One of the most rewarding things that a person can do is starting a small business. Being an entrepreneur can give you the ability to explore your passions and creativity, directly profit from your hard work and create something that can be passed onto your children. However, the process for starting a small business remains a mystery for many. To help, below are some steps you can use to make your dream of being a small business owner a reality. If you have made the decision to stop being an employee and become a business owner, this action plan is likely for you.
Step 1 – Decide on the Kind of Business You Want
The first step to becoming a small business owner should always be investing yourself into one of your passions. Being a small business owner can be extremely stressful especially for the first few years. It is likely to eat up all of your time and put a strain on other parts of your life. Make sure your business idea is related to something you enjoy. Do some soul searching to determine what idea or ideas are worth investing a good portion of your money, effort and life into. Enjoy cooking? How about a bakery or restaurant? That is assuming that you want a brick and mortar business and can afford the start up costs. Or, how about starting a food blog? This would be much easier to start and require very little in the way of startup capital.
Step 2 – Perform Market Research
After you have decided on the kind of business you want, you need to do some research to check whether or not your aspirations for a small business are feasible in the marketplace. Unfortunately, most new businesses fail. You need to make sure that you have a clear shot at success before you launch your company.
Do research into similar businesses that exist in your area or elsewhere. Have they been successful? Is your product too similar to theirs to compete with those established companies? Is there anything you can learn from how they do business? If a market currently doesn’t exist for your product or service, perform market research to discover whether or not people would be interested in what your proposed business would offer them.
Other questions you will want to find the answers to during this step is in regards to startup costs. If your ideal business is a brick and mortar, what will it cost to get that up and running? Is it possible that a franchise exists that would fit your passion and interests and would be a turn-key operation? Perhaps the most important step in your journey may very well be the market research phase. Since so many businesses do ultimately close their doors, you will want to make sure your research is rock solid.
Step 3 – Find Suppliers
If you decided that your small business idea is feasible, you must now begin doing some legwork to seek out other business entities that can help get your company up off the ground. For example, if you want to start a submarine sandwich shop, you need to seek out suppliers such as bakeries and food service companies that can provide you with the needed ingredients and supplies. If you wish to create a retail store product, you need to seek out distributors that can put those products on store shelves. Depending on the type of business you will be starting, finding suppliers of goods and services is a key step in your business progression.
Step 4 – Get the Needed Paperwork in Order
Businesses are highly regulated at the federal, state and local level. One of the most important steps of starting a small business is making sure you bring it into existence legally. Otherwise, you may end up being forced to close your doors by authorities.
Make sure you know the legal processes you have to complete. Also get all the necessary paper work and forms in order well before you submit them. Things you may need to do include obtaining a business license from your state, incorporating your company, obtaining zoning permits, gaining copyright protection, meeting health department standards, purchasing business liability insurance and more. All of this can be quite overwhelming so take your time.
A good first step in this category would be to decide your business structure. Ideally you wouldn’t want the business to operate under your own name, or with you taking all of the liability should something go wrong. For this reason, you would want to research setting up a Limited Liability Company or LLC. Alternatively, you could look into setting up a C or an S Corporation. The main reasoning behind this, along with some tax considerations, is to transfer liability away from you as a person, and onto the Corporation. While there are online resources that will help you set up an LLC or Corporation, our recommendation is that you consult a local business attorney. Each State will have their own requirements for setting up a Corporation or LLC, so be sure to follow your State-specific guidelines.
Step 5 – Create a Business Plan
Next, you should complete one of the most important steps of the process, drafting a business plan. A business plan is certainly needed if you wish to obtain a loan to start your new company. A business plan can be thought of as a formal declaration of the business goals you are seeking to achieve with your proposed company.
This plan needs to be very specific. It should include a thorough overview of the products and services you wish to provide, an analysis of the market you wish to operate in, an explanation of your marketing plan as well as specific financial figures that will be required to put this plan into action. For more information on how to craft a business plan, check out the Small Business Admiration’s website on the topic.
If you have never created a business plan before, and not many of us has, you will definitely want to get some professional help. Yes, you can follow a guide or use the Small Business Administration guidelines, however, this is not a simple task for the newbie business owner. If you aren’t fully comfortable with market forecasts, profit and loss projections, cost of goods sold, and more, then definitely get a professional to help you through the setting up of a formal business plan.
Step 6 – Create a Budget
You need to get into the nitty-gritty of how your business is actually going to function in the real world in terms of finances. Without budgets, you may spend too much money and bleed yourself dry with no firm plan on how to right the ship. The budgets you create should include specific figures relating to start-up expenses, fixed operating costs, overhead expenses, employee payroll, an initial marketing plan used to sell your products to customers and more. This will all be subsumed in the business plan but you will definitely want to get as down to nuts and bolts as you can. Fact is, you can’t run a business without getting down to brass tacks so to speak. There are no “gut feelings” when it comes to business and money. Instead, you need to become a mini-accountant, a trusted leader, and a financial guru of sorts to run your business. Of course there are always CPA’s to help you through this process but we urge you to learn as much as you can about the financial side of running a business.
Step 7 – Create a Marketing Plan
To successfully launch your company’s products or services, you also need a marketing plan. Like your overall business plan, your marketing plan should be very thorough and specific. While there are definitely ways to market you business without spending any money, some of the below strategies will cost some money to implement.
The marketing plan should include information regarding your products, pricing, distribution plans, advertising strategies, promotions, customer service solutions and social media strategies. You also need to include information on the demographics you are targeting, the brand you are trying to create and the position you are trying to obtain in the marketplace. Other considerations for marketing might be the building of a company website, a social media marketing strategy, and what your advertising opportunities will be (with associated costs of each). There are definitely resources available that will help you create a marketing plan but this is another area you might want to hire a consultant to help you with.
The success or failure of your business lies in marketing to some degree. You need customers to buy your product or service and marketing is the main way to reach those potential customers.
Step 8 – Obtain Financing
If you have done all of the steps above properly, you should now be able to go out and find financing for your proposed small business. This of course is assuming that you are planning a brick and mortar operation. Use the budgets you created earlier to determine how much capital you need to get your company up and running.
Unless you are independently wealthy, or have an idea for an inexpensive business startup, you will need outside investment. Don’t be afraid to reach out to people who you have already networked with before. This can include past business partners, former clients, family members, friends or other associates. You may also need go to people you have not had prior relationships with before such as banks and investors. Use your business plan you created previously to convince them that your proposal is sound and they are more than likely to make their money back if they give you a chance.
A best case scenario, and certainly a more conservative approach, would be to bootstrap any new business if at all possible. If you plan to start an online business of some sort, you likely won’t need any financing. Websites are very cheap to set up and maintain, however, there is a steep learning curve to actually earning money outside of a brick and mortar operation.
The important thing to remember here is that some of the above steps might take a very long time to complete. Depending on how complex your proposed business is, some of the above steps might takes months to accomplish. If this will be your first business you will definitely want to err on the side of simplicity when starting off. The more complex your business idea is, the more money that is needed to get the idea off the ground, the more chance you are taking.
If you are ready to get going on your entrepreneurial journey, we hope the above guide will get you going in the right direction. Good luck!
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