Short Guide: How to Start a Busines

Inspiration can come from anything, a book, television show, acts of kindness, or a simple thought or idea. You’ve found your inspiration and now have an idea to start a business. It’s always a great feeling to become your own boss, but are you ready to commit and dedicate yourself to it?

Starting a business takes a lot of hard work and can be very time-consuming. When considering starting a business, you must do your research to fully understand how your small business can compete in the market. So if you’re ready to turn your side hustle or develop a new product, then continue reading this blog.

FIND YOUR NICHE

Before classifying yourself as an entrepreneur, take a moment to reflect on your small business idea. Think about these two questions “what makes my business different?”, “what problem can my business solve for consumers?”. After understanding your value proposition (the benefit or reasoning consumers would choose your business over competitors), it’s time to do your research. Take a look at similar small businesses in your industry and area and ask yourself “is the market too saturated, or can I do something better?”. This will help you decide if your potential small business will be able to compete and or be sustainable to execute and grow.

WRITE A BUSINESS PLAN

You’ve found your niche and determined that you’re ready to develop the idea. The next step is to write a business plan. A business plan is a written document that describes the business and plans for reaching its goals. The purpose of a business plan is to provide an overview of your small business for investors (or banks to receive a loan) and forecast your finances. The following sections are important and are commonly found in almost every business plan. Use this as an outline to begin writing your business plan.

Executive Summary

The executive summary is the first section that appears in a business plan. This conveys the basis of your small business; your product or service offering, the structure, mission, and other details about your business. It is also good to provide a brief overview of your financial projection and ways to generate revenue. Investors will want to see growth action plans.

Description

This is where you provide specifics. Dissect your product or service, define your target audience, your selling point or value proposition, the name of your business may also be written here, and your team description (if you have one).

Market Research

Remember your earlier research? Now, it’s time to study competitors. In this section, you will need to define two to three competitors and analyze their businesses. Document their operations (what are they doing well, what could they do better, how will you compete, etc.). Gather as much information as you can uncover, including demographics, financials, and unique characteristics.

Financial Forecasting

Here you will provide an in-depth analysis of your finances and funding needs. Try creating a sample balance sheet with operating expenses, cost of equipment or programs, office needs, contractors, and other expenses. Follow up with a cash flow statement; how the small business will generate revenue to cover these expenses.

Vendors

Map out all suppliers or potential partners the small business will need to run or grow. If starting a clothing line, there may be a need for a print/embroidery shop to place designs on clothing. If starting a dropshipping e-commerce website, the business may need a supplier to buy products to house on the website and to ship to customers. As an entrepreneur, it is your job to think through every aspect of the small business that will make it successful.

Funding

In this section, it's time to connect the dots. After you've described the business, defined your target consumer, examined the competition, and identified partners/suppliers, you will then break down the funding the small business needs to operate.

LEGAL DOCUMENTATION

Business paperwork can be overwhelming and confusing, but it is not impossible to complete. The first type of document to file is the Articles of Incorporation or Organization based upon your business structure. There are five common types of business structures to choose from:

Corporation

A corporation is seen as a separate entity (primarily for tax and liability purposes) and contains one or more owners/shareholders. This structure pays corporate tax.

S-Corporation

An S-corporation or “S-corp” has one or more people, not to surpass 100, the owners/shareholders are also separate from business liabilities. S-corps pay personal taxes.

Sole Proprietary

There is only one owner, and the liabilities of the business are tied to that person. A sole proprietor will pay personal taxes and self-employment taxes.

LLC (Limited Liability Company)

In an LLC, there are one or more people who are separate from business liabilities. This business structure pays personal or corporate taxes and self-employment taxes.

LLP (Limited Liability Partnership)

Partnerships contain two or more people who may be personally responsible for any business liabilities (depending upon the type of partnership). They will pay personal taxes along with potential self-employment taxes.

Sit down with a business lawyer to understand each business structure as it can impact business operations, taxation, funding, and other liabilities and assets. The business lawyer will then provide information on filing for an Employer Identification Number (EIN) if needed, state sales taxes, and any permits. The Internal Revenue Service (IRS) website describes each business structure in-depth.

FUNDING

Unless you have a hefty savings account, the search for funding is critical. With a good business plan that lays out the details, friends and family may be more inclined to donate. According to Businessnewsdaily.com, within the first three months of launching their businesses, 22% of founders said that they have received funding from friends and family. Your sphere of influence is always recommended as your first step for funding, next are loans. Banks require new businesses to have a sound business plan that sounds profitable. It can be difficult to secure a loan without any leverage or clear vision as to how your small business will be successful. In other words, how the business will be able to pay back the loan acquired. Another option is government grants. If your small business meets certain criteria (which can be a wide range of requirements), the government may fund your business. Innovative Change Consulting Group can assist you in researching government grants or non-government grants for funding. Don’t rely on one option when there are so many out there.

A small business won’t be small forever. On the path to getting started, hardships and rejection will happen, starting a business takes time, courage, and patience, it won’t happen overnight. Don’t quit your day job, if possible, try starting the business as a side hustle. Freelancing is a great way to grow skills, build a clientele, and earn extra cash to help fund your business. This can make the transition into being a full-time business owner easier as the business grows. Work on the business little by little. If side hustling or freelancing isn’t possible, try segmenting each action item into phases so that it doesn’t become overwhelming. Understand that everyone won’t see your vision. It is up to you to make your small business come to life. There are many resources to help new entrepreneurs. Innovative Change Consulting Group can assist you in forming your business. Schedule a consultation today.