The Tasks Involved in Launching a Business Can Be Daunting. Learn the Five Most Critical Steps to Launching Your Dream Business.
So you’ve thought about it for years, quietly doing the legwork to start your own business while holding down a full-time job. Now you’re coming closer to setting your dream in motion, but the question remains: how do you actually turn your new business from a dream into reality? Of course, there are many factors to consider: location, products offered, price points, marketing methods, supplier partnerships, financing – the list goes on. But what should come first in getting a small business off the ground? Here are perhaps the five most important steps to starting a business:
- Write your business plan – Even if you are not seeking outside funding at this stage, a business plan will help crystallize your vision and outline your first operational steps. By actually putting important aspects of your plan on paper –including an executive summary, company overview, market analysis, financial projections, sales and marketing strategies, and a product or service description –you will get a better idea of the business’s potential and lend your business more credibility from the outset. It is also a gut check of how serious you are. If you take the time and care to write a business plan, chances are you are serious enough to move forward. You should also create a financial model for the business complete with early projections. It should have some assumption tables (eg., units sold/revenue, price, etc.) where monthly assumptions can be plugged in and trickle down to preliminary monthly financials (P&L Statement, Balance Sheet and Cash Flow Statement). Here is a great business planning software package from Palo Alto Software. It is a great product that will help you accomplish your business plan and projections in a fraction of the time. This important step gives you invaluable visibility early on with the business. You can add more sophistication to your financial model as you grow. Last, the executive summary in the business plan should be broken out separately so you can send only this as a teaser for potential investors or partners to help secure a meeting or conversation. You will probably get asked for this by savvy folks. We will cover this topic in more detail in future posts.
- Select a business location – Finding the right location for your business can mean the difference between success and failure, especially for a retail business. According to the Small Business Association (SBA), some of the factors to consider in selecting a location include zoning regulations, competitive factors, transportation options and demographics. Proximity to customers could also be a major consideration for some businesses. For example, if you need to call on advertising agencies as a potential customer set. You will need to gauge your ideal budget so realistic projections of sales and other expenses are essential (ie., the importance of creating a business model) prior to securing your lease or mortgage.
- Determine your financing options – You may decide to tap into savings, use lines of credit, borrow from friends or relatives, secure grants or business loans, solicit venture capital or rely on some combination of these options. If you need to secure outside financing, it is imperative that you have early traction with the business unless perhaps it is money from friends and family. You will also need to have your business plan, financial model and investor presentation prepared and bullet proof. Think carefully before going down this road. Any documented investment from friends or family will require that they be an accredited investor, which basically means they can afford to lose their entire investment. Any outside investors will require meaningful traction in the business before they would consider investing. No outside investors will invest if it is just you and an idea unless perhaps you are a proven entrepreneur with a successful track record. Bootstrapping the business in the early days would be the best approach assuming you are in the financial position to do this. As you grow, these decisions get bigger.
- Choose a business structure – There are a number of legal structures that might make sense for your business. It’s incumbent upon you to research these options to ensure that you understand the legal requirements and liabilities of each. However, you almost certainly will want a business entity that will shield your personal assets from business debts and claims. For example, a limited liability company (LLC) structure accomplishes this. You should consult a lawyer at this stage to determine the correct structure for you.
- File the necessary paperwork – Beyond the legal structure, you will need to file for a Federal Employer Identification Number (EIN) and a state employer identification number. Depending on the type of business, you may also need an operating license or licenses that are specific to your industry. A lawyer can help you file for these as part of setting up the legal structure of the business. This is a very important step with many details. Take your time and do it right. Be organized about this and keep good records as you will need all this information to be accessible. We will cover this more in future posts.
There is so much that goes into getting your business started that you will probably need to conduct your own research and rely on external resources to ensure that you cover all your bases. Start with the Small Business Administration and try to find mentors along the way that can help you with more customized information and advice.
Good luck as you begin your journey! Let us know if we can help. You can email us at firstname.lastname@example.org.