How to Start a Business March 30 2014
Here are some practical tips every aspiring business owner can use to help launch a successful startup:
Is your "great business idea" actually viable? The first test is whether your idea meets an unmet need in the marketplace. In other words, is there sufficient demand for whatever service or product you intend to sell? If there are existing businesses providing similar products or services, you must identify why your business will be more attractive to customers. You should start by doing some online research, reading leading publications in your industry and sampling your potential customers. Google Keyword Planner is also a great way to find out what people are searching for online. It may even help you discover a new business idea. Here is a tutorial on how to use Keyword Planner.
Selecting a name for your business is a task that requires care. Although the name may not be as important as the marketing effort behind it, an effective name can naturally attract customers, so take the time to choose the right one. Here are a few things to consider first:
- Avoid regional names (think big, your company may expand beyond its current location).
- Avoid initials and numbers (these can be confusing to communicate to potential customers).
- Avoid long names (ones that are complex or will not fit into a web address).
- Avoid using your own name as a business name (not a good idea for legal reasons).
There are two types of naming processes - natural and coined. A natural name uses words that can be found in a standard dictionary, and usually conveys an understanding of what a company produces (ie., Conquest Graphics). A coined name is created by combining or altering words (ie, SynaGro). Regardless of whether you choose a natural or coined name, be sure to do a trademark search to ensure that you do not run into future legal problems for using the name of another business.
Selecting a Business Structure
This is a crucial step since your business structure will determine how much business tax you will pay and how you will report income to the IRS. Essentially, you have the following choices when setting up a new business: Sole Proprietorship, LLC, Partnership, C Corporation or S Corporation. It is best to seek the professional advice of both a Certified Public Accountant (CPA) and Attorney. Make sure the professionals you choose are used to dealing with small business owners.
When starting a business, every new business owner should write a business plan since it is used to highlight the potential strengths, weaknesses, competition, and expected performance of the business. It is also the key document bankers and potential investors will review when deciding whether to invest. You can make the task of writing your plan easier by downloading business plan samples or outlines such as the one provided at the bottom of this page. You can also use business spreadsheets to help complete startup pro forma, or search for a professional business plan writing service. A CPA can also help you to project realistic startup expenses. The final document should demonstrate your planning skills and communicate how the company will reach profitability. You should know how all the facts and figures were derived, be able to defend them, and understand how you are going to operate the business in order to meet your projected goals.
Many small business owners do not see the need for this, but it is crucial to have a document which clearly details marketing goals. Your marketing plan does not have to be a formal document, but you should take the time to write a page or two for your own reference that defines the following:
- A monthly ad budget and projected revenue
- Target demographics - What distinguishes your target customer (age range, education level, interests, etc.)
- A slogan you will use in advertising and/or on your website
- Types of marketing projects you will pursue (press releases, online ads, print ads, etc.)
- Advertising sources you will use
- How you will track and measure your results
- Your Online Business Strategy. Read more about online startup topics via Shopify's eCommerce Marketing Blog.
Applying for Licenses & Permits
If you live in the United States, you will need to register your new business with your state or county registrar. Since licensing rules vary by location, start with your state or county government website (such as Michigan.gov), and search for information on business licensing. You will likely have to fill out one or two short forms and submit a licensing fee. Depending on the type of business you intend to operate, your city government may require you to purchase additional permits.
Funding Your Business
How will you finance your business? You can ask friends and family to invest in your business, pursue a business loan at your local bank, seek out angel investors, or pursue social lending online. If you have previously applied for a business loan at a bank and been denied, you can apply for a SBA loan. For detailed information on funding your new business, see our blog article How to Finance Your Business.
Finding a Location
Whether you are looking to rent or own a space for your business, you should be sure to do some due diligence before committing to any property. You especially want to ensure that you are operating in a space that is safe, accessible to both employees and customers, and free from a high concentration of competitors. A commercial realtor can help you to narrow options. Once you determine an attractive and affordable location, be sure to check your local city zoning requirements to ensure that your type of business can operate legally in the location you have chosen. It is also a good idea to consult an attorney prior to signing any commercial lease.
No matter what industry your business operates in, risk is unavoidable. However, you can minimize your exposure to risk by buying business insurance. The main categories of business insurance include: workers compensation, health, disability, interruption, property, automobile and liability insurance. You can get free customized quotes from leading insurance companies by visiting the business insurance tab at NetQuotes.com.
Outsourcing and/or Hiring New Employees
As your business grows, you will have more work to do than you can handle by yourself. At that point, you will need to hire your first employee or outsource tasks to others. Using a resource such as Elance.com will help you reduce stress while keeping your operation running smoothly.
Accounting - Maximizing Profit & Minimizing Tax
Every purchase you make for your business is potentially deductible. By using savvy tax strategy and an efficient accounting system, business owners can save thousands if not millions of dollars annually. First make sure you understand which expenses are legally deductible. Here are the most common expenses business owners deduct: professional accounting & legal fees, utilities, equipment purchases and repairs, postage, office supplies, advertising, insurance, rent, travel, bank fees, and employee wages. The smartest way to handle business taxes is to educate yourself on basic business tax deductions, keep all receipts, track income & expenses using a spreadsheet or accounting software, and seek out a CPA to help with your tax strategy and preparation of business tax forms.
Metrics - Measuring the Results of Your Efforts
This will be your most important ongoing task during the lifecycle of your business. Whether you need to know the Cost of Customer Acquisition or which recruiting strategy is bringing in the most productive employees, you will use metrics to get that information. Here is a great book that further explains the use of metrics:
Lean Analytics: Use Data to Build a Better Startup Faster...