A great start-up business always starts out as an idea, but you have to transform that idea into action. That’s where many individuals can start to feel overwhelmed. It’s understandable to freeze up at the deluge of things that are required to get a business started, but getting going is actually easier than you might think.
Like any big goal, if you start by breaking it down into smaller tasks, you’ll be able to tackle enough of the actions necessary to get started. Here are six ways to break down the process and simplify getting started with your own small business.
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.
Choose your Industry
Every new business starts with an idea. Maybe there’s something you are 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. If you know your strengths and what you enjoy, you are more likely to tackle a business problem that is best suited to your skills and interests and is less sensitive to your shortcomings. Capitalize on your strengths, and accept input from advisors and the team on decisions outside your range. Everyone will see you as a better listener and a stronger leader who is not autocratic and knows how to tackle the many unknowns of a new business. Too many people fail because they are working on someone else’s problem. You won’t be happy in the wrong business.
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.
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.
Writing the Business Plan
During the brainstorming, you should also start thinking about your business plan. A smart entrepreneur has a vision of where he/she sees herself and the business in the foreseeable future and writing it down in a business plan helps you stay on track and focus on your goal. A business plan is an essential road map for business success. This living document generally projects 3-5 years ahead and outlines the route a company intends to take to grow revenues.
Among the possible sub-parts of your business plan includes the:
Executive Summary which is the snapshot of your business plan as a whole and touches on your company profile and goals. This section briefly tells your reader where your company is, where you want to take it, and why your business idea will be successful. If you are seeking financing, the executive summary is also your first opportunity to grab a potential investor’s interest.
Company Description provides information on what you do, what differentiates your business from others, and the markets your business serves. This section of your business plan provides a high-level review of the different elements of your business. This is akin to an extended elevator pitch and can help readers and potential investors quickly understand the goal of your business and its unique proposition.
Service or Product Line answers questions like what do you sell? How does it benefit your customers? What is the product life cycle? Get tips on how to tell the story about your product or service. If you have any existing, pending, or any anticipated copyright or patent filings, list them here. Also, disclose whether any key aspects of a product may be classified as trade secrets. Last, include any information pertaining to existing legal agreements, such as nondisclosure or non-compete agreements.
Funding Request and Financial Projection tackles the possibilities if you need funding. This provides financial projections to back up your request is critical. You should develop the Financial Projections section after you’ve analyzed the market and set clear objectives. That’s when you can allocate resources efficiently. 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.
Marketing & Sales reveals how you plan to market your business? What is your sales strategy? Marketing is the process of creating customers, and customers are the lifeblood of your business. In this section, the first thing you want to do is define your marketing strategy. There is no single way to approach a marketing strategy; your strategy should be part of an ongoing business-evaluation process and unique to your company. After you have developed a comprehensive marketing strategy, you can then define your sales strategy. This covers how you plan to actually sell your product.
Selecting Your Preferred Business Structure
An important step in forming a new business is to choose the type of business structure you will use. There are several types of business entities to choose from, including sole proprietorship, partnership, corporation, limited liability company, and limited partnership. Each has its own advantages and disadvantages, as well as tax consequences of which you should be aware. When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. Legal and tax considerations enter into selecting a business structure.
You have to decide which of these entities best suits your business objectives and needs. You can get help in making this decision from a tax practitioner, such as an accountant, enrolled agent, or attorney. A tax practitioner can also provide information about how to establish the business structure you choose.
As an entrepreneur, you will have no place and no one to hide behind. Knowledge of yourself is the key to confidence, and confidence builds leadership. Building a new business requires good leadership to develop the market, attract customers, motivate the team and conquer the unknown.
Register your Business
Obviously, you need to register your business and declare a proprietorship to it. But before you can do that, you have to settle on what to call it. Naming your business is an important branding exercise, but if you choose to name your business as anything other than your own personal name then you’ll need to register it with the appropriate authorities. This process is known as registering your “Doing Business As” (DBA) name.
Choosing a business name is an important step in the business planning process. Not only should you pick a name that reflects your brand identity, but you also need to ensure it is properly registered and protected for the long term. You should also give a thought to whether it’s web-ready. Many businesses start out as freelancers, solo operations, or partnerships. In these cases, it’s easy to fall back on your own name as your business name. While there’s nothing wrong with this, it does make it tougher to present a professional image and build brand awareness.
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.
Take Care of the Legalities
To run your business legally, there are certain federal and state licenses and permits you will need to obtain. For some other industries like buying and selling liquor, special certificates are needed before you start operating or else you might find yourself and business in unnecessary trouble. The form of business you operate determines what taxes you must pay and how you pay them. The following are the five general types of business taxes according to Internal Revenue Services.
All businesses except partnerships must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized. The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return.
Generally, taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes, and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax but other taxes such as self-employment tax and alternative minimum tax.
If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
It should be noted that anytime self-employment tax is mentioned, it only refers to Social Security and Medicare taxes and does not include any other taxes that self-employed individuals may be required to file.
This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities, such as on wagering or on highway usage by trucks. One of the major components of the excise program is motor fuel.
Manufacture or sell certain products.
Operate certain kinds of businesses.
Use various kinds of equipment, facilities, or products.
Receive payment for certain services.
Form 720 – The federal excise taxes consist of several broad categories of taxes, including the following.
Communications and air transportation taxes.
Tax on the first retail sale of heavy trucks, trailers, and tractors.
Manufacturers taxes on the sale or use of a variety of different articles
When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following:
Social security and Medicare taxes
Federal income tax withholding
Federal unemployment (FUTA) tax
Aside from national laws that your business needs to abide by, there are also local state laws that you need to be aware of and observe for a smooth sailing operation. It is very important where your establishment located, and what government rules apply.
The good and the bad news is that as an entrepreneur, you won’t have a manager charged with directing your efforts or peers helping you implement, and your new team will be quick to tell you only what you want to hear. Thus the burden is on you to capitalize on your strengths, find co-founders and team members to fill the gaps and find mentors and advisors you trust.