Setting a firm foundation is vital to small business success.
- Preparation is key to getting all your business ducks in a row.
- Licenses, permits, and insurance requirements vary by state.
- How you choose to structure your business has legal and tax implications.
As excited as you are to get your new business venture up and running, going in without a plan is a lot like driving in a foreign country without GPS or a map. You may accidentally get where you want to go, but there are likely to be problems along the way. Preparation is everything when it comes to starting your own business. Prepping can save you money, time, and frustration. These steps should put you on the right path.
Make a checklist
There are certain things every small business owner needs to accomplish to get their business off the ground. They include:
- Do market research
- Develop a business plan
- Secure financing
- Name your business
- Determine your business structure
- Secure an Employer Identification Number (EIN)
- Apply for required licenses and permits
- Open a business checking account
- Purchase insurance coverage
- Develop a marketing strategy
Once you’ve taken care of each task, check off your list. Let’s take a closer look at each one.
Do market research
You may be passionate about your business idea, but is there a market for it? And if there is a market, is it already saturated? For example, you may want to sell sports equipment, but if there are already two sports stores in your small town, the market is probably saturated.
The most successful businesses are those that fill an unmet need. For example, let’s say you live in an area full of young, dual-income families. You might want to open a daycare or a service that sells pre-made frozen meals, as there is likely a market for these.
The more closely your business matches the needs of the community, the more likely it is to catch on.
Develop a business plan
A business plan does not have to be lengthy or fancy. It will basically act as your North Star, reminding you of your mission. It also gives potential financing sources a better idea of what you’re trying to accomplish.
Here’s what a business plan should include, at minimum:
- A description of your business and its potential value to customers
- The type of customer you hope to appeal to
- How much investment the business will require to get up and running
- The amount of revenue you anticipate the business earning
- How your experience to date qualifies you to start the business
- How you plan to advertise
If you’re not financing your start-up costs, you’ll need to determine where to find the funds. You may look at a small business loan, crowdfunding, or venture capital investors willing to take a risk.
Name your business
The ideal business name will give customers a clear picture of the service you provide. For example, if you’re starting a locksmith business, the name Gold Coast Services tells customers nothing about what you can do for them.
Check your state’s online database to ensure the business name isn’t already in use. Using any search engine, type in “(name of your state) locate registered business names.” Be careful because there are online businesses that charge you a fee to look up business names. Scroll down until you find your state’s official governmental site. There, you’ll be able to access business names at no cost.
To be doubly safe, you can also check the business name you’d like to use with the U.S. Patent and Trademark Office.
If the name you’ve chosen is available, register it in your name. Also, now is the right time to choose an internet domain that makes it easy for potential customers to find you.
Determine the structure
How you structure your business has both legal and tax implications. Here are some of the most common structures:
- Sole proprietorship
- S Corporation
- Limited liability company (LLC)
Carefully study each business type to determine which works best for you.
Secure an EIN
Securing an EIN is as easy as applying through the IRS website. Upon completion, the IRS will immediately supply you with a number that you can download, copy, and save for your records.
Apply for licenses and permits
Each city, county, and state requires its own licenses or permits, depending upon your business type. One way to make sure you’re getting it right is to call both local and state government offices and ask to speak with someone who deals with business licensing and permits. They’ll be able to tell you precisely what you need.
Open a bank account
It can be tempting for a small business owner to co-mingle business and personal funds, especially if their business does not bring in much cash at first. It’s a good idea to have a separate checking account for each, though.
A separate business account not only makes bookkeeping easier but it also allows you to find what you need at tax time without digging through unrelated expenses.
Purchase business insurance
Business insurance requirements vary by state. However, here are the most common types of business insurance:
- General liability
- Product liability
- Professional liability
- Commercial property insurance
- Business owner coverage
- Worker’s compensation (if you have employees)
Develop a marketing strategy
The goal is to drive as many customers to your business as possible. Here are some steps to make that happen:
- Create an online presence on social media sites like LinkedIn, Facebook, and Instagram in the name of your business.
- Build a website that offers useful information to potential customers. For example, if you own a bakery, share a few baking how-tos. If you own an auto repair shop, offer tips for keeping a vehicle in prime shape. You may build a site yourself or hire someone to build a professional-looking site for you.
- Create a business logo that’s easily recognized.
There are no guarantees in life, but the more preparation you put into starting your business, the more likely it is to soar once it gets off the ground.
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