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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.