Starting your own business: a primer
For many Americans, starting their own business is part of the American Dream. It requires careful preparation and consistent execution. But if you’re willing to follow expert advice and exercise diligent effort tempered by patience, you stand a good chance of getting a successful and profitable venture off the ground.
Here are some tips on how to get your business started:
Take a realistic self-inventory
What are your strengths and temperament? A prospective business owner needs to have the motivation, adaptability, optimism and resilience necessary to see a business idea all the way to full realization. Assuming you’ll be profitable right away is a common small business mistake, so make sure you’re prepared to possibly lose money in the short term when starting a business.
Have a strong idea
A business should be built around something that the owner is enthusiastic about and is experienced in, and that somehow improves people's lives.
Write a business plan
A business plan is crucial to understanding the path your business will take. This document usually projects three to five years forward, outlining the steps an organization will take in order to grow revenue.
After an overall executive summary, you should outline the new company in terms of what it does and what differentiates it in the marketplace. Next, devise a market analysis comprised of well-researched data on the industry, the marketplace and the range of existing competitors. Resources such as Hoovers, the US Census Bureau, the U.S. Commerce Department's Economics & Statistics Administration, as well as your local chamber of commerce or business development agency, can offer extremely valuable data and expertise.
The business plan should include an explanation of the company's organizational and management structure, along with a description of the product line or services. Outline the sales and marketing approach, with a well-thought-out and realistic strategy. If you're not entirely self-funded, explain how initial funding will be pursued. Provide realistic financial projections.
Finally, add an appendix containing useful information, such as permits, certificates, leases and resumes.
Create a financial assessment
Measure your available assets versus the necessary costs of the startup business. Commercial bank loans, although often difficult to obtain, can bridge the gap. There are also small business loans from the Small Business Administration.
When sizable capitalization is needed, many new owners turn to outside investors, although these investors will usually demand a large say in the running of the business.
On the other hand, a crowdfunding campaign can involve a great many backers, each contributing a relatively small amount, therefore enabling the originator of the business idea to retain decision making rights.
Once you acquire funding, you have to spend the money wisely. That means finding ways to cut down on business expenses without sacrificing on your product or service.
Pick a designation for your business
There are several technical, officially recognized designations a business can hold, denoting the organization's basic structure. The title you choose will affect tax and legal issues relating to the business.
The simplest form is a Sole Proprietorship (SP), meaning that one person -- the owner -- will assume all responsibilities. A Limited Liability Corporation (LLC) offers a compromise between the simple, streamlined SP and the more complex, liability-shielding Corporation. There are also such designations as Cooperative, Partnership and S-Corporation, the latter of which is for larger companies. An attorney, tax accountant or associate at the U.S. Small Business Administration (www.SBA.gov) can further explain these classifications and their relevance to your own business.
Figure out tax obligations, licenses and permits
A business may owe income, self-employment, employee and excise taxes. It is recommended to plan for these financial allotments at the outset. Larger businesses will need to get a federal employment identification number, and most companies will require state licenses, a local tax registration certificate and local permits, such as zoning variance and conditional use.
Decide if you’ll offer an employee benefits plan
If you plan on hiring employees for your small business, it’s not always as simple as figuring out a salary. Offering an employee benefits plan can help your small business attract talent and provide protection for workers. Luckily, there are plenty of flexible employee benefit plan options tailored for small businesses.
Obtain the legally necessary and recommended insurance plans
A new business requires certain kinds of insurance. Some types are mandated and some types are strongly suggested to protect against worst case scenarios. The two required insurance plans are surety bonds - required in some industries - and workers compensation insurance. Surety bonds can be bid bonds, payment bonds, performance bonds or ancillary bonds.
Among the recommended insurance plans are personal disability, general liability and BOP (Business Owner Policy), professional liability (often called malpractice), employment practices liability, commercial auto, cyber liability and umbrella.
New business owners should speak to a trusted insurance professional to find out which policies would help the owner avoid financial or legal disaster based on their specific industry.
In addition to these steps, a new business owner must be ready to continuously brainstorm and solve problems; seek out new information, feedback and advice; and network with would-be customers as well as suppliers. Branding and advertising - both online and offline - are essential and must be approached with a flexible-minded, long-term game plan.
Following methodical, concrete steps such these promises anyone starting a new business a good chance at success. Don’t forget to contact Nationwide for information on the various insurance coverages to protect your new business.