Things To Know Before Starting a Business
Starting a business is an exciting time. It is the beginning of a venture that has the potential to change your life. However, being in business is not all fun, it is hard work, too. There are different ways to set up your business and the way you do it will affect the way you manage your business. So, it is important to know some things before you start a business.
Entrepreneurs all over the world start businesses each day. The way they start their business plays a role in its success. You are at an advantage when you are in the know. Use this as a guide, so you know how to start a business that will remain successful for many years.
Write a Business Plan
Before you begin working on your business you need to write a business plan. It is a guide for your success and one of the most powerful things you can do to properly set up your business. So, if you are serious, sit down and write it all out. A basic business plan outline is below:
- Executive Summary – This first section is extremely important because it sets the tone for the rest of your business plan and people are likely to stop paying attention if it does not capture them. So, think about it carefully and craft something that really tells who you are. You want to highlight the problem you are fixing for your customers, your target market, your solution, a financial forecast and the founding team. However, in this section, you do not want to give too much detail. You just want to entice the reader and draw them in, so they will read your entire plan.
- Opportunity – Describe your product or service and tell the reader what problem it solves. Write it from the customer’s point of view. Give details and include graphs, drawings and other relevant information.
- Market Analysis Summary – Give details about competitors. Tell how your business is different than your competition. Give pricing details, tell the reader what your competitor is doing right and what they are doing wrong or need to improve on.
- Company and Management Summary – Give a basic overview of what your company does and who works for your company, including yourself. Each manager/member should have a summary in this section. You should also give the important aspects of your business and the why behind your business. This section introduces you and your company to the reader.
- Execution – This section should outline how you plan to carry out your business operations successfully. Give clear, concise details about how you plan to operate your business. This section will act as a guide, which will help you execute your plan and reach your goal.
- Financial Plan – In the financial section you need to include all important financial information. For example, you need to include projected payments for taxes, business license renewals, repayment of loans, expenses, forecasted profits and losses and funding sources you plan to seek.
Choosing a Business Name
When you choose your business name, you need to make sure no one else is using the name you want. Below are some tips to selecting a great name.
Tips for Choosing a Business Name
- Do a search on your state’s Secretary of State website to see if the name you want is available.
- Getting to your state’s SOS is easy. The web addresses are all formatted like this: “https://www.sos.state.XX.us.” Just replace the XX with the abbreviation for your state. For example, “https://www.sos.state.tx.us.”
- Check domain names.
- Check trademarks before selecting a name or making a logo.
- Pick a name that is easy to remember.
- Choose something catchy and/or eye-catching
It is extremely important that you check with the SOS first before you begin using a name. It will keep you from having to change your company’s name and branding down the road.
Funding Your Business
There are a number of ways to fund your business. It is important to consider what type of funding you will seek because it may impact what type of company you decide to form. There are plenty of ways to fund your business and people fund all types of businesses. When you have funding, you have endless options. Bootstrapping is another way to fund your business and although there are many benefits to this method it is often a treacherous road to success when you are bootstrapping. You have to invest a lot of yourself personally. So, there are some important things to consider when it comes to funding. Luckily, there is support for entrepreneurs at all stages of business, no matter if they are bootstrapping or working with Government grants.
Types of Funding
You need to know what option are available to make an educated decision. So, there is a list of popular business funding methods with a description of each.
- Bootstrapping – Getting to your desired business goal by using what you have at your disposal or not using outside funding.
- Taking Loans Out – Loans are obviously a popular method for funding your business. You can even apply online for a business loan.
- IPO / Selling Equity In your Company – Once your business is established with verifiable financial records, you can sell equity in your company. Some other form of funding is usually needed prior to an initial public offering (IPO). An IPO is when a business decides to go “public” and sell stock on the market.
- Private Investors – Seeking out private investors or borrowing money from friends or family is one way to fund your business, although it is important to outline all aspects of the private investor’s role in the company. You should also outline a plan for repayment and both you and your investor should have it signed and notarized.
- Angel Investors – Investors who do not expect the business to repay their investment. Similar to a grant, this form of funding usually involves your investor coaching your business and helping you meet valuable business connections.
