So
you want to start your own business? If you think it's going to be easy, think
again: Entrepreneurship is a journey that requires a lot of time, effort and
hard work, and perhaps unsurprisingly, many people end up failing. But if your
company survives, the rewards of entrepreneurship are well worth the obstacles
you'll face on the road to success.
If
you think you're ready to start your first business, here's a step-by-step overview
of what you need to do to make it happen.
Brainstorm ideas
Every
new business starts with an idea. Maybe there's something you're really
knowledgeable and passionate about, or perhaps you think you've found a way to
fill a gap in the marketplace. Wherever your interests lie, it's almost
guaranteed that there's a way to turn it into a business.
Once
you've narrowed your list of ideas down to one or two, do a quick search for
existing companies in your chosen industry. Learn what current brand
leaders are doing, and figure out how you can do it better. If you think
your business can deliver something other companies don't (or deliver the same
thing, but faster and cheaper), you've got a solid idea and are ready to create
a business plan.
Another
option is to open a franchise of an established company. The concept,
brand following and business model are already in place; all you need is a good
location and the means to fund your operation.
Build a business plan
Now
that you have your idea in place, you need to ask yourself a few important
questions: What is the purpose of your business? Who are you selling to? What
are your end goals? How will you finance your startup costs? All of these
questions can be answered in a well-written business plan.
A
business plan helps you figure out where your company is going, how it will
overcome any potential difficulties and what you need to sustain it.
Assess your finances
Starting
any business has a price, so you need to determine how you're going to cover
those costs. Do you have the means to fund your startup, or will you need to
borrow money? If you are planning to make your new business your full-time job,
it's wise to wait until you have at least some money put away for startup costs
and for sustaining yourself in the beginning before you start making a profit.
While
many entrepreneurs put their own money into their new companies, it's
very possible that you'll need financial assistance. A commercial loan through
a bank is a good starting point, although these are often difficult to secure.
If you are unable to take out a bank loan, you can apply for a small
business loan through the Small Business Administration (SBA) or
an alternative lender.
Startups
requiring a lot more funding up front may want to consider an investor.
Investors usually provide several million dollars or more to a fledgling
company, with the expectation that the backers will have a hands-on role in
running your business. Alternatively, you could launch an equity
crowdfunding campaign to raise smaller amounts of money from multiple
backers.
Determine your legal business structure
Before
you can register your company, you need to decide what kind of entity it is.
Your business structure legally affects everything from how you file your taxes
to your personal liability if something goes wrong.
If
you own the business entirely by yourself and plan to be responsible for all
debts and obligations, you can register for a sole proprietorship.
Alternatively, a partnership, as its name implies, means that two
or more people are held personally liable as business owners.
If
you want to separate your personal liability from your company's liability, you
may want to consider forming one of several different types of corporations.
This makes a business a separate entity apart from its owners, and therefore,
corporations can own property, assume liability, pay taxes, enter into
contracts, sue and be sued like any other individual. One of the most common
structures for small businesses, however, is the limited liability
corporation (LLC). This hybrid structure has the legal protections of
a corporation while allowing for the tax benefits of a partnership.
Ultimately,
it is up to you to determine which type of entity is best for your
current needs and future business goals.
Register with the government and IRS
To
become an officially recognized business entity, you must register with the
government. Corporations will need an "articles of incorporation" document,
which includes your business name, business purpose, corporate structure, stock
details and other information about your company. Otherwise, you will just need
to register your business name, which can be your legal name, a fictitious
"Doing Business As" name (if you are the sole proprietor), or the
name you've come up with for your company. You may also want to take steps
to trademark your business name for extra legal protection.
After
you register your business, the next step is obtaining an employer
identification number (EIN) from the IRS. While this is not required for
sole proprietorships with no employees, you may want to apply for one anyway to
keep your personal and business taxes separate, or simply to save yourself the
trouble later on if you decide to hire someone else. The IRS has
provided a checklist to determine whether you will require an EIN to run
your business. If you do need an EIN, you can register online for free.
Regardless
of whether you need an EIN, you will need to file certain forms to fulfill your
federal and state income tax obligations. The forms you need are determined by
your business structure. A complete list of the forms each type of entity will
need can be found on the SBA website. You can also find state-specific
tax obligations there. Some businesses may also require federal or state
licenses and permits in order to operate. You can use the SBA's database to
search for licensing requirements by state and business type.
