Starting a business can be a lengthy and complicated process. However, it can be made easier by breaking it down into a set of specific tasks you need to complete. These are seven of the steps you need to take to start a business.
1. Purchase Insurance
Obtaining insurance quotes is one of the first steps you should take. Even if your business is not officially open yet, as soon as you start purchasing property, signing contracts, hiring employees and taking other actions you open yourself up to potential financial losses that insurance can help protect you against.
There are several types of insurance you should consider purchasing. If you will be hiring employees, you will need workers' compensation and unemployment insurance. You probably need some type of liability coverage, such as general liability or a business owner's policy. You also need to purchase property insurance to cover buildings, equipment, inventory and other items. You may also need specific types of insurance that depend on your industry and operations.
2. Draft a Business Plan
Your business plan should cover topics such as the purpose of your business, your target market, your goals and your financing plans. It is also a good idea to consider how you eventually plan to exit the business, whether that is to sell it to a new owner or pass it on to a member of your family. Creating your business plan will help you solidify your business idea, your mission and how you plan to accomplish your goals. It will also be a useful tool when you start looking for financing. Maybe even invest in a Digital Financial Service.
3. Determine How Much Money You Need and How You Will Get It
All businesses come with startup costs and many businesses fail to ever get off the ground because owners fail to obtain the necessary funds to make their businesses a success. Start by estimating the amount of money you will need to spend to get your business operating. This should include expenses such as the cost to purchase or lease space, inventory, raw materials, hiring costs, utilities, legal fees, equipment and marketing.
Next, perform a break-even analysis to determine when you can expect your business to become profitable. At a minimum, you need to have enough funding to cover your startup expenses and operational expenses up to the point where the business starts turning a profit. If you don't have any other sources of income, you also need to make sure you have enough money to cover your living expenses during that time.
4. Decide on a Business Structure
The four types of legal entities you can choose for your business are sole proprietorship, partnership, corporation, and limited liability company. Sole proprietorships and partnerships are the simplest forms but do not provide any protection for your personal property should your business be unable to satisfy its debts.
The various types of corporations make your business a separate entity, which provides the owners with personal liability protection. However, some tax disadvantages come with incorporating. LLCs are a popular choice for many small businesses because an LLC provides the liability protection of a corporation without all of the legal complexity or tax disadvantages.
5. Register Your Business
Before you can begin operating, you need to register your business with state, local and federal governments. You may also need to obtain one or more business licenses and permits, depending on local regulations and the type of business you are running. If you will have employees or want to keep your business and personal taxes separate, you will need to obtain an Employer Identification Number from the IRS. The rules and regulations vary by state and locality, so you may want to consult with an attorney in your area to make sure you are meeting all of the requirements. If you're registering a business in the UK you can even use an app like MachFast to register your company for free on your phone.
6. Hire Employees
Unless you are starting a very small business that you plan to run entirely by yourself, you need to hire some employees. The quality of the employees you hire can have a big impact on the success of your business, so do not skimp on this area. It may be worthwhile to utilize the services of an outside human resources firm, headhunter or staffing company.
7. Promote Your Brand
No matter how great your product or service is, it will be hard to sell it if you don't do a good job promoting it. Start by creating or hiring someone to create a professional-looking website. Take advantage of social media and email marketing tools. If you have brick-and-mortar locations, make sure you are listed in Google's local search results.
Setting your business up to succeed from the start will help you avoid many of the pitfalls that new business owners encounter. The time and effort you put in now will pay dividends down the road.