- Silent Partners – A silent partner is someone who invests money in your business and owns a stake in the company, but they do not make business decisions or help manage the business.
Setting Up Your Business
You will want to set your business up in a way that works for you. In order to do this, you need to have a name selected, you should know what type of funding you will seek and what each type of funding is. Below are the types of businesses.
- Limited Liability Company (LLC) – If you are in a risky business you should seriously consider forming an LLC. Like a corporation, a limited liability company limits the liability of the owners by creating a separate entity a court can hold responsible for debts and legal obligations. LLCs benefit from pass-through taxes, meaning the company is not taxed on the money it earns. The members must claim the profits and losses on their personal taxes.
- Limited Liability Partnership (LLP) – This is the same thing as an LLC with more than one member.
- Corporation – A corporation also offers protection against liability for the business’s affairs, however, a corporation with the exception of an s-corporation is taxed on the money the company makes and then taxed again when the company pays out dividends or disburses payments. A corporation must file a separate tax return, then the members, managers and stockholders claim the money they received from the corporation on their taxes.
- Sole-Proprietorship – You may file a fictitious name, usually at your local tax assessor’s office, Then, you use your social security number and conduct business as the DBA you create. This is the riskiest option because you and the business are one in terms of liability.
- General Partnership – A company formed by two or more people.
- S-corporation – An S-corporation is a corporation that enjoys pass-through taxes and the benefits of being a corporation.
After you file for your DBA or form your corporation, you need to open a business bank account, order business cards, get a website, list your business on Google businesses and buy marketing materials for your business.
Essential Marketing Materials
Depending on what type of funding you go with, you may have limited funds. So, below there is a list of essential marketing items you need:
- Business Cards – You need a clean, easy to read the business card to give customers and potential clients.
- A Brochure – Gives vital information about your business. You can create a brochure or an infographic. Similar to a napkin presentation, you need to be able to explain it in 2-3 minutes and the reader should know what your business does just by looking at the brochure.
- A Website – In today’s business world, you have to have a website. Every other business like yours has a website. To be competitive, you need to have a website which should be updated for SEO. SEO makes your site visible on search engines under specific keywords.
Expenses for Starting a Business
There are expenses when you are starting a business. Regardless of how you plan to fund your business, you need to know how much it costs to start your venture. Each business is different, which is why your business plan is so important. Plus, you need your business plan to give to potential investors. So, writing out your business plan before you start your company is essential. Armed with your business plan and the information below, you will have a good idea of what it costs to start your business:
- Filing your DBA – $15-50
- Filing of formation of your corporation or LLC – $200-400
- Cost of business licenses in your area – Varies depending on where you conduct business.
- Business permits needed to conduct business. – Varies depending on your location.
- Business cards and brochures – $400
- An attractive website – $500+
Branding Your New Business
Branding is one of the most important things to do in today’s business world. Branding starts as soon as you select a name and design a logo for your company. However, you need to put more thought into it than that. Your brand story helps customers relate to you. To develop a brand story that is unique. Your story should give the why behind your company. What made you decide to offer the services or goods you are selling? Get personal; clients want to know what drove you personally to create your own business.
Maintaining Your Business
It is important to know what you have to do to maintain your right to transact business. Each state has different laws for each entity type. Plus, the IRS has different laws for each. You must comply with the IRS and the localities that govern your business in order to properly maintain your business. Furthermore, you are required to keep copies of documents for the IRS and for your local government offices. You have to check with each of the offices governing your business. However, common steps for keeping up with your business obligations are below.
- Corporations must file a corporate tax return each year.
- LLC owners must follow the proper procedures for claiming profits and losses on their tax returns.
- Sole-proprietorship owners and partners must claim the business income on their taxes.
- Renew required business licenses and permits.
- Pay franchise tax or file an information report.
In your local area, the requirements may differ. It is a good idea to check with your SOS and other governing agencies to verify each of the steps you must complete to properly maintain your right to transact business. If you forfeit you have to pay a fine and you risk losing your business name.
If you need additional support or resources to help with your start-up business, consider looking into an online lender. Check out the small business loans and other resources available to small business owners at competitive rates, designed to help you stay ahead in your industry.