It may seem unconventional, but now may be a good time to start a business. We explained the economic reasons to start your business in a down economy in a prior post. This time, we look at the businesses formed last week, today or in the next couple of weeks to come. What is that you can be doing while we wait for the stay at home orders to be lifted?
SIDE NOTE: If you have been in business for some time, we have already written 4 Tips on Sustaining Your Small Business During the COVID-19 Pandemic and What Your Small Business Can Be Doing to Take Advantage of the Down Time.
To give your future business the best chance for success, it’s imperative to start off on the right foot by following the appropriate steps to launching your own business.
1. Develop your business idea
The first step to starting a business is to develop a business idea. A business idea is a concept that can be used for commercial purposes. This idea will be the foundation from which you grow your business.
If you already have a business idea, keep moving through the steps in the guide. If you don’t have a business idea nailed down, that’s okay. Ambitious individuals eager for entrepreneurship can develop a viable business idea by considering a few key questions.
What are you passionate about?
One way to come up with business ideas is to consider what you are passionate about. Your passion is generally something you know a lot about and have relevant skills for. Not only will this help you avoid burnout and unnecessary frustration, but it also can help your business idea seem more valuable to investors and lenders.
What need can you solve?
Successful businesses offer a service or product that fulfills a need. As you research your desired industry, you may discover a business or consumer need that is not currently met with other products on the market. This is where you come in, build your business idea around the solution for this unmet need.
Is this idea profitable?
Before you move forward with your business idea, consider if it could be profitable. Not all ideas are economically viable even if they meet all other criteria. Compare the costs of running your desired business with how much revenue you can realistically expect to make. Cut ideas that would not be profitable to save yourself time and money.
2. Write a formal business plan
Once you have your business idea, the next step in starting a business is to create a formal business plan. Having a formal business plan is exceedingly important when launching any new business. A well thought out plan gives you a set of clearly defined goals and objectives that will focus your day-to-day operations. In addition, a well-written and organized business plan is an absolute necessity for successfully securing any outside investment or financing.
To create a professional business plan, you’ll need to do some research. Most of the information in your business plan will involve two critical areas.
- Competitive landscape analysis - If you’re starting a business, it’s important to know who your competitors are. Get familiar with your competitors with the help of a competitive analysis. The goal of a competitive analysis is to learn more about your competitors. A successful analysis will uncover who your competitors are, what they offer, and their strengths and weaknesses.
- Unique selling proposition - An essential part of your business plan is to explain what the unique selling proposition (USP) of your product is. Your USP is what sets your business apart from competitors and creates value for consumers and potential investors. Potential USPs might include product features, accessibility, or quality.
For more information, see our guide fordeveloping a small business plan.
3. Assess your funding options
All businesses need funding. Before you register your business, consider your funding options. Businesses are typically funded in three ways.
- Self-funding - Self-funding, also known as bootstrapping, involves using your own financial resources to start your business. Self-funding may be the ideal funding solution for businesses that don’t require as much capital to start or for individuals interested in retaining complete control over their business.
- Loans - You can also fund your business with a small business loan. Loans are a good option for individuals interested in retaining complete control of their business but do not have the personal financial resources to fund it.
- Investors - Another option for funding your business is through external investors. Investors will typically fund a business in exchange for equity[?]. This option is less of a financial risk than the other funding options, but owners no longer control their business in totality.
4. Choose your business structure
Different corporate structures offer different benefits to business owners, while also dictating different requirements. Be sure you choose the most beneficial structure for you and your business. You have the following business structure options:
- LLC - Limited Liability Companies provide personal asset protection, shielding business owners from being personally liable for business debts. And unlike corporations, LLCs aren’t beholden to the same strict recordkeeping requirements.
- C Corporation - A C Corp is the only type of organization that can "go public" and sell an unlimited number of ownership shares. They do typically get taxed at a higher rate due to taxes being imposed at both a personal and corporate level, however having access to more capital, higher revenue potential, and ultimately profits often offset this.
- Nonprofit - A Nonprofit Corporation is a special type of business structure, which exists to provide certain benefits to organizations that have the main goal of serving the public. Much like with other formal business types, those who run Nonprofits are provided limited liability protection.
