Starting a small business involves making and implementing a checklist of critical financial decisions, planning, and accomplishing various legal activities. I’ve started several small businesses since I was young and found the process can be overwhelming if you don’t know where to start. To help you establish your own company, I’ve created this guide for you as an aspiring entrepreneur. Read on to understand how to get started and what you need to know before setting things up.
Questions to Answer Before Starting a Business
One way to help you create a solid plan is by defining several factors affecting your business. Answering the key questions below can give you more confidence and strength in your choices as you move ahead.
Who Is My Target Customer?
Ask yourself who are the people who would benefit the most from using your products/services. Try answering some basic demographic questions about your potential customers, including the following:
- What is their age?
- What is their gender?
- Or what is their income level?
- And why do they need your offerings?
Suppose you’re in college and want to start a cleaning business. Are your customers going to be other students who live around the campus? Or will you go after more affluent customers in homes a little further out? Knowing your customers can help you offer products that meet their unique needs. For example, students will likely want to spend less and, at the same time, will be less demanding than a customer who pays more. It also allows you to market to them in the best ways possible.
Remember that your business cannot be for everyone. You must look for a niche market and focus on your target audience to secure financial rewards later.
Who Are My Competitors?
Competitor research is vital for all entrepreneurs, regardless of their industry. Knowing your rival businesses allows you to track their ups and downs while clearly showing the current market state.
For instance, Google is the current market leader in search engines, with 85.55 percent of market share. In response, other search engines must develop new ways to encourage people to use their platforms online instead.
Competitor research can be complex, but it can put your business in the best position possible to succeed.
What Is My Unique Selling Point (USP)?
After knowing your competitors, you need to define your unique selling point (USP). To know your USP, ask yourself what makes your business unique and special. How is your new company different from other businesses that offer similar products?
Remember that just because your market is growing does not automatically mean guaranteed success for your business. If the demand for your product/service is high, but everyone is buying from your competitors, it will not benefit you.
For example, if you are promoting classic card games online, discuss the features players can get only from your product. If you have trivia or historical decks, you can highlight the educational benefits of playing on your site.
What Are My Business Goals?
Defining your business goals is crucial because it allows you to measure your success in the long run. Where do you see yourself in five or ten years?
Having a long-term vision for your business is vital; one day, you will make your money from your small business alone.
9-Step Checklist to Starting Your Small Business
You need to be thoroughly prepared if you want to start your own business. That said, things will almost certainly go awry once you get started.
You need to adapt to changing situations to launch your own company successfully. You can follow this nine-step guide to make this process more convenient.
1. Do a Thorough Market Research
Thorough market research can help you determine if there is an opportunity to convert your idea into a successful business. It can help you gather information about potential customers and companies already operating in your niche. Use that data to find a competitive edge for your business.
Collect demographic data to better understand opportunities and possible limitations for getting customers. This data can include age, family, wealth, interests, or other relevant information to your company.
Answering the questions below can give you a good sense of your market:
- Economic indicators
- Market size
- Market saturation
2. Create a Business Plan
Your business plan functions as the foundation of your company. It serves as a roadmap for operating, structuring, and growing your business. You can use it to demonstrate to people that working with you or investing in your company is the correct choice.
A good business plan will guide you through each stage of starting and operating your business. The document can help you think through the key elements of your new company.
It is important to note that there is no right or wrong way to create a business plan. When you develop it, you must make a guide that will effectively meet your needs.
Most business plans can be categorized into two standard groups: traditional or lean.
Traditional business plans use a standard structure and encourage business owners to go into detail in each section. This type of plan can be dozens of pages long and requires more work upfront.
Meanwhile, lean startup business plans still use a standard structure. However, they summarize only the most crucial points of the key elements of your projections. These plans can be easy to make and can be only one-page long.
3. Look for Funds
Now that you have a solid business plan, you need to figure out how much money you need to get your company up and running. Fortunately, there are several ways to secure capital for your company. Here are some of the common ways to fund your business:
- Tap investors for venture capital
- Try crowdfunding
- Apply for a small business loan
- Join investment programs
4. Decide on a Location
Your company’s location is only one of the most crucial decisions you will have to make when starting a business.
Your site affects important business factors like zoning laws, taxes, and other legal obligations your company will be subject to. You must be thorough and strategic when choosing a city, state, and neighborhood to launch your business in.
Where you start your business can depend on your partners’ location, target market, and personal preferences. Other factors to consider are different government agencies’ costs, benefits, and limitations.
