10 Things You Need To Know When Starting A Business
Owning your own business can be a very rewarding experience. Conducting diligent research prior to venturing into entrepreneurship, utilizing available resources, and keeping a close eye on the financial picture will enhance your chances of operating at a profitable level.
The U.S. Small Business Administration classifies a small business as a venture with fewer than 500 employees. According to the U.S. Census Bureau, that accounts for 99.7% of all businesses in the United States.
Statistics show that only about 50% of start-ups make it beyond the first 2 years. The most common reasons for a business to fail are:
- inadequate research
- insufficient capital
- poor financial management
1. USE RESOURCES, AND GET SOME HELP.
There are numerous resources available that can help you getting off to a successful start. Free and low-cost training and confidential counseling is available through these organizations.
- America’s Small Business Development Centers (a premier partner with the NASE)
- U.S. Small Business Administration
- National Association for the Self-Employed (NASE)
A great deal of information is compiled in the NASE Start-up Kit
It is also a good idea to select a certified public accountant (CPA) and/or attorney for advice during the course of your business. This will also help with staying compliant with tax requirements and other government regulations.
A benefit of NASE membership is 24/7 access to ASK THE EXPERTS, advice from professional experts from a variety of industries.
2. DETERMINE THE LEGAL STRUCTURE.
Depending on your type of business, some legal forms of business are more suitable. You could operate as a sole proprietor, partnership, or incorporate. To find the right structure it is a good idea to meet with a CPA and/or an attorney to get guidance.
NASE benefits include connection to partners that can help with determining of legal structure, and actual incorporation services.
- Legal Zoom
- BizFilings
Don’t forget to check available web domain names when choosing a legal name for your business.
3. WRITE A BUSINESS PLAN WITH FINANCIAL PROJECTIONS.
You should always write a business plan, even if you do not need to secure financing. It is like a blueprint for building a house; you wouldn’t just run to the hardware store and start building. The business plan will even be a useful tool after the business has been started. It is a living and breathing document that grows and adjusts with your business.
Parts of the business plan:
- Executive summary (synopsis of the plan)
- Market analysis (define target market, analyze competition)
- Company description, organization, and management (legal form, owners, personnel)
- Product and/or service (what is your niche, what customer demand is being met)
- Sales strategies (determine size of the market, and how to reach the target market)
- Funding request (how much is needed, and exactly how will it be used)
- Financial projections (define one-time upfront and ongoing costs, determine break-even point)
Here are some good tools to start with:
- SBDC
- SBA
- NASE (The NASE expert in this area is Gene Fairbrother)
4. FIND START-UP FUNDING.
The most common way to start a business is from the owner’s own savings. Traditional financing through a commercial lender, or a SBA Loan Guarantee could be viable options as well. Please be advised that there are no grants to start or grow a small business!
Exactly determine how much it will cost to start and operate the business. It is a good practice to have at least 6 months of working capital available as well. It typically costs more, and takes longer, to start a business. Make a list of all one-time expenses that will be incurred, and then calculate how much it will cost you to operate the venture every month.
Small business advisors (examples listed above), can assist you in putting these projections together.
5. FIND THE RIGHT BUSINESS LOCATION.
Depending on the type of business, a home-based business location may be the right one for you. Learn more here about operating from your home.
If you will be choosing a brick-and-mortar location, you will want to have a checklist in regard to the facility (zoning, size, layout, repairs needed, lease terms and cost, traffic count, adequate parking, competitors in the area, etc.).
6. GET BUSINESS INSURANCE.
The type of insurance will depend on your industry. The most common types of insurances are general liability, workers comp, property, auto, life, health, and inventory.
7. REGISTER YOUR BUSINESS AND APPLY FOR PERMITS & LICENSES.
Determine if you need an Employer Identification Number (FEIN/Tax ID) from the IRS.
To find out about the rules for city and county business licenses, check with your local Department of Revenue, or check out what the SBA has to say.
8. DETERMINE YOUR EMPLOYEE NEEDS.
NASE has great resources, and experts available as part of your membership benefits. Read our article about hiring your first employee. Be as realistic as possible and ensure this step is well thought through as hiring employees can drastically change your business needs.
9. FIND A PERFECT DOMAIN NAME FOR YOUR BUSINESS.
The domain name of your business is part of your brand, and it will be the first impression customers get of your company. The name should be easy to spell and say, not too long, and match your legal business name as closely as possible.
Here is a good overview of Technology every business should have.
10. LEARN ABOUT THE DIFFERENT TYPES OF BUSINESS TAXES.
Learn about the different types of business taxes that are applicable to you and your business. Make sure you take these into account in your finances and know how frequently they need to be paid (yearly, quarterly etc.)
The NASE has tax experts available to help, don’t be afraid to ask!
Here is another overview of tax responsibilities.
Business Deductions
Q: I just started my new small business and was looking for a list of what is deductible and what isn’t. Does such a list exist?
