1. Do your research.
You want to make sure you understand the industry you’ll be involved in so you can dominate. No matter how unique you might think your business idea is, you should be aware of competitors.
“Just because you have a brilliant idea does not mean other people haven’t also had the same idea,” said Wright. “If you can’t offer something better and/or cheaper than your competitors, you might want to rethink starting a business in that area.”
You should also consider your target demographic, which will be the driving force in each decision you make. You can’t earn a profit without your consumers, so make them your priority.
2. Take care of the legal aspects.
One of the first steps you should take in starting your business is choosing its legal structure, said business attorney Mason Cole of Cole Sadkin LLC. “It will dictate the taxes, paperwork, liability of the owner(s) [and] other legal aspects, as well as whether or not the company can have employees.”
Additionally, you should acquire proper registration from the government to open your business.
“This means the entrepreneur will need to create the articles of incorporation, obtain an employer identification number and apply for necessary licenses, which will vary by state and industry,” Cole said.
3. Map your finances.
Starting a business requires money that you likely won’t have right away, which is why it’s encouraged to seek capital.
“Most entrepreneurs start a business with a very limited amount of capital, which is a large hurdle to many,” said Cole. “However, there are plenty of options available to a budding business owner. The first and most common place to seek capital is with friends and family. If that is not enough, expand the search to angel investors and venture capitalists. Should these options not provide the amount needed, then apply for business loans through banks and small business associations.”
Travis Sickle, certified financial planner of Sickle Hunter Financial Advisors, advises entrepreneurs to be organized with taxes and fees. There are multiple payments you’ll need to make, and you don’t want to file late for any.
“You have to figure out how much your payroll is going to be in order to make your tax payments timely,” said Sickle. “The timing can vary depending on your payroll. You also have to figure out other business taxes, such as city, county and state.”
4. Understand the risk.
Of course, there will always be a level of risk with a new business venture. Calculating, understanding and planning for risk is an important step to take before you start working on your business. This means assessing your industry’s risks before moving forward with a business plan.
“Entrepreneurs should know their industry’s risks before purchasing business insurance,” said Jeff Somers, president of Insureon. “For example, accountants will want to consider professional liability insurance in case a client files a lawsuit, claiming there was a costly error on their tax return. Restaurant owners are more likely to need general liability for slip-and-fall accidents and liquor liability insurance, which can pay for lawsuits.”
While there are inherent risks in whatever industry you may enter, there is also the enormous personal risk that comes with starting a business. Once you’ve determined how your business could be affected by risk, consider how the new business will acquire funding once you’re up and running.
“Conversations about risk should happen upfront,” said Tom Coletta, SVP and commercial market executive with Axiom Bank. “It is important to understand your bank’s guidelines in these areas. Once banks start lending outside of a 3-to-1 debt-to-worth ratio, the loan request tends to get more scrutiny, as it appears to be riskier.”
5. Time it right.
Timing is an important element of building a business. Sure, you want to start your business at a time when the economy is healthy and your prospective industry is expanding, but there’s also a flow to decision-making that’s important to be aware of. Kevin MacCauley, founder and CEO of Upper Hand, said that it’s important to be decisive when you’re building a business.
“I wish I understood how detrimental the role of time [can be] in building a business,” he said. “You only have so much time to find out if you’ve made the right business decisions. As I once read, if you’re 70 percent of the way to making a decision, make the decision. If you try to get to 90 percent, you’ve waited too long. If I could have had that mindset from day one, I would probably have had fewer sleepless nights when I was going through tough times.”
6. Hire help.
Starting a business should not be an independent journey, no matter how tempting that sounds. Hiring help along the way will set you up for success.
Another smart hire is an accountant. It’s nearly impossible for one person to handle every aspect of a company, and above all, your finances should not be put at risk.
“I had a full-time job as I considered starting my own business in 2009, but I did a lot of groundwork before I started, and bringing on an accountant was an important step,” said Sarah Burningham, president and founder of Little Bird Publicity. “It helped me understand what I needed to do to make this work from a profit standpoint, [as well as] the ins and outs of state, federal and local taxes.”
It’s important to have assistance on the legal side of the business especially, ensuring you are protected and going about the process the right way.