average Price Per Unit – Variable Costs) = Break-Even Point
Every entrepreneur should use this formula as a tool because it tells you the minimum performance your business must achieve to avoid losing money. Furthermore, it helps you understand exactly where your profits come from, so you can set production goals accordingly.
Here are some common reasons to conduct a break-even analysis
Determine profitability. This is generally every business owner’s highest interest. Ask yourself: How much revenue do I need to generate to cover all my expenses? Which products or services turn a profit, and which ones are sold at a loss?
Price a product or service. When most people think about pricing, they consider how much their product costs to create and how competitors are pricing their products. Ask yourself: What are the fixed rates, what are the variable costs, and what is the total cost? What is the cost of any physical goods? What is the cost of labor?
Analyze the data. Consider the volume of goods or services you would have to sell to be profitable. Ask yourself: How can I reduce my overall fixed costs? How can I reduce the variable costs per unit? How can I improve sales?
Watch your expenses. Don’t overspend when starting a business. Understand the types of purchases that make sense for your business and avoid overspending on fancy new equipment that won’t help you reach your business goals. Monitor your business expenses to ensure you are staying on track.
Consider your funding options. Startup capital for your business can come from various means. The best way to acquire funding for your business depends on several factors, including creditworthiness, the amount needed and available options.
Business loans. If you need financial assistance, a commercial loan through a bank is a good starting point, although these are often difficult to secure. If you cannot take out a bank loan, apply for a small business loan through the S. Small Business Administration (SBA) or an alternative lender.
Business grants. Business grants are similar to loans, but do not need to be paid back. Business grants are typically very competitive and come with stipulations that the business must meet to be considered. When securing a small business grant, look for ones specific to your situation. Options include minority-owned business grants, grants for women-owned businesses and government grants.
Startups that require significant funding up front may want to bring on an angel investor. Investors can provide several million dollars or more to a fledgling company in exchange for a hands-on role in running your business.
You can learn more about each of these capital sources and more in our guide to startup finance options.
Choose the right business bank. When you’re choosing a business bank, size matters. Assess your banking and financial needs. Can the bank you choose meet them? Can they grow with you? You may not need a business loan now, but will you in the future? If the answer is yes, you may want to choose a bank that can offer that to you later. A bank in which you already have an established relationship, and you know may or may not be a good choice for you in the future.
Will your business do a lot of volume? Will you need change service (smaller bills to break down bigger bills)? Review your needs with the services they provide and the cost of those services to your business?
Key takeaway: Financially, you should perform a break-even analysis, consider your expenses and funding options, and choose the right bank for your business.
4. Determine your legal business structure. Before registering your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong.
Sole proprietorship: You can register for a sole proprietorship if you own the business independently and plan to be responsible for all debts and obligations. Be warned that this route can directly affect your personal credit.
Partnership: Alternatively, as its name implies, a business partnership means that two or more people are held personally liable as business owners. You don’t have to go it alone if you can find a business partner with complementary skills to your own. It’s usually a good idea to add someone into the mix to help your business flourish.
Corporation: If you want to separate your personal liability from your company’s liability, consider the pros and cons of corporations (e.g., an S corporation or C corporation). Although each type of corporation is subject to different guidelines, this legal structure generally makes a business a separate entity from its owners. Therefore, corporations can own property, assume liability, pay taxes, enter contracts, sue and be sued like any other individual. “Corporations, especially C corporations, are especially suitable for new businesses that plan on ‘going public’ or seeking funding from venture capitalists in the near future,” said Deryck Jordan, managing attorney at Jordan Counsel.
Limited liability company: One of the most common structures for small businesses is the limited liability company (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
Ultimately, it is up to you to determine which type of entity is best for your current needs and future business goals. It’s important to learn about the various legal business structures available. If you’re struggling to make up your mind, discussing the decision with a business or legal advisor is a great idea.
5. Register with the government and IRS. You will need to acquire business licenses before you can legally operate your business. For example, you must register your business with federal, state and local governments. There are several documents you must prepare before registering.
Articles of incorporation and operating agreements To become an officially recognized business entity, you must register with the government. Corporations need an articles of incorporation document, which includes your business name, business purpose, corporate structure, stock details and other information about your company. Similarly, some LLCs will need to create an operating agreement.
Doing business as (DBA) If you don’t have articles of incorporation or an operating agreement, you will need to register your business name, which can be your legal name, a fictitious DBA name (if you are the sole proprietor), or the name you’ve come up with for your company. You may also want to take steps to trademark your business name for extra legal protection.
