There are no secrets to success. It is the result of preparation, hard work, and learning from failure. Colin Powell
Starting a small business is exciting; sharing your idea with the world, engaging new people, tapping into your creativity, and reaching for a dream. This IS exciting!
To make sure your business is strong it is very important to start at the bottom, the foundation, the planning stage. I know, it is not as exciting as creating a product or doing something you love; but it is a necessary part of the process to ensure your business survives for as long as you wish it to.
Many times businesses with great products or services collapse because the owner failed to plan properly. Planning doesn’t have to take months or weeks but it does take forethought and research.
Some background on myself, I have started and operated four businesses with my husband. I am on the verge of starting another. One of our businesses is closed and two are open, and one we transferred ownership to our partners. These entities included sole proprietorships, general partnerships, LLC’s, C-Corps, and S-Corps. I was responsible for forming each of the legal entities, maintaining records, accounting (including tax ID), trademarking, and with some dissolving them. Yup, I’ve done pretty much all of it.
1. THINK! —
Grab your laptop, tablet, paper and pencil – whatever is handy – start documenting your thoughts. What is your business about? Is it a product, service? What kind? Who is your target market i.e. who do you think your customers will be? Are you a local, regional, national, global business? Will you work from home or need office or retail space? Will you work alone or have partner(s)? How will you fund your business? Will you need a start-up loan, access savings, etc.?
2. Research —
Use the internet to check out potential competitors; what makes you different, what can you do to make yourself stand out? Go to the library and check out books on starting a new business. The Nolo books were invaluable to me when starting each of my companies. Research local, city, county, and state laws regarding starting a small business. Some homeowners associations will prohibit a home-based business. Some towns require you to notify neighbors if you establish a business in your home. Check into this before filing any forms. Will your company make money? Source manufacturers and suppliers; get pricing to determine costs. Learn about different business structures (sole proprietorship, LLC, C-Corp.) and narrow down which ones you think will work for your business.
3. Organize —
What I mean here is write a business plan. It sounds daunting but a business plan is really writing down what your business will do, how it will make money, marketing, and structure. For instance, the business plan starts with Purpose. Purpose equals “What Will My Business Do”. Simple but very important to help you organize and gather your thoughts; to be very clear what you want your business to be or do. While you’re doing this consider writing a marketing plan. I love marketing plans because you can organize all of the ideas about social media, advertising, and promotions.
4. Meet with your CPA —
Unless you are an accountant, banker, or have financial background you must meet with your CPA. Don’t have one? As your friends, mentors, or associates for recommendations. I cannot emphasize this enough. Meet with your CPA. This person will do your business taxes for you — they have a wealth of knowledge regarding tax laws and can help you decide which business structure is best for you. TurboTax is not going to cut it when you need to pay your business taxes. Period. Call your CPA.
5. Consider a Business Structure —
After meeting with a CPA you probably have more think about. Consider the advice you are given and weigh it against what level of commitment do you want for your business structure. What I mean by that is, a C-Corp. requires more maintenance than a sole-proprietorship. But the C-Corp. offers benefits the sole-proprietorship does not. This is where you must educate yourself about the different structures available to you. Here is some light reading about business structures. I will go into more detail, including my experiences with each one, in the next post.
It may seem like a lot of work before getting down to doing what you really love, but trust me, the payoff is great if you form your business correctly in the beginning. It can be very difficult to undo or redirect a business once it is well established. Yes, I’ve had to do that too!
I’m looking forward to sharing the different business structures and my experiences in the next post. Congratulations on starting your new business!