Steps to Starting Your New Enterprise
Perhaps you have always had a dream to start your own business. You have a great idea and believe you can turn that idea into a marketable and creative company. The Small Business Administration (SBA) states that 30% of new businesses fail in the first year, and approximately 50% fail in the first five years. Starting a new business is not easy. It takes time and tenacity to work through the steps to get the right start. Listed below are some necessary steps when starting your new company.
Complete Market Research
The top reason a new business closes is the failure to investigate the market potential of what you are selling. Researching market demand and competition on the Internet is a start. Look at target customers, pricing, and the offerings by price point. Complete a market survey using live participants with a research company or an online survey. Establish if the consumer responds to your product or service and quantify the response. Look at social media sites and go out and visit similar local businesses before completely jumping in to determine if you have enough funds and infrastructure to take the product nationwide.
Fund your business
Funding your business may not be as easy or inexpensive as you might think. Determine how you will finance your business and identify the interest rate you are able to obtain. Will you use your own funds or credit line, or will you take on an investor? Let’s say you suddenly inherit $10,000 and decide that is enough to kick off your operation. You start up the corporation without any plans on how you will continue to fund it until you make money and “surprise” you fail in six-months.
Starting a new enterprise requires a reliable and conservative business plan. In the blueprint, you will define realistic goals for your business, and identify how your company will successfully achieve those goals. You will also identify possible problems and create anticipated solutions. Development of such a plan can help you figure out if there is a need for the new enterprise through research and surveys. You will also need to identify the costs and inputs required to start up and run the company and outline strategies and timelines that need to be implemented and met. Development of this roadmap will give you an understand if $10,000 is enough to keep the company going, or if you need to find additional funding. Important Note: Don’t expect to get paid in the first year. Do you have a source of income until you start making money?
Write your business plan
Creating an accurate business plan will help you understand the market and provide you the facts needed to sell the idea to those who finance your program. You will need to put together a comprehensive five-year financial plan that shows revenue growth and a return on your investment to make your concept for the business a reality.
Your business plan begins with the market demand for the product and or service. You need to understand what a realistic revenue input is in before developing a plan for expenses. Be sure to brainstorm all the costs for a start-up to understand your financial needs to begin operating. Next, consider ongoing costs and place them in a separate category. It would be most helpful to have a CPA build the financial portion of your business plan.
Often new owners build a plan, establish their business, gain an initial customer base, and begin to become complacent. After all, they have been working many hours and things are looking brighter. Do not be disillusioned. Business changes rapidly and you need to change with it. Being on top of critical trends will allow you lots of time to adjust your strategy so that you can remain successful. Think of your business plan as a living document – one that changes as your operation changes.
Pick your business location
Location, location, location is everything if your business relies on foot traffic. Just as important is your Internet location. People shop, search, and research online for everything these days. So, if the need is already there, the virtual ability and visibility of your business is crucial. Will you work from home or have a retail space? Remember it is all about location so be sure to pick the right area whether it be retail or web.
Select your business name
Caution: Do not try to be too cute with your business name. You want the name of your company to reflect what your operation is all about. Have a business attorney validate that the name of your business is not already taken. After that research is completed and you are sure you want this name, ask your attorney to trademark your business identity so no one else can use the name when your business takes off.
You will need an attorney to help you establish your small business. There are several elements that need to be completed. You will need to create a business structure and apply for a Federal and State ID and business licenses. You will need an EIN (issued by the IRS) to open a business account.
- A Limited Liability Company (LLC) is a corporate structure in the United States that limits the owner’s liability for the company’s debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship. An LLC is the least complicated business structure and a good place to start.
- If you wish to raise capital and offer shares in the company as part of the business plan, you may need to start a corporation or an INC. A corporation is defined as a form of business operation that declares the business as s separate legal entity guided by a group of officers known as a board of directors. A corporate structure is the most advantageous way to start a business because the corporation exists as a separate entity.
- Doing Business As or a DBA is a legal term meaning that the name under which the business is conducted and presented to the world is not the legal name of the person or persons owning and being responsible for the operation.
Register your business
Register your company with the Federal and State governments and obtain an EIN number (similar to a Social Security number but for the business) to file tax returns, obtain licenses, permits and open a business bank account. An attorney should be able to guide you through these steps.
Apply for licenses and permits
Various licenses and permits are required to operate a business. These requirements vary by Federal, State, and County Laws. Use an attorney to understand what is needed to run your new business.
Open a business bank account
Now you are ready. Go to several banks to determine the optimal terms and conditions for maintaining a bank account and accepting credit card payments. You will pay a fee for accepting credit card payments of 2% to 4% until you can prove that you take care of your customers. Shop around for the lowest fees.
Your business has been growing for the past year. You now think it is time to expand. Before you do so remember the steps you took to get started. The expansion should follow a similar path. Complete your market research, update your business plan, obtain feedback from your customers and shareholders. Too little research and expanding too fast can sink the whole enterprise. Don’t let that be you after you have gotten such a great start.