Deciding to start your own business is an exciting time. There are so many possibilities and options ahead. Taking things one step at a time and understanding how to start a business will keep you on track and allow you to make the best decisions possible.
Come Up With a Great Idea
A successful business is built on a compelling idea:
- Is there a service missing in your area?
- Do you have a fantastic idea for a product?
- Do you know how to do something better than most people?
Consider your skills and resources, and pick something you can be passionate about.
Keep in mind that starting a business doesn't always mean starting from scratch. There are a lot of franchise opportunities available. A franchise lets you run a location of an already successful chain. The parent company often offers support to help you become successful in your new business.
Write a Business Plan
You will need to create a business plan so that you can work through important questions and become fully prepared for what is ahead. Be sure to carefully describe who are you selling or marketing to and how you will reach them.
You will need to decide whether your business will be brick and mortar, or an online business, or both. You also will need to include the type of business structure you are going to create—such as a sole proprietorship, LLC, or corporation.
One of the most important parts of your business plan will be your budget and financials. You'll need to determine where the money to start the company will come from and whether you need to seek funding.
You should plan out your projected expenses and profits and map out the types of employees, inventory, and equipment you will need to start a small business. While the business plan is meant to help you think through and plan your company, it is also a document you can provide to potential investors or lenders to help them evaluate your business.
Address the Money Matters
You can't start a business without cash. You may have personal funds you can use. Family and friends may be willing to give you a loan or invest in your business. You may also choose to take out a loan or launch a crowdfunding campaign. The Small Business Association (SBA) offers loans to those starting a small business, as do various other lenders.
If starting your own business is going to require substantial amounts of funding, you may need to consider venture capital or angel investors who can provide larger sums. Using a business credit card is another option, but one that can be risky since the interest rates are high.
Determine Your Business Structure
The type of legal entity is an important choice whether you start an online business or a brick-and-mortar company.
A sole proprietorship is simple to set up and puts you squarely in control. You'll need to register the name you are doing business under with your state or county. While you are completely in control in a sole proprietorship, you also are completely at risk. If the company gets sued, you are personally and financially liable. If the company goes under, you're on the hook for the debts.
A partnership functions in much the same way, except you and someone else are owners together and equally liable.
One of the most popular structures to consider as you determine how to start your own business is a limited liability company, or LLC. This requires some simple paperwork and registration with your state, and provides you with the liability protections of a corporation—the LLC is liable, not you—while still giving you the tax benefits of a sole proprietorship or partnership, as profits are passed through to the owners who report them on their personal taxes.
A corporation may be another option to consider, completely separating your own liability from that of the company. Incorporating may provide additional benefits and better access to capital. There are different types of corporations with different kinds of taxation to consider.
Once you have done the necessary paperwork to register your company and obtained the funding you need, you will be ready to choose a location, hire employees (if necessary), begin production or offering of your services, register with the state and federal government for tax I.D. purposes, obtain any business licenses required in your area, consider business insurance, and set up a business bank account.
With the right advance planning, you can create a new business that fulfills your dreams and is more likely to be successful.