When you are thinking of starting your own business, you have many decisions to make. Where should you begin and what is the right sequence to take to go from wanting to be an entrepreneur (WANTrepreneur) to becoming an entrepreneur?
Here is the essential do list to transform from a Wantrepreneur into an Entrepreneur.
Step 1: Develop a Business Concept
Do you have a bold idea for your own business? That is terrific. Now comes the hard part – fleshing out that idea and thinking about the many different components of your business. Will it sell goods, services, or both? Does it need a physical storefront, is it web-only, or a combination of both? What type and how many employees will you need? Are there skills you will need to acquire in order to be successful?
Consider, too, your own personality. If you are shy or introverted, does it make sense to be in a business that requires a lot of interaction with others?
A good rule of thumb when thinking about a business idea is that your business should provide a real-world solution to a real-world problem that potential customers are experiencing. The market for this idea needs to be extensive enough … and able to reach you … to be viable.
Spending some time formulating a plan for your business, its components, characteristics, and your role within it are important preliminary steps.
Step 2: Do Your Research
Before you decide on a business to consider, make sure you have done your homework. There are plenty of resources online and in print that can give you insights about the industry you are considering, the barriers to entry, the skills needed, the demand for goods and services, and the market appetite for the type of business you are thinking about starting.
While you may have your heart set on a particular type of business, it is not a bad idea to explore a few different types of companies before settling on the one that you want to pursue.
You also need to be sure to understand the target demographics of the business. Who are the likely customers? What are their characteristics? Do they need to live in the your business' area or can they access your company online?
Finally, you need a clear understanding of your competitors. How well-resourced are those in the same business? Are there competitors near you? Can the market handle another player? Is there something your potential business offers that the competitors do not? How will you market and explain these competitive advantages in a way that makes a compelling case for your customers to choose you instead of them?
These insights on markets and customer base will form the basis of your business plan. Understanding what your business can be and what its markets, customers, and competitors will be forms the foundation of a well-developed business plan. When you have answered these questions with real data, you will be more appealing to potential investors or financiers.
Another aspect of the business plan is determining your revenue model. Basically, how are you going to make money?
What do your goods and services cost you, how much are your overhead costs, and what do you owe on loans or to your investors each month? Once you have a clear sense of your costs, you need to decide on a pricing model that will drive your revenue. If you are offering a service, will you sell it at a flat rate or on an hourly basis?
The same goes for goods or products you may sell. What price do you need to charge per unit to turn a profit? Are there other ancillary goods or services you can provide to complement your main product?
Step 3: Establish a Structure
The legal structure under which you establish your company usually boils down to three core questions:
- How many owners or shareholders do you have?
- What tax burden will you have?
- What liability will you and other owners incur?
The basic types of corporate structures are:
- Sole proprietor. The simplest and most common structure, with no separate business entity created. The proprietor assumes all liability.
- Partnerships. If you have investors or business partners, a legal partnership makes sense. In limited partnerships, one partner absorbs most of the liability while in a limited liability partnership, that risk is shared.
- Limited liability companies. Profits and losses in LLCs can be passed through to personal income, but members are considered self-employed and need to pay taxes accordingly.
- Corporations. These are legal entities separate from those that created them. There are C corp, S corp, B corp, Close corp, and Nonprofit corp options, each with different guidelines.
In some instances, the business structure you choose allows you to sell stock. However, that decision also means that stockholders hold influence and will expect returns on their investment.
In order to understand the many different types of business structures and all their implications, it is wise to consult a business advisor.
Step 4: Learn the Legalities
In addition to the business structure you use, there are other legal considerations to starting your own business. If you start a business in certain industries, there are regulatory issues that need to be addressed. Start a company that makes frozen yogurt and you will need to abide by federal regulations regarding the way the yogurt is made, including making sure that the processing plant and ingredients are safe and clean. Starting a frozen yogurt franchise? There will be local health department regulations that need to be followed to ensure your employees and customers are safe.
There are other legal considerations to understand and comply with, such as rules governing the hiring of workers, how much you have to pay them, how much they can work, and what the conditions need to be for those employees. Tax laws need to be followed to ensure that deductions are handled appropriately, too.
The many legal aspects may seem daunting, at first. However, having talented advisors in place means you get the counsel and advice you need to remain legally compliant and aboveboard.
Step 5: Make Sure Finances Add Up
When you are ready to start a business, you need to be sure you have the finances or financing available to both open the doors and to keep them open. Before starting a business, it helps to have a clear assessment of your personal financial situation. What do you need to live on, what savings do you have, what does your credit report say about you, and what other financial obligations do you have now or in the near future?
There are many options available for small businesses looking to finance their start-up costs. These include:
- Bank loans, though the market is tight when it comes to small business lending
- Personal savings
- Venture capital, in which investors provide you with start-up funds in exchange for a portion of your company’s revenue
- Personal or business credit cards
- Federal, state, and local programs designed to support small business
No matter what the source of your funding is, it is likely in the early months and years of your business, you will incur a lot of debt. Knowing how much you need to keep your business afloat, and to live on as your business grows, means you go into your business ownership with your eyes wide open.
Step 6: Pick and Register a Name
What’s in a name? For a business, everything. You will want to select several potential names that will fit your business, give customers a sense of what you do, and be marketable.
You will need to be sure that the names are available as domains on the web and are not trademarked or copyrighted. There are simple tools to check if the name you seek is a state or federally registered trademark. You will also want to be sure the name can be registered in your town, city, or county clerk’s office.
Once you have done your due diligence, you want to register the name locally, at the state and federal levels, and online.
Step 7: Find a Location
Whether your business is physical, virtual, or both, you need to find places for your home base. For physical locations, you will need to know how much rent you can afford, whether you need office or retail space, whether zoning is appropriate for your selected location, how to negotiate a purchase or lease, and how to get ready to hang your shingle.
You will also need to be sure that you have the proper paperwork. That means ensuring your business is licensed and permitted appropriately. Your business entity paperwork needs to be filed, too.
You will also need various types of insurance coverage to protect yourself, customers, and employees.
Step 8: Hire Employees
Not every business may need or be able to afford employees at the onset. However, if your business grows, it is very likely you will be hanging a Help Wanted sign.
You may need to hire salespeople, front-desk people, technicians, skilled workers, marketing teams, or any number of other types of people. A strong team of professional advisors – an accountant, attorney, and business advisor – is usually a good step. Even though these employees may not be everyday workers, having your trusted advisor team in place helps you work through the other complex issues necessary to have a sound business foundation.
Step 9: Look for a Trusted Partner
Benetrends is a trusted partner for businesses looking for small business startup loans and ongoing business operations. Our unique funding strategy allows entrepreneurs to leverage existing 401(k) or IRA funds to finance or expand businesses. And our ongoing business services – retirement plan administration, payroll management, credit card processing, and insurance -- help businesses grow.
To learn how Benetrends can be your partner to fund and build your business, download Innovative Funding Strategies For Entrepreneurs today.