Starting a business is stressful. It requires an incredible amount of commitment and resilience to succeed. There are hundreds of tasks that need to get done and you are responsible for it all. Luckily, with some SMART planning before opening your doors, you can drastically increase your chances of success.
Before taking the plunge, the first thing you need to do make sure your business is the right one. How do you know? Use the 5 P’s of Purpose to help you find what you were meant to do. This is important because if you “know your why”, then you can overcome “any how” and “any what.”
Once you establish the right one, the next steps you need to take involves planning, making key financial decisions, and completing a series of legal activities. Read below to learn more about each step!
1. Create a Business Plan
Before you start to spend any money or use resources, first put pen to paper and clearly layout a SMART strategy. Creating a business plan can save you considerable amounts of money and resources. The goal is to plan for problems you may face, figure out how to avoid them, and have contingency plans to help.
Make sure your SMART business plan answers these questions:
- Where do you want to go? Use this goal-setting exercise to bring clarity to what you want to accomplish. What is your mission? What is your vision?
- Where are you now? Just like your GPS on your phone, even if you know where you want to go and the route, it will be useless if you don’t know where you are. Do an honest assessment of how much capital you have, your skillset, your network, and whatever else you need for your business. Remember, if you over-exaggerate or are over-optimistic about your current reality, it can lead to unrealistic expectations or lead you to dismiss important problems to address.
- How will you get there? Once you know where you are and where you want to go, you need to create a plan on how to get there. You can’t go into the world of business without the plan. Nobody got anywhere without being organized and having a clear idea of how to operate.
When you have a written plan, you have a much easier view of how things should go. It should contain at a minimum information on the most important aspects regarding the business. The more that you plan your business, the more likely it is that you will see it through to completion.
A well-researched and adaptive business plan is often the difference between success and failure in business. Another reason to have a well-written business plan is so that potential investors and loans will be easier to acquire should you need them.
2. Conduct Market Research
This should be part of your business plan. No matter what you do or sell, it’s crucial to know if there’s a market for what you’re offering. There is a big difference between what you think they want, and what they actually do want. Market research serves several purposes. It can give you insight into what your customers are willing to buy and how to continually improve your product or service.
You also need to understand the industry you are in. Is it a dying one like book stores or a growing one like healthcare technology? You also need to know who the major players in your industry are. There are only two strategies to compete against your competitors: cost-strategy (think Wal-mart) or differentiation-strategy (think Whole Foods).
Your market research should also include location and geography. Especially if your business requires a physical presence, does your business provide a need for the area that you are in? It may be a product or service that people want, but they may not be in your area.
Lastly, your market research needs to consider your target demographic and niche. You can’t be all things to all people. Would you want to get brain surgery from a brain surgeon or a general practitioner? Successful businesses dominate a particular niche and specialty and are able to branch out afterward.
Amazon started with just books. After cornering that market, they were able to rapidly expand. Your niche will be the driving force in the revenue and profit you generate. They are your core base, so you need to find out who they are, and make them your priority.
3. Funding Your Business and Budgeting Your Finances
This will also be a part of your business plan. You will need to figure out how much money you’ll need to start your business. If you don’t have that amount on hand, you’ll need to either raise or borrow the capital. Acquiring the necessary funding can seem like a challenge, but fortunately, there are plenty of options available.
Some of the most common funding sources are borrowing from friends and family or going to your local bank for a traditional loan. Whether you borrow money from friends and family, get a loan, or bring on investors, managing your cash flow in the early stages of a business is vital to future success.
Learn to do your books, read financial statements, and create a budget. Not good with numbers? Then you can outsource, however, make sure that you verify and have an overall understanding of your profit margins, break-even point, and other financial numbers that serve as your dashboard on how you are doing.
4. Choose Your Business Structure
There are many different types of business entities: C-Corporation, S-Corporation, Limited Liability Corporation, Partnerships, Sole Proprietor, and many more. The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability.
Do your research on what entity is best for you based on your product or service, your individual needs, if you have partners, how much ongoing administration you want, and future needs. You could do this yourself, hire an attorney, go to the Small Business Administration, get advice from other experts and mentors, or use a service from Your Company Formations Ltd to set it all up for you.
5. Choose Your Business Name and Brand
While the previous steps will be similar for all businesses, this is where you differentiate from others. It’s not easy to pick the perfect business name. Maybe you already have one or have narrowed it down. You’ll want one that reflects your brand, your personality, and captures your spirit.