5. Pick a name
The next step is to choose a name. Your business name is your brand’s identity, it should be something that represents you well. Avoid names that are complicated to spell or pronounce, but be creative and find a name that is unique and easy to remember.
Need more tips? See our in-depth guide on how to choose a business name.
After you have chosen a name, you’ll need to make sure it’s available. Conduct a quick and free business name search to determine if your desired name has been trademarked or otherwise claimed by another business.
Once you’ve found the perfect name and made sure it’s available, it’s a good idea to claim the matching domain names and social media handles. This will ensure your brand will be easily recognizable across a variety of platforms.
6. Register your business
To make things official, you’ll need to register your business. Most states have their own specific requirements, but there are a few universal requirements.
- Register your business name - After you’ve chosen a name, you’ll need to file your business name with your state’s agency. This will allow you to claim the name and prevent other businesses from using it.
- Get a tax identification number - All corporate entities are required to have a federal tax ID number that is used to identify the business (much like a Social Security Number). This identification is used for a variety of financial reasons: paying taxes and applying for credit, for example. Be sure to apply for this number early on, and store it securely to prevent any corporate identity theft.
- Register for state and local taxes - Take the time to make sure that you have all relevant local and state-level licenses that are required for running a business in your industry.
- Get a business license - Most states require new businesses to get a business license or permit before they can start operating. There’s a generic business license for every type of business in some states, but other states may require specific licenses for highly regulated businesses, such as those within the foodservice industry. Check the regulations for your state and industry to ensure you are in compliance.
Visit our learning center to find state-specific business registration guides to learn the exact requirement in your state.
7. Open a business bank account
The next step in starting a business is to open a business bank account. Even if you are running a small business, it is integral that you keep you and your company’s finances separate. Your business bank account will be used to pay bills and receive payments from customers, so you’ll need to keep it separate from your personal account to keep it organized for easy bookkeeping.
Compare multiple banks to find the right one for your business. Each bank will have its own set of requirements for what you will need to open up your business’s first bank account. Consider the requirements, perks, fees, transaction limits, ATM accessibility, and customer service of each option to find a bank that is right for your business.
8. Develop an accounting system
Mismanagement of financial resources is one of the most common reasons a business fails, especially new small organizations. Once you’ve set up your business bank account, it’s crucial to develop a foolproof accounting system. An accounting system can help you with details such as:
- Quickly creating accurate balance sheets
- Organizing and automating your payroll
- Determining and deducting taxes
Whether you will have an accountant on retainer or plan on using small business accounting software to track your finances, you will want to carefully record your business income and expenses. Making a point to keep your finances organized will save you a substantial amount of time, and likely money, in the future.
9. Obtain required insurance
If you care about the success of your business, make sure you have all of the required insurance policies. BizJournals reports that 75% of small businesses are underinsured by 40% or more and up to 40% of businesses have no insurance at all. The right business insurance reduces your personal liability and can prevent serious financial stress on your business due to uncontrollable events.
Typically all businesses need liability and property insurance, but you may be required to obtain additional insurance policies dependent on your industry, if you have employees, or if you or your employees use vehicles for work purposes. It’s important that you understand these requirements before opening your business so that you can ensure you are in compliance with each of these regulations. You can use a product like SureApp to help you get insured easily and quickly.
10. Research and conform to all regulations
There are several governing bodies (OSHA, the Department of Health, etc.) that exist to make sure that your business is operating to code. Make sure you understand which organizations will be monitoring your company, and then make sure that you are in compliance with their rules and regulations. Failure to keep up with these requirements can result in serious business ramifications, including:
- Government imposed fines and fees
- Increased government scrutiny
- The dissolution of your business
If you need help determining what compliance requirements your new business will have to follow, it is best to seek out the advice of a registered agent or attorney.
Learn more about business compliance requirements in our blog.
11. Set up your business location
Whether you plan to have a physical location that customers can visit or operate solely online from your own home, you will need to set up and organize a space for your business. Keep these considerations in mind when setting up your business.
For physical locations:
- Is it big enough? Consider the amount of space you will need when browsing available listings. Will you need a retail space or will you only need office space? Will you require a warehouse for storage or a workshop? These are all things to keep in mind in order to find the most optimal space for your needs. Conversely, avoid choosing an option that has too much space to save on costs.
