So, do you want the good news or the bad news first? The bad news is, starting a small business isn’t quite as easy as the title of this post makes it seem. The good news is, every new business venture has to start somewhere, and often simply jumping in is the best place to start. Many successful entrepreneurs before you have been in your shoes and many dreamers to come will navigate the same challenges. Before you set your sails for success, take note of these 10 tips to push yourself off in the right direction.
1. Research Your Business Idea
You can always tell a great business idea from the so-so ones by the way it energizes you. Suddenly, something in you has clicked, like sliding the final pieces into a jigsaw puzzle, and now you can almost see the big picture. Even great ideas, however, can fall short of their potential without the proper research to support them.
Turn your great idea into a thriving business through extensive market research and competitive analysis. This process will help you get a well-rounded understanding of your industry, market, and target demographics, so you can fine-tune your idea. Aim to answer the following questions:
- Is there a demand for your product or service?
- How big is the customer base for this business?
- What does your ideal customer look like? (E.g. Gender, economic status, age, etc)
- What is the geographic range your business will serve?
- How many competitors are already in this market and who are they?
- What is the potential price range for your service and your competitors’ service?
You’ll also want to conduct an analysis of the competitive landscape. This will help you understand what other businesses you’ll be up against. Research the following about your competitors:
- Strengths and weaknesses
- Market share
- Opportunities to enter the market alongside them
- Who their target market is
2. Create a Small Business Plan
After you’ve added dimension to your idea, write a small business plan to organize it. A business plan will serve as a foundational tool for building your business, so dedicate time, energy, and thoughtfulness needed to create it.
Not only will this plan help guide the structure, operations, and growth of your small business, it can also convince potential lenders and investors to partner with you. Aim to include the following in your business plan:
- Executive summary: This is a brief, high-level overview of your business idea. Think of it like the spark notes of your business plan.
- Company description: Provide a detailed profile of your business. Explain key points like who your target consumer is and what problem you’ll solve.
- Market research and analysis: This is where all of your previous market research will come in handy. Use this section to summarize that information.
- Company structure: Provide details on how you will structure your company.
- Product or service: Describe your product or service and its benefit to customers. Include a breakdown of the product lifecycle.
- Marketing or sales strategy: Pitch how you will connect potential customers with your product. Include details on sales and marketing approaches.
- Funding request or financial projection: This is the grand finale to your plan. Include a specific ask for funding along with a breakdown of how exactly the funding will be spent.
3. Pitch & Revise Your Business Idea
Take your business plan and pitch it to a handful of people to get meaningful feedback. Aim to include a diverse audience to read your idea to eliminate biased opinions that can prevent you from seeing major flaws (sorry, mom). Go the extra mile and present your idea to get practice articulating your business and funding request — you never know when you might find yourself in front of investors.
There’s no shame in going back to the drawing board. Sometimes, you’ll need a few revisions to nurture an idea into a successful business. It’s better for small business owners to work out the kinks early on than be overwhelmed by trying challenges down the road while juggling a team of employees and customer orders.
4. Get Funding
Beyond requesting funding from investors, take time to research grants and loans available to small businesses. There is a wealth of opportunity to get you the capital you need to turn your startup into a reality. The Small Business Administration (SBA) is a champion for startups and freelancers looking for financial help to continue succeeding.
The SBA offers a variety of grants, including those for businesses involved in scientific research and development, businesses looking to foster long-distance relationships through exporting or general loan assistance. The SBA also provides disaster loan assistance should your business become economically injured due to an unforeseen crisis.
5. Open a Business Bank Account
Having a separate business bank account is crucial to keeping your business finances organized and under control. Take advantage of super-efficient mobile banking services that help you manage your finances right from your smartphone.
Mobile banking means you can deposit checks, move money, or track spending habits at any time. Some, like NorthOne’s small business banking, integrate your accounting and bookkeeping tools with your bank account so you can have ultimate transparency into the financial health of your business.
6. Learn About Cash Flow
Speaking of financial health, it’s a no-brainer that a healthy business is a successful one. Once your business is up and running, prioritize cash flow as a regular part of your financial management. This will help you stay on top of your spending, as cash flow provides insights into how your money is being spent. Calculating your small business’s cash flow can be an overwhelming task the first few times, so learn how to calculate cash flow (add interlink to upcoming “How to Calculate Cash Flow” article) early on to familiarize yourself with the process.
After you calculate your cash flow, take the time to conduct a cash flow analysis as well. This provides deeper insight into your finances and will allow you to make intelligent adjustments to your spending that can help your business grow.
6. Determine Your Business Structure
Before you register your business, you must determine how your business will run. This goes beyond management and the hierarchy of your employees. The business structure of your venture legally affects everything from taxes to liabilities. The four types of business structures are:
- Sole proprietorship
- Limited Liability Company (LLC)
A common mistake of new entrepreneurs is to register their business as a sole proprietorship. People typically gravitate towards this choice if they own the business entirely by themselves and want total control over how it’s run.
However, choosing to identify as a sole proprietorship places your personal assets and personal credit at risk. The choice that adds the most protection for new business owners is to identify as an LLC. This creates a defined line between your business and you. Meaning, your personal assets are protected should something go wrong. Of course, every business is unique so be sure to research each type of structure to determine which is best for you.
7. Register and Get IDs
Okay, so you’ve mapped out the business plan, shaped the idea, decided on the perfect name, and figured out your legal structure. It’s now time to register your business to distinguish it as its own legal entity. The process for registering (as well as the requirements) may vary depending on the state you are registering your business in.
Federal registrations to consider:
- Register in order to get trademark protection
- Register in order to get certain tax exemptions
- File to get a federal tax ID or employer identification number (EIN)
- File with the United States Patent and Trademark Office to trademark your brand or business name
Note that most businesses opt out of registering to get trademark protection or tax exemption status, but it’s worth mentioning so you know your options.
You’ll need to register with the state agencies, like the Secretary of State’s office, a Business Bureau, or business agency, if your business checks one of the following conditions:
- Has a physical presence in the state it’s registering in
- You frequently do some level of business in the state
- A significant percentage of revenue comes from the state
- Employees work in the state
8. Apply for Licenses and Permits
Business licenses and permits are other legal pieces that you’ll need to comply with your state, federal government, or industry regulations.
The license you’ll need, as well as what information is required in order to file and be approved, depends on the industry your business belongs to. Research the various licenses from the SBA to research accurate information. It costs money to get business licenses and permits, so you need to prepare for this expense. Additionally, some licenses and permits have expiration dates. Pay close attention to when your documentation will expire to make sure you are always legally operating your business.
9. Create Visibility
After overcoming the hurdles associated with getting your business structured and registered, start building brand visibility. Dedicate time to creating a user-friendly website where customers can easily access your business. Include comprehensive information about your mission statement, products, contact information, and links to social media accounts.
Explore innovative marketing ideas to attract new customers to your business. Don’t be fooled by the ornate advertising methods of bigger corporations; you don’t need deep pockets to create an effective marketing plan. Strategies like publishing diverse, quality content to a blog or leveraging social media to showcase your products can have a powerful impact.
10. Network & Create New Relationships
Lastly, networking is vital to the success of any small business. What really sparks buzz around that mom-and-pop eatery on the far corner of your city’s downtown center? Sure, the food tastes like a cozy hug on a plate, but it’s the word of mouth that keeps the foot traffic coming. Put effort into nurturing your relationship with the local community, including fellow businesses in your area (yes, even the ones in your industry). This will help build a positive reputation that encourages customers to choose you and your business time and time again.