Select your technology
Just
about every business today needs a solid set of tech tools to operate. Some
will be more tech-heavy than others depending on the industry, but at the very
least, you will likely need a powerful and reliable business laptop or smart
device to help you keep things organized.
Since
many key business functions — accounting, invoicing, point-of-sale software,
presentations, etc. — can now be managed via mobile apps, you might be able to
get away with just a smartphone or tablet. For more complex business functions,
you'll want to consider a computer with strong security features, storage
options and performance speed.
For
those who want to operate their business on a smart device, think about whether
you'll need a separate phone or tablet for your professional apps and data. For
instance, you could route your calls through a third-party app on your existing
phone so you don't need to give out your personal cell number. However, if you
use the same apps for business and personal purposes, it might be easier to
separate them so you don't accidentally share information with the wrong
audience.
Purchase an insurance policy
It
might slip your mind as something you'll "get around to" eventually,
but purchasing the right insurance for your business is an important step that
should happen before you officially launch. Dealing with incidents like
property damage, theft or even a customer lawsuit can be costly, and you need
to be sure that you're properly protected.
Gyawu
Mahama, social media and marketing manager at small business insurer Hiscox,
said to choose insurance that's tailored to your specific business practices to
ensure you're not paying for more coverage than you need.
"As
a small business owner, you don't need a once-size-fits-all insurance
plan," Mahama said. "Coverage doesn't have to cost a lot.
General- and professional-liability insurance coverage for a sole
proprietorship can be purchased for a few hundred dollars a year."
If
your business will have employees, you will, at minimum, need to purchase
workers' compensation and unemployment insurance. You may also need other types
of coverage depending on your location and industry, but most small businesses
are advised to purchase general liability (GL) insurance, or a business owner's
policy. Mahama said GL covers three basic categories: property damage, bodily
injury, and personal injury to yourself or a third party.
If
your business provides a service, you may also want to consider professional
liability insurance. It covers you if you do something wrong or neglect to do
something you should have done while operating your business, Mahama said.
Mahama
advised checking in with your insurance provider throughout the year to keep
the provider updated on any changes happening in your business.
Choose your partners
Running
a business can be overwhelming, and you're probably not going to be able to do
it all on your own. That's where third-party vendors come in. Companies in
every industry from HR to business phone systems exist to partner with you and
help you run your business better.
When
you're searching for B2B partners, you'll have to choose very carefully. These
companies will have access to vital and potentially sensitive business data, so
it's critical to find someone you can trust. In our guide to choosing
business partners, our expert sources recommended asking potential vendors
about their experience in your industry, their track record with existing
clients, and what kind of growth they've helped other clients achieve.
Build your team
Unless
you're planning to be your only employee, you're
going to need to hire a great team to get your company off the ground. Joe
Zawadzki, CEO and founder of MediaMath, said entrepreneurs need to give
the "people" element of their businesses the same attention they give
their products.
"Your
product is built by people," Zawadski said. "Identifying your
founding team, understanding what gaps exist, and [determining] how and when
you will address them should be top priority. Figuring out how the team will
work together ... is equally important. Defining roles and responsibility,
division of labor, how to give feedback, or how to work together when not
everyone is in the same room will save you a lot of headaches down the
line."
Brand yourself and advertise
Before
you start selling your product or service, you need to build up your brand and
get a following of people ready to jump when you open your literal or
figurative doors for business.
Create
a logo that can help people easily identify your brand, and be consistent in
using it across all of your platforms, including your all-important company
website. Use social media to spread the word about your new business,
perhaps as a promotional tool to offer coupons and discounts to followers
once you launch. Be sure to also keep these digital assets up to date with
relevant, interesting content about your business and industry.
Grow your business
Your
launch and first sales are only the beginning of your task as an entrepreneur.
In order to make a profit and stay afloat, you always need to be growing
your business. It's going to take time and effort, but you'll get out of your
business what you put into it.
Collaborating with
more established brands in your industry is a great way to achieve growth.
Reach out to other companies or even influential bloggers and ask for some
promotion in exchange for a free product sample or service. Partner with a
charity organization and volunteer some of your time or products to get your
name out there. Starting a business can be risky and challenging, but armed
with the proper tools and information, you can put yourself on the path to
entrepreneurship.