In the United States, small businesses made up 99.7 percent of all businesses in 2016, according to the Small Business Administration. These 28 million small businesses employ over 1 million people and there was more than a 38 percent increase in minority owned businesses compared to 2015. For many people, owning a business means designing a career that is flexible, is a way to invest in yourself and provides you with financial independence, but that does not mean every small business will be successful. In fact, only about two-thirds of all small business are still operating after two years and only half will survive five years, something that has not changed much over time. There are significant challenges to starting a small business, but these ten tips can help you prepare for success and could make the difference between whether your company survives or fails.
Research is Critical
You may have come up with a strong business idea, but if you don’t balance the idea with reality, you could be destined to fail. A small business must solve a problem, fill a need or offer something not currently available in the market and that the market indicates it needs. There are many ways to conduct research on your business. You can conduct focus groups, offer surveys or even use trial and error to determine the need for your idea. You need to answer certain questions with your research, however, be sure you get valid information. These may include:
- Who needs your proposed product or service?
- Is your product or service already available on the market?
- How much competition is there?
- How well will your business fit into the existing market?
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Create a Business Plan
A business plan is a blueprint for your business that will guide you from the starting point and through establishing your company. It should also include details about how you plan to grow your business. If you will need to obtain financing for your business, banks and other financial organizations will expect to see a professional business plan. If you don’t need financial support to start your business, you may not need an elaborate plan, but you still need something in writing to help guide you through starting and operating the company.
Financial Knowledge is Important
Even a small, home-based business may require an initial investment and every business eventually needs to cover regular expenses. Create a spreadsheet that includes your initial start-up costs which may include:
- Grand opening events
- Legal fees
- Licenses and permits
- Market research
- Property leasing
Create a second spreadsheet that includes ongoing expenses like rent, utilities, marketing, production, travel and employee salaries to determine what you will need on an ongoing basis to keep your business operational. If you discover that you will need financing, there are several places where you can go, including the Small Business Administration, banks, angel investors, crowdfunding and agencies that award grants.
Select a Business Structure
Once you have established funding to start your business, whether you choose a financing option or use your own funds to get the company off the ground, you need to determine what type of business structure you will follow. You may choose to act as a sole proprietorship, which means you own the business yourself or you may open as a partnership where you and one or more other people operate the business together. You can also choose to operate as a limited liability corporation (LLC) or a corporation. These have more legal requirements than a sole proprietorship or corporation but also offer more protections to you personally. The type of structure you choose has an impact on your taxes, your name and your liability. For this part of your plan, you may want to consult with a CPA or attorney.
Choosing Your Company Name
The name you choose for your company has an impact on all aspects of your business. Think through all possible implications. Choose a name that people will connect with your business. Once you have chosen a name, you need to be sure it is not currently in use or held under a trademark. If you have chosen to operate as a sole proprietorship or partnership, you will need to register the name with either your state or county. Corporations or LLCs are normally registered when the corporation documents are filed. You will also want to register a domain name for your company website.
Obtain Licenses and Permits
As tedious as it can be, obtaining the proper licenses and permits are important for any new business. If you are starting a home business, you may need to check zoning laws in your area to be sure you are permitted to own a business at home. Almost every state requires that companies acquire a business license, and these are usually renewed annually.
Create an Accounting System
Most small business owners will tell you that when they started their business, the accounting requirements were the most difficult to manage on their own. Your accounting system helps determine your budget, how you set your rates, how you pay your bills and how you file your taxes. Using a system like Quickbooks allows you to easily set up an accounting system on your own or you can hire a professional.
Determine Where Your Business Will be Located
Your business location is another very important factor to decide. If you are locating in a retail location or building away from your home, you want to be sure it has adequate square footage for your equipment, storage and the setup you have in mind. You also need to decide if buying a location or leasing a commercial space makes more financial sense. Read this article on How to Set Up your Own Home Office.
Hire the Right Team
Once you have established financing, a location and put your business plan into motion, it is time to begin hiring employees. Create written job descriptions for each position you will need to fill, including all job responsibilities. The Small Business Administration offers many tips for hiring your first employees. If you have decided to hire independent contractors, you want to work with your attorney to create an independent contractor agreement before beginning your search. If you will be operating your business alone with no employees, you still want to have a strong support team in place. Consider finding a mentor, small business coach or family members who will provide you with advice, motivation and assistance when you need it.
Marketing Your Business
Once you have everything in place, you will want to start bringing in clients or customers. If you created a business plan, marketing should have been included as part of the plan. You can use that initial plan to expand it into a detailed marketing plan. There are many free marketing tools you can use as well. For example, your local Chamber of Commerce may offer email advertising to members at no or reduced costs to get the word out. You can also use social media and other online sources to advertise. It is important to remember, however, that you will eventually need to spend money on marketing to reach the maximum customers you can, so be sure to include that in your budget.
Owning your own small business can be exciting and rewarding, but it can also be frightening and complicated. By following these ten simple tips, you will set up your new business for success and be better prepared if you run into difficulties. Remember that business success will not happen overnight, but with consistency and dedication, you can build your small business into a successful enterprise.
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