Starting a business is complex. The initial decision to build on a idea is not a simple one. It is not something to take lightly, but most entrepreneurs know that once an idea for a venture has developed it is almost impossible to let it go.
I have had sleepless nights thinking about how I would market a business. I’ve tossed and turned over what products or services I should offer. I have made lists after lists of who I believed would be best served by my products or services. Then in the dawn of the morning, I would sit with my head in my hands and ask myself the question that can kill a dream. “How do I get started?” When there is no clear answer in sight, a dream can be deferred until it is dissolved into a would’a, should’a, could’a (or would have, should have, could have depending on the vernacular you use in your self-talk).
I have a cousin-friend that always tells me that, “Cousin, you can kill a dream, but you can’t kill a plan!” So, let’s think of the steps of building a plan like a recipe. Good recipes provide an outline of structure to build upon. The order of how your mix them and additional ingredients you add will depend on what outcome you are looking for. Starting a business involves planning, outlining key financial decision, and completing some legal activities. This 8-ingredient plan will result in the beginnings of a solvent empire!
Ingredients:
- A business plan
- Get business assistance and/or training
- Choose a location
- Finance your business
- Establish a legal structure
- Register your business name
- Secure a Tax ID number
- Register for State and local taxes
Directions:
A business plan serves as a base to build off of. This is considered a living document, because it will project 3-5 years ahead and define a clear route you want to take in order to grow your business revenue. First start by writing down every aspect of your vision. The writing need not be in technical terms, but it should contain as much detail as you can muster. Once you have this draft completed, contact local Small Business Administrations or SCORE to take advantage of free or low cost counseling services. These types of organizations will be able to assist you with identifying strengths and weaknesses in your plan. They may also serve as a great resources for securing finances to expand or relocate your business.
Where you do business is extremely important. This step requires research about the area and the market you intend to serve. It may be not wise to open a mom and pop coffee shop next to Starbucks. You may have better coffee and pricing, but their branding will likely overshadow your advertisem*nt efforts. If you are manufacturing (sewing, crocheting, woodworking, etc.), you may have to decide if you can convert an area of your living space to serve as a small workshop or if you need to rent a larger space. Remember, deciding on a location involves the demographics of your market, assessing your inventory needs, scoping the competition, staying within a budget, and understanding city zoning ordinances.
Are you going to liquidate a savings or investment account to fund your start-up? Are you looking to raise funds through venture capital? Funding will have a direct impact on your chances of success, its scale, and long-term prospects. It is perfectly reasonable for a craft business to start small with little funding. As product is made and sold, revenue is set aside to fund expansion. Other industries may require that you amass a large amount of inventory or goods to build your product. The funding needs vary; nevertheless, every business needs money to successfully grow.
Business structure will determine taxation and liability. As a sole proprietor, you may deduct some business expenses on your personal income taxes. Selecting the proper entity type is also an exercise in risk assessment. Let’s face reality; we live in a litigious society. You want to protect yourself and your personal assets against unjustified claims. If you are starting a white-water rafting instruction school, limiting your level of liability against claims would be wise. For this part, I would suggest you talk to an attorney (or spend hours reading up on every possible structure). Your CPA can assist you with the taxing requirements for each, but do the work to understand the liabilities that come with each structure type. (*I am not an attorney and the information in this section is not intended to be legal advice). Once you pick your structure, register your business name and secure your Federal Tax ID Number aka Employer Identification Number (EIN). Some states may require you to have a registered number with them as well.
Tax, tax, and more tax! Running a business can be very taxing, but tax compliance is essential to a strong financial portfolio. In addition to taxes required by the IRS, you will need to pay some state and local taxes. Go to your state taxing agency and sign up for Sales and Use Tax, Franchise Tax (depending on corporate structure), Worker’s Compensation Insurance, and Unemployment Insurance.
Time:
The amount of time it takes to lay your foundation will depend on you. No magic number or timeline exists. It is my personal experience that working with the flame too high can result in burn-out; likewise, failing to put heat under the process will not give rise to the vision. The key is to work consistently to check off the start-up steps.
Inspiration:
“And the Lord answered me and said, “Record the vision and inscribe it on tablets, that the one who reads it may run. For the vision is yet for the appointed time; it hastens toward the goal and it will not fail. Though it tarries, wait for it; for it will certainly come, it will not delay…” Habakkuk 2:2 (New American Standard translation).
- Get Started