Most states require you to get a DBA. You may need to apply for a DBA certificate if you’re in a general partnership or a sole proprietorship operating under a fictitious name. Contact or visit your local county clerk’s office to ask about specific requirements and fees. Generally, there is a registration fee involved.
Employer identification number (EIN) After you register your business, you may need to get an employer identification number from the IRS. While this is not required for sole proprietorships with no employees, you may want to apply for one anyway to keep your personal and business taxes separate, or to save yourself the trouble if you decide to hire someone later on. The IRS has provided a checklist to determine whether you will require an EIN to run your business. If you do need an EIN, you can register online for free.
Income tax forms You must file certain forms to fulfill your federal and state income tax obligations. Your business structure determines the forms you need. You will need to check your state’s website for information on state-specific and local tax obligations. Once you set this all up, online tax software or an accountant can help you file and pay your taxes quarterly and annually.
“You might be tempted to wing it with a PayPal account and social media platform, but if you start with a proper foundation, your business will have fewer hiccups to worry about in the long run,” said Natalie Pierre-Louis, licensed attorney and owner of NPL Consulting.
Federal, state, and local licenses and permits Some businesses may also require federal, state or local licenses and permits to operate. Your local city hall is the best place to obtain a business license. You can then use the SBA’s database to search for state and business type licensing requirements.
Businesses and independent contractors in certain trades are required to carry professional licenses.
You should also check with your city and state to find out if you need a seller’s permit that authorizes your business to collect sales tax from your customers. A seller’s permit goes by numerous names, including resale permit, resell permit, permit license, reseller permit, resale ID, state tax ID number, reseller number, reseller license permit or certificate of authority.
It’s important to note that these requirements and names vary from state to state. You can register for a seller’s permit through the state government website of the state(s) you’re doing business in.
Key takeaway: Register key documents like articles of incorporation or an operating agreement, a DBA, an EIN, income tax forms, and other applicable licenses and permits.
6. Build your team. Unless you’re planning to be your only employee, you’ll need to recruit, hire and maintain a good team to run a successful business.
7. Choose your vendors. Not every business will need the same type of vendors, but there are common products and services that almost every business will need. Consider the following functions that are a necessity for any type of business.
Enabling multiple customer payment types: Offering multiple payment options will ensure you can make a sale in whatever format is easiest for the target customer. Compare options to find the best credit card processing provider to ensure you’re getting the best rate for your business. That’s because small business credit card processing is often a direct route to more revenue and a larger customer base.
Taking customer payments: Set up a point-of-sale (POS) system so that you have a state-of-the-art interface for making sales. The best POS systems couple this payment technology — which largely overlaps with credit card processing — with inventory management and customer management features. As such, POS systems are especially important if you plan to sell products instead of offering services.
Managing finances: Many business owners manage their own accounting functions when starting their business, but as your business grows, you can save time by hiring an accountant, or by choosing the right accounting software provider.
8. Brand yourself and advertise. Before you start selling your product or service, you need to build up your brand and get a following of people who are ready to jump when you open your literal or figurative doors for business.
Company website: Take your reputation online and have a website created and managed for you. Many customers turn to the internet to learn about a business, and a website is a digital proof that your small business exists. It is also a great way to interact with current and potential customers.
Social media: Working with a Marketing & Design Agency who can help you implement a social media strategy to create Brand Awareness about your new business, perhaps as a promotional tool to offer coupons and discounts to followers once you launch.
CRM: The best CRM platforms allow you to store customer data to improve how you market to them. A well-thought-out email marketing campaign can do wonders for reaching customers and communicating with your audience. To be successful, you will want to strategically build your email marketing contact list. Consult with your Marketing & Design agency on this.
Logo: Having a logo designed for you will help people easily identify your brand, and use it across all of your platforms.
Having a Marketing & Design Agency who can keep your digital assets up to date with relevant, interesting content about your business and industry.
“The issue is they see their website as a cost, not an investment,” Bowen said. “In today’s digital age, that’s a huge mistake. The small business owners who understand how critical it is to have a great online presence will have a leg up on starting out strong.”
Creating a marketing plan that goes beyond your launch is essential to building a clientele because it should continually get the word out about your business. This process is just as important as providing a quality product or service, especially in the beginning. Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. That takes time and effort, but you’ll get out of your business what you put into it.
Do you have an online presence for your business or a personal brand? What is your Online Marketing Plan? What is your budget....we are here to help:
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