5. Choose a Legal Entity for Your Business
The legal entity of your business can affect how much you pay in taxes, your registration requirements, and your liability. Here are the different types of legal entities:
A single individual runs a sole proprietor enterprise for their own benefit. This legal structure is the simplest form of business organization.
Sole proprietor enterprises have no existence apart from the business owners. This means that liabilities associated with the company are also the owner’s personal liabilities. It also means that the business terminates upon the owner’s death.
In a sole proprietor business, the owner undertakes the company’s risks to the extent of their assets.
General and Limited Partnerships
A general partnership is an expressed or implied agreement between two or more people who start a business venture for profit. Partners contribute money, labor, property, or skill in this legal structure. The partners also share in the profits and losses of the business, and they have unlimited personal liability for business debts.
Meanwhile, limited partnerships limit partners’ liability for the business’s debts. The total limitations vary depending on the amount a partner has invested.
Owners of limited partnerships are supposed to file a certificate of limited partnership with state authorities.
A corporation is a legal entity whose scope of business activity and name are restricted by its charter. To start a corporation, owners must first file Articles of incorporation with the state.
In a corporation, stockholders are protected from liability. Additionally, if a stockholder is also an employee, they can enjoy certain tax-free benefits, like health insurance.
This type of business entity undergoes double taxation: first through taxes on profits and another on taxes on stockholder dividends.
Limited Liability Company (LLC)
An LLC is a business with a hybrid structure that combines a partnership and a corporation. LLC members have operational flexibility and enjoy certain benefits similar to those under a partnership.
Small Business Corporation (S-Corporation)
Subchapter S-corporations are a type of special closed corporations designed to give small corporations with tax benefits. The members must first meet the Internal Revenue Service (IRS) requirements to get the advantages.
Owners waive and report corporate taxes on their federal income tax returns. Doing so prevents double taxation.
To know the best legal entity for your business, you can consult an attorney when starting your company. Doing so ensures you choose a business entity that perfectly suits your needs.
6. Name Your New Business
Creating an appropriate and fitting name for your business can be complex. You will want a name that reflects your company’s brand while ensuring it is unique and another firm in your state does not use it.
When thinking of a name, ensure that you come up with something that does not clash with your services or products. After thinking of one, you must take the necessary steps to register and protect it.
There are four pointers to remember when registering your name:
- An entity name protects you at a state level
- A domain name protects your company’s website address
- A trademark protects you at a federal level
- Although “doing business as (DBA)” does not provide any legal protection, it can be legally required in some instances
7. Register Your Company
Once you have chosen a business name, the next step you need to take is to register your company and protect your brand.
Registering your business varies depending on your location and business structure. Registering can be straightforward if you have already determined which business entity to launch and where to establish it.
For small businesses, registering your company can be as simple as registering your business name with state and local governments. But, if you conduct business using your legal name, you may not need to register anywhere. But remember, if you do not register your business, you could miss out on certain legal benefits, personal liability protection, and tax benefits.
Fortunately, you can always contact a professional business formation service to help you navigate the registration process. As per this SmallBusinessHQ post, there are many such organizations that you can choose from, including Incfile and its alternatives.
8. Secure Required IDs and Licenses
You must apply for an employer identification number (EIN) from the IRS. You may need the number to open a bank account and pay taxes. The EIN is a social security number for businesses.
Additionally, you may want to get federal and state tax IDs when starting a business. The IDs are required in certain states.
You should also secure all necessary licenses to keep your business running smoothly and legally compliant. These licenses for your new company vary depending on your industry, state, and other factors.
9. Open a Bank Account for Your Business
After registering your new business, you need to open a business bank account. Doing so can help you deal with legal, tax, and other day-to-day issues. If you have the appropriate IDs and paperwork, opening an account for your business can be easy.
Having a business bank account comes with several advantages, including:
Business banking provides limited personal liability protection by separating your business funds from your personal finances. Merchant services also give purchase protection for your customers and ensure that their personal data remains secure.
Business banking comes with the option of a line of credit for your company. You can use these funds in an emergency or if you need new equipment for operations.
- Purchasing power
Credit card accounts allow you to make large startup purchases. It also helps establish a credit history for your new company.
A business bank account lets your clients pay you with credit cards. They can also make checkouts to your business instead of directly to your personal account.
A business bank account also lets you authorize your staff to handle day-to-day financial tasks without you having to divulge your personal banking information.
Start Your Small Business With No Stress
These are only a few crucial things you need to know when launching your own small business. While these tips can help you start, remember there is no single path to business success.
You have to prepare for issues that will come up along the way. If you successfully adapt to changing situations, you will find a profitable business that you can grow and be proud of.