As much as we may wish the opposite were true, you simply cannot start a small business overnight. It’s a long, drawn out process with scores of intricate, moving parts. What’s more, many of those “parts” have to be put in order of before opening day. No matter what type of business you’re starting, there are things you need to have ready to go before launch.
A Business Plan
It’s tedious, I know, but creating a comprehensive business plan is incredibly important. Not only will you need it to secure financial backing from investors, you’ll also need it as a guide to help manage your business effectively through the years.
A solid business plan should include an executive summary, company overview, industry analysis, customer analysis, competitive analysis, marketing plan, operations plan, financial plan, management team, and projections. The plan should be 30 to 50 pages long. If it’s too short, it may not be properly addressing every facet of your business (which can lead to trouble later on down the road.)
Unless you’re independently wealthy, it’s likely you’re going to need financial help in the form of investments or loans. Before you head to the bank with your business plan in hand, take some time to thoroughly assess how much money you will need to start your business, maintain operations, and live comfortably. Since you’ll definitely encounter unexpected expenses along the way, play it safe and give that number some ample padding.
A Registered Name
You’ll need to register your business name with your state or local government so no one else can use it (in your state). It’s important to note that this type of registration doesn’t provide trademark protection in the 49 states where your business is not registered. If you plan to operate on a national level (this includes online services), it’s a good idea to get your business name trademarked with the U.S. Patent and Trademark Office. This will provide much stronger protection for your brand.
Businesses that operate as a corporation, partnership, or have employees must have an Employer Identification Number (EIN) from the IRS. An EIN is used by the government to identify your business for tax purposes — it’s kind of like a Social Security number for businesses. Even if your business is a sole-proprietorship, it’s still wise to apply for an EIN as it creates further separation between your business and personal liability. Keep in mind that you’ll need an EIN to open business accounts, apply for business licenses, and file tax returns,.
A Legal Structure
When choosing a legal structure for your business, the main things you’ll want to consider are taxes, limitation of personal liability, ease of transferability, and admission of new owners.
This process can be difficult as each type of organization (sole proprietorship, partnership, corporation, S corporation, LLC) has advantages and disadvantages. I recommend discussing structure with both an attorney and an accountant before making a decision.
Permits and Licenses
Depending on the industry you’re operating in and where you’re located, you may need several permits and licenses for your startup. Most licenses are at the state level, but you may need to be licensed on the federal level as well. A federal license will be required if your business is involved in any activity that is supervised and regulated by the government, such as alcohol, tobacco, aviation, or broadcasting.
A Business Account
Though it’s easy to use your personal account to pay for business expenses, it’s not a habit you want to get into. If you plan on making any major purchase (say, through suppliers) or running payroll, you’re definitely going to need a business account. Fortunately, many banks and credit unions offer free business accounts — all you need is your EIN and business license and you’ll be good to go!
It’s always better to have insurance and not need it than to need it and not have it. Before you launch, determine what property will be requiring coverage. You may want to consider liability insurance for your premises, business vehicles, and products. If you work from your home, ensure your homeowner’s insurance will cover damage and theft of your business assets. You’ll most likely need a combination of insurances, something that can be obtained in a Business Owner’s Policy (BOP). Contact your local insurance brokers to answer questions and find the best price.
If you’re opening a brick-and-mortar business, you’ll need to figure out your location fairly early on in the game. Start by determining how much rent you can afford. Then, look for neighborhoods that would be good for your business and fit your budget. If you’re going to be running a retail business, pay close attention to foot traffic, accessibility, and any other factors that will have an impact on how many people walk in your store.
Websites are no longer an option — they are a necessity. Choose an appropriate domain name (as close to your business name as possible) and build a clean, organized, and visually interesting website. Make sure contact information and business hours are easy to find. For SEO purposes, it’s a good idea to start a blog and post helpful, engaging, or thought provoking articles (related to your business/industry) at least once a week to help your website rank higher in the search engines.
Starting a business isn’t the easiest of tasks, but once you get going, it can be one of the most rewarding experiences of your life. If you take your time, plan appropriately, and make sure all your ducks are in a row, you’ll have a much higher chance of succeeding where others have failed.