- Is it conveniently located? A conveniently located business is essential for customers and employees. If you’d like customers to come to your business, choose a location that is easy to navigate to, find, and park. If you have a service-based business, you’ll want to choose a location that is central to your service area so that employees can quickly travel to and between job sites.
- Will you buy or lease? Determine whether you will buy or lease a building or suite. Buying a commercial property will build equity and has the potential to appreciate in value or become a source of rental income, but leasing is typically the more affordable option for small businesses.
For home-based businesses:
- Do you have a dedicated office space? Even if you plan on running your business out of your home, it’s still recommended that you have a dedicated office space. You will need somewhere to work on your computer, take phone calls, and store important documents. Reserving a space in your home for business purposes will allow for better organization and work-life balance.
- Is there enough storage? In addition to office space, you’ll need to consider if you’ll need storage space and how much. For example, if you run an e-commerce store you will need somewhere to safely store your products and packaging.
- Do you have reliable internet? If most of your business is done online, it’s crucial to have a strong and reliable internet connection. Some equipment, such as routers or wifi extenders, can help improve your connection, but if you live in a dead zone, you may want to reconsider operating your business out of your home.
12. Find and hire relevant business professionals
Having skilled and reliable employees can be a great asset to any business. Even if your business isn’t large enough to warrant multiple employees, there are a few essential roles that can be filled on a contractual basis. Consider outsourcing these roles to save yourself time and stress.
- Legal counsel - A proficient attorney can help protect you and your business in the event of any unforeseen legal problems.
- Accountant or bookkeeper - An accountant can assist you with legally minimizing your tax-related expenses, and help ensure that you are correctly keeping track of your financial assets.
- Registered agent - A registered agent's primary role is to receive any formal correspondence between government agencies and your business to help keep your business compliant.
When you are ready to hire additional employees for your business, talking to other business owners and conducting research using professional directories is a great way to find professionals that will fit your needs.
13. Create a website
Now that the Internet is easily the most widely-used information source among all types of customers, it is integral that your company has a website. Your website is one of the first things a customer will seek out when determining if they will do business with you, so it’s important to make a good impression. Make sure that your website is a good representation of your business and provides useful information about your products or services.
If you’ve never built a website, you have a few options. Either look into template-driven options that you can create yourself, or locate a reliable and skilled web development agency or freelancer that can build a site for you.
14. Market your business
Before you can make your first sale, you’ll need to reach your customers. To do this you’ll need to develop a marketing plan. Your marketing plan will organize and outline the steps you’ll need to take in order to successfully market your business.
Consider the standard marketing channels and determine which combination of the two will work best for your business.
- Traditional marketing - Traditional marketing is the conventional mode of marketing that helps businesses reach out to their audience with various offline advertising and promotional methods, such as billboards, flyers, mailers, and print and broadcast ads.
- Digital marketing - Digital marketing is the more modern approach to marketing that allows businesses to precisely target their audience and connect with them with the help of various online methods, such as organic search, email marketing, and search and social ads.
15. Grow your business
Launching your business is only the beginning of your duty as an entrepreneur. Businesses don’t achieve success overnight, so it’s important to plan what steps you’ll need to take to grow your business and make it profitable.
The last step in starting a business is to create a growth plan. A growth plan is a roadmap that guides your business from Point A to Point B, helping you make business decisions that are aligned with your goals.
Learn how to make your own growth plan with our comprehensive guide.
Swyft can help make this process as smooth as possible
There is a lot to getting a business up and running which means there are plenty of things to do even if customers aren’t available right this instant. Because one blog post can’t cover it all, we helped write an e-book on How to Start a Business From Scratch. As you can see, there are plenty of things you can be doing in this downtime to put your company on a path to success. Don’t let this time go to waste.
To help you be productive during this time, we have curated the articles from our Learning Center to help you accomplish some of the things we discussed above.
- Read about business models and make sure you have the right one
- Why it may be a good time to start a business
- Maybe now is a good time to start a less risky micro business
- How to start a home-based business
- How to start a business with little to no money
- When to incorporate your side hustle
- How to create a business plan
- How to start your business starting right
- How to start a nonprofit in 8 steps
- We also made an entire ebook on How to Start a Business From Scratch
There’s even more in our Learning Center.