Right now, aspiring
entrepreneurs all across the country are planning their paths to business
ownership. It's a journey that requires a lot of hard work, and 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.
1. Brainstorm
ideas
2. Build a business plan
3. Assess your finances
4. Determine your legal business structure
5. Register with the government and IRS
6. Select your technology
7. Purchase an insurance policy
8. Choose your partners
9. Build your team
10. Brand yourself and advertise
11. Grow your business
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 the 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.
David Silverstein, a
global business consultant and CEO of operational strategy consulting
firm BMGI, cautioned would-be entrepreneurs against starting a business
just for the sake of being a business owner: You need a viable business model,
not just an idea, he said.
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. A full guide to writing your plan
can be found here.
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.
You can learn more
about each of these capital sources and more in our guide to startup
finance options.
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. More details about the different business
structures can be found here.
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
or not 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.
There are a lot of different
factors to think about when you're looking for business technology. 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.
If you're thinking of
purchasing a new laptop for your business, check out our guide to the
best business laptops.
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.
Learn more about the
types of insurance policies your business might need here.
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.
Ready to find a vendor
for your business needs? Check out our reviews and best picks in Business
News Daily's Find a Solution center.
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
A great startup idea
won't do you any good if people don't know about it. 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.
A company
website and social media profiles are practically essential for any small
business in today's world. Create a logo that can help people easily identify
your brand, and be consistent in using it across all of your platforms. Use social
media to spread the word about your new company. You can even use social
media 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.
For more information
on creating an effective marketing plan for your business, visit our
guide here.
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. In this article, Business News Daily offers some
suggestions for rapid growth.
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.
