Most people have probably spotted a successful business and thought, â€śI wish Iâ€™d thought of that.â€ť A good idea can be golden, but inspiration alone is not enough to make it a reality. Launching a new business, however small, is a major undertaking that involves many steps â€” some fairly mundane and some a bit intimidating. Hereâ€™s a list of some of those important tasks to help you get started the right way.
This step is listed first for a reason. Properly done, the analysis you do here will allow you to think clearly and critically about your business idea. And your answers will apply to other key steps in this process. Essentially, you want to know if your idea is unique (in all the world or specifically in your local area) and if it meets a genuine need for an identifiable market.
Think about financing, market research and competitive analytics. Think about what your business will do, how it will reach customers, your competitors, what makes you different from your competitors, what resources youâ€™ll need, what expenses youâ€™ll have, and how youâ€™ll make money.
â€śItâ€™s really important to think about the details at this stage,â€ť said Mitch Bienvenue, director of the Illinois Small Business Development & International Trade Center at the College of Lake County. â€śWho am I going to sell to, how am I going to sell it, what am I going to charge, is it financially feasible and so forth.â€ť
Business plans donâ€™t necessarily have to be full-blown, 40-page documents anymore. If the business you have in mind is a simple one, the plan can be informal and brief â€” though it should still grow out of a thoughtful first step.
Taking time to create a robust business plan is one of the smartest things you can do. Studies have shown that companies that start with a business plan grow 30% faster than those that donâ€™t.
If you need outside funding, say through lenders or investors, your business plan will have to be much more detailed. But you wonâ€™t need to work from scratch â€” there are plenty of templates available to help you assemble all the necessary information.
Business owners fund their companies in a variety of ways, ranging from using their own savings or personal loans to investments, crowdfunding, economic development grants and loans from financial institutions. Commercial lenders typically require a strong business plan, a good credit score and collateral, too.
For new businesses, getting a regular bank loan can be difficult. â€śIf youâ€™re just starting out and you have no business history or business assets to put up as collateral, it can be very tough,â€ť Bienvenue said. â€śWe tell those people theyâ€™ll probably have to dig into their own pocketbook, use savings, appeal to friends and family or use credit cards. Itâ€™s uncomfortable and itâ€™s scary, but it is a reality.â€ť
Before you can register your business or get a tax identification number (EIN), you need to decide on the legal structure of your business.
â€śItâ€™s an important decision involving two major factors â€” what amount of protection from liability you need and how youâ€™re going to report your taxes,â€ť Bienvenue said. â€śWe always encourage people to consult with a business attorney and a CPA.â€ť
The major types of structures include:
Once you choose your businessâ€™ legal structure, youâ€™ll want to apply to the IRS for an employer identification number (EIN), unless youâ€™re a sole proprietorship, which doesnâ€™t require one. Every state has different requirements for small businesses, so make sure you visit your stateâ€™s website to find specific information on registering your business, getting permits and licenses and filing your business name. Donâ€™t forget to set up a business banking account and apply for a business credit card.
Preparing to properly manage your companyâ€™s finances is one of the most important decisions to make, right at the very beginning. If you have the resources, consider hiring a part-time bookkeeper â€” or paying one to help you set up and use the accounting software yourself.
â€śYou can do a lot yourself with software like Quickbooks, but you absolutely have to set up and maintain some sort of system for bookkeeping,â€ť Bienvenue said. â€śItâ€™s essential. If you donâ€™t, and you get into a bad spot, that could be the end of your business.â€ť
A lot of people wait until tax time to hire a CPA, which is fine as long as youâ€™ve done a good job of keeping your books.
You should have spent some time already doing market research and competitive analysis while writing your business plan. Now use that information to start promoting your business. After youâ€™ve made branding decisions like designing a logo and a company slogan, marketing involves reaching out to potential customers through your website and social media profiles.
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