If you’re a first-time business owner, starting your company has probably been a rollercoaster ride of excitement and anxiety. You have a lot to think about and significant investment in your efforts. However, to get the most out of your endeavors, you’ll need a blend of determination, unique business offerings, and enough funding to get everything off the ground.
Get started on the right foot with this insightful article that gives you a quick step-by-step guide for starting a new business.
Create your business idea
The whole purpose of your new company is to fill a need in your target market. Whether you plan to offer marketing services or create colorful widgets, you need a business idea that will generate demand and translate into profits. When you’re brainstorming ideas, determine the following:
• Who are your target customers?
• What competitors do you have?
• What unique selling proposition (USP) will you use?
• How will you fund your new business?
• Will you need employees?
Another important perspective to understand is that it’s possible that a unique idea for a business could also mean it doesn’t have much demand. So, make sure any product or service you intend to offer is properly researched. Market analysis is essential when creating a profitable company, so be sure to gather data on your target market demographics, spending behaviors, income, and more.
The following methods are great approaches to gathering this important information:
• Conduct online surveys
• Observe consumer purchases
• Conduct interviews
• Start a focus group
In addition to firsthand research, explore secondary market research found in journals, studies, and other related data found online.
Write a business plan
Business plans are essential in any strategy you develop for your new company. This document will guide you and your team regarding operational challenges and organizational hierarchy and provide market research and industry forecasting that could help lenders decide to fund your venture further.
If you’re unsure how to go about writing a business plan, the federal Small Business Administration has a template you can download and fill out. Expect to provide information for the following categories:
• Company description
• Market analysis
• Funding request
• Marketing and sales
• Executive summary
• Organization and management
• Service or product line
• Financial projections
• Appendix
Purchase business insurance
Insuring your business should be a top priority from the moment you decide to start it up. Many liabilities threaten the financial security of your endeavors. Some are completely beyond your control, such as hurricanes or theft.
A comprehensive policy shields your business from claims brought against you by customers, employees, suppliers, and more. For example, who pays for the damage if an employee accidentally damages a customer’s home while installing a carpet? Without coverage, you will. Imagine how costly an uninsured car accident is or a fire that burns your workspace to the ground. Could you afford to rebuild on your own?
When you call around for insurance quotes, keep in mind that different risks require different coverage. When indemnifying your new company, consider purchasing a combination of the following to get maximum protection against damage claims and lawsuits:
• General Liability
• Business Interruption
• Commercial Property
• Commercial Auto
• Workers’ Compensation
• Professional Liability
• Cyber Coverage
• Tools & Equipment Protection
Insurers also offer a package of coverages known as a Business Owner’s Policy (BOP) that offers a lower premium. Often, the standard bundle includes general, commercial, and professional liability, but you might be able to customize your policy and include additional options, such as commercial property.
Consult with a knowledgeable insurance agent or research small business coverage online to find the best insurance options to protect your clients, employees, equipment, and other assets.
Figure out how to finance your new business
Don’t let your business be part of the half of new companies that fail their first year because of inadequate funding. As an entrepreneur with a unique service or product, you will have many options for securing additional capital for your venture. Remember that any loans or investments you obtain should fuel your financial and business goals.
Below is a list of suggested funding sources to consider when seeking further capital to run your company:
• P2P loans
• Create a startup campaign
• Venture capital
• Small business loans from the SBA
• Bootstrapping
• Ask your family, friends, and relatives
• Crowdfund
• Angel investments
Focus on which options best fit your business structure and avoid limiting yourself to just one or two funding sources. Once your company starts taking off, you’ll likely need additional investment to scale and meet demand quickly.
Decide on what business entity you’ll use
Another important decision you’ll need to make is the business entity type you’ll operate as. This process accomplishes several goals, including providing credibility to your partners, customers, and vendors you rely on to succeed.
Generally, you’ll need to choose one of the below options:
• Sole Proprietorship
• Limited Liability Company (LLC)
• Corporations
• S-Corporation
• Partnerships
• Nonprofit
Each structure has its tax and liability benefits, though you’ll have full liability when things go wrong as a sole proprietorship. This means that your business and personal assets could be used to settle any claims brought against you. Consult with a knowledgeable tax accountant or commercial law attorney to determine which option is best for your startup. It’s also possible to change structures later once your business has expanded.
Once you’ve completed the necessary paperwork to register your business with the state, you can focus on obtaining any additional licenses and permits you need.
Get the necessary licenses and permits
Another important step in starting a new business involves getting any certifications, licensing, and permits to operate legally. Often, you’ll have different requirements on the local, state, and federal levels, so do your research! Without having this important paperwork in order, you could face serious consequences for violating industry regulations and laws.
If you plan to hire employees, you’ll also need to get an Employer ID Number (EIN) from the Internal Revenue Service for tax filings. This is a free identification number for your employment taxes and yearly filings. You can apply online on the IRS.gov website.
Team and product development
With all the legal red tape out of your way, it’s time to start building your team (if you plan to have employees) and develop your product for manufacturing or supporting your service-based business.
This is also a good time to ensure you have the processes in place to run your business adequately:
• Finance
• Marketing
• R&D
• Sales
• Customer Support
• Operations
• Manufacturing
When going through the application and hiring process, look for candidates with values that align with your company’s. Employees are an asset to our business, so prioritize those with appropriate experience and skillsets to build a core team you can rely on as the foundation of your new venture for years to come.
Payroll and accounting
The next step is to create administrative systems to handle any payroll you might have along with your bookkeeping to help your business operate efficiently and profitably. Any payroll process you create must meet the legal requirements set forth by local, state, and federal laws. This includes ensuring employee information is complete, taxes get paid, and wages are reported accurately.
If you decide not to hire a third-party service for this aspect of running your company, investing in solid account software that offers training and round-the-clock support is your best bet. If you aren’t familiar with bookkeeping, consider taking a course to understand the basics of managing your business finances.
Whether you hire an accountant or keep your own books, having the right support in place will ensure you streamline your administrative tasks and keep your payroll and accounts in good order.
Preparing your business for the future
Things often don’t align with our expectations as business owners, so preparation to help you and your team navigate unexpected challenges will be pivotal to your brand’s survival. This includes safeguarding your assets and finances against the liabilities innate to your market and outside forces beyond your control.
Comprehensive business insurance can give you peace of mind knowing that if an employee gets hurt on the job or a customer sues over a faulty product you sold them, your company can recover without devastating financial and reputational loss.
This article was written by Angela Scott-Briggs from TechBullion and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].