A: The question is a very good one, but also one that I don’t like to answer. The first key point is that any ordinary and necessary expense that you incur in facilitating your trade or business is deductible. If you pay for a license or a sign, business cards or thank you cards, file folders or file cabinets, air fare or restaurant fare, it’s always deductible if the primary purpose of the expense is business. Be careful reading from a list provided by your CPA or even the IRS that might lead you to spend money that you don’t really need to spend. Rather than review a list, review your business needs and make sure you keep good records of the money you actually disburse. If you spent the money on business, it is deductible.
Having said all of that, the IRS does have a great publication to help you account for most deductible business expenses, called Publication 535, Business Expenses. You can also review Publication 334, Tax Guide for Small Business for more detail about your new business activity. Both publications can be downloaded for free from the IRS website at www.IRS.gov. It is a great idea to review these publications but let your own business bank account dictate what is actually deductible for your business. Never spend money that you don’t have to just to get a tax deduction.
Perhaps the most important lists to review are those tax deductible items that may not appear in your business checkbook. The business use of your automobile is a very common business expense and can be overlooked since it does not appear in the business bank account. Likewise the use of a Home Office can also be overlooked if you indeed operate your new small business out of your home. If you contribute personal assets to the business such as a computer, laptop, office furniture, copiers, etc. a portion of the actual costs of those items may be deductible based on business use even if purchased prior to starting the business. Lastly, don’t forget about contributions to a retirement account for you and your employees which can be a very valuable business deduction.
As always, don’t forget that you are not alone. Bookmark our website at NASE.org as well as the IRS website at IRS.gov you will always be able to find the help you need.
Feeding Self Employment
Bridgette John is the owner of Get Snackin Las Vegas, a locally owned, family operated vending company delivering top-notch vending solutions to customers in Las Vegas, Nevada and the surrounding area. Bridgette transitioned her past experiences with customer service in the restaurant and catering industry to owning her own business in the vending industry. Get Snacking Las Vegas now services four locations with seven machines and is looking to place three more within this next year.
What inspired you to enter the field you are in?
A few years ago, I was looking to start a small business and show that I could run a company. I knew I wanted to keep the startup cost down when I was exploring various opportunities. One of the first businesses I looked into was Firehouse Subs but the startup costs were more than I was looking to spend. When I learned of the vending industry, all the pieces started to fit together perfectly.
What led you to start your business?
About two years ago, I learned about the vending business from a former coworker and once I started researching it, the more it felt like the right move. And as they say, the rest is history.
What challenges have you faced in your business?
One of the first challenges that I had to deal with was staying ahead of the requests from the consumers. Learning to predict customer needs was not something that I was familiar with. I had to really read trend reports closely and study as much information as I could to overcome my unfamiliarity in this new territory.
How do you market your business?
My business is primarily spread through word of mouth and by meeting other people and businesses in the community. I occasionally send out flyers and do other small marketing promotions but as I said, word of mouth has really been the best way for me to get introduced and build relationships with other businesses.
Do you have any employees?
I do not currently have any employees, I do everything myself: marketing, accounting, inventory, sales and housekeeping. I am hoping to be able to grow my business soon and start the process of bringing on additional people.
What does a typical day look like for you?
My days usually start with checking my inventory at the warehouse first thing. Once I check my inventory, I then make a plan on what we need to order, load the truck with supplies and head to locations. I’ll fill machines, collect monies, update item prices, rotate inventory and then make a list of what is needed for the next time. My days are a cycle of maintenance on my current machines and planning for what I will need in the coming weeks.
What’s the best thing about being self-employed?
I love being able to market and operated my business how I want to. The freedom and creativity that I have is wonderful.
Which NASE member benefit is most important to you?
The first benefit that got my attention was the Growth Grant, I saw an ad listed in our local newspaper and was immediately interested. Once I became a member, I really started to utilize the information provided about being self-employed and how to improve my business.
What’s the most important piece of advice you would give to someone starting their own business?
The most important piece of advice I can think of is to be honest and work hard. Being self-employed isn’t easy, but if you are honest with yourself and those you work with and you work hard, it will be much easier.
Senate Bill Deducts Health Insurance for Self-Employed
On July 22, 2015, Senator Vitter, Chairman of the Senate Small Business and Entrepreneurship Committee, introduced a huge package of tax deductions for small businesses, including the full deductibility of health insurance for the self-employed.
S. 1827, Small Business Tax Compliance Relief Act, "does not see to alter tax rates or pursue wholesale reforms. Instead, the legislation is mostly technical in nature and provides relief from provisions frequently cited as overly restrictive or onerous for a small business," stated the Senator in a letter to supporters.
The NASE has long championed the full deductibility of health insurance for the self-employed. The inability for the self-employed to deduct the cost of their health insurance is a significant financial burden, increases their tax liability by nearly 15.3% annually than other business owners. If the self-employed were allowed to fully deduct their health insurance costs as a business expense, the U.S. economy would have roughly $39 billion injected annually that would allow for individuals to re-invest in their business, purchase goods, and hire additional employees.
We look forward to working with the Chairman and his colleagues in advancing this important piece of legislation.