While deciding on a name, start creating your brand with the color scheme, tagline, and the message you want to convey. Why is this important? In today’s economy, your brand reflects who you are, what you offer, and why people should care.
As part of your brand, you want to create a strong visual identity. Your brand style guide should include:
- Logo size and placement
- Color palette
- Typography and fonts
- Iconography
- Photography/image style
- Web elements
Once you have decided on your name and logo, check to make sure it isn’t being used by someone else. You can check your state’s business registration page and uspto.gov. The last thing you need is spending quite a bit of money to find out you can’t use it!
6. Register Your Business
Once you’ve picked your business name, you want to make it legal and protect your brand. Based on your business structure and location, you may need to acquire proper registration from the government to open your business.
For most small businesses, registering your business is as simple as registering your business name with state and local governments. In some cases, you don’t need to register at all. If you conduct business as yourself using your legal name, you won’t need to register anywhere. But remember, if you don’t register your business, you could miss out on personal liability protection, legal benefits, and tax benefits.
If your business is built around a proprietary idea or product, make sure to protect your ideas as well. It is a competitive market, and people are always looking to find out what their competitors are doing. If your idea is unique, consider patenting or trademarking it. If an extremely complex service or product, contact a trademark attorney.
While it may cost a little at first, in the long-run it could save you quite a bit in of heartache in the long-run. Apple sued Samsung based on trademark infringement. The cost? $539 billion dollars that Samsung was ordered to pay!
7. Get Your Tax ID Numbers
Once your business is set up, you’ll need to register to pay the correct taxes. Your Employer Identification Number (EIN) is your federal tax ID. You need it to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits. It’s like a social security number for your business. Some — but not all — states require you to get a state tax ID as well.
You can apply for an EIN with the IRS assistance tool. It will guide you through questions and ask for your name, social security number, address, and your “Doing Business As” (DBA) name. Your nine-digit federal tax ID becomes available immediately upon verification.
Once your business is properly registered and you have your respective tax ID numbers, you should open up a business bank account. Don’t use your personal one to prevent the commingling of personal and business funds. A small business checking account can help you handle legal, tax, and day-to-day issues. The good news is it’s easy to set one up if you have the right registrations and paperwork ready.
8. Apply for Necessary Permits and Licenses
Most small businesses need a combination of licenses and permits from both federal and state agencies. The requirements – and fees – vary based on your business activities, location, and government rules. You’ll need to get a federal license or permit if your business activities are regulated by a federal agency. Requirements and fees depend on your business activity and the agency issuing the license or permit. It’s best to check with the issuing agency for details on the business license cost.
States tend to regulate a broader range of activities than the federal government. For example, business activities that are commonly regulated locally include auctions, construction, and dry cleaning, farming, plumbing, restaurants, retail, and vending machines.
Some licenses and permits expire after a set period of time. Keep close track of when you need to renew them — it’s often easier to renew than it is to apply for a new one. You’ll have to research your own state, county, and city regulations. Industry requirements often vary by state. Visit your state’s website to find out which permits and licenses you need.
Make sure you have the correct licenses and follow the proper regulations. You need to be operating within the guidelines of the law. Unless you are well versed in business law already, you need to educate yourself on the business laws and regulations in the field you decide to pursue. By educating yourself on them early, you will be able to take the appropriate steps to safeguard yourself legally.
9. Find the Right People and Professionals to Work With
As a smaller business, you have limited time and resources so to get things done. You can only build a great company with great people! If you don’t have the money to hire full-time employees, look to outsource important areas of your business to professionals. With professional assistance, you will minimize the risk of business failure and maximize the chance of success.
The most common tasks to outsource are web design, marketing, bookkeeping, accounting, and other administrative tasks. You can’t replicate yourself and you certainly don’t want to burn yourself out! There is much that needs to be done in running a business. Focus on the tasks that only you and do, and outsource the rest!
Starting a business is a long-term thing. Beyond giving it your all, it’s important to direct your energy to the right tasks – especially when first starting. The SMART first steps in starting a business are creating your business plan, researching competitors, assessing the legal aspects of your industry, considering your finances, and finding the right people to work with.
You’ve got to be prepared to face the ups and downs. Luck and talent help, but it comes down to pure grit. Being able to push through the good and the bad. If you want the rainbow, you’ve got to put up with the rain.