Starting a new business is no small feat. It involves several of steps, from the early planning stages to filling out the necessary legal documents. Here are 10 steps to consider when starting a new business.
1. Create a business plan
A well-defined business plan is essential because it helps establish achievable goals and a guideline for managing business operations. Starting a business is risky, but it can also be fulfilling, mentally and financially. Beginning this exciting journey with a business plan is a significant first step.
2. Choose a name for your business
The name of your business is the first impression a customer gets from your business. You also want to separate yourself from the competition and stand out.
3. Decide on the legal structure of your business
The structure of your business is fundamentally a creation of state law with a few variations between states. Common structures include:
· Limited liability company (LLC)
· Sole proprietorship
· S corporation
· C corporation
Which one works best for you depends on your total risk tolerance, especially regarding personal assets, the taxation of your profits by the Internal Revenue Service (IRS), your long-term financial goals, and how you choose to design your management structure.
4. Determine a location for your business
Unless you conduct your business solely online, the location of your business doesn’t just play a role in attracting customers and their retention but also creates an appeal for employees. This is a critical step in your pursuit of a long-term business plan.
5. Register your business if necessary
Businesses don’t necessarily need to register with the federal government to become a legal entity aside from filing to get a federal tax ID. Some businesses register for trademark protection or tax-exempt status. If you are interested in trademarking your brand, business, or product name, you have to file with the United States Patent and Trademark Office.
Depending on how you want your business structured is how you will go about registering it. For example, if your business is a limited liability company (LLC), partnership, corporation, or
nonprofit corporation, you will have to register with any state where you do business. You would also need a registered agent in your state before you file. You may be required to file for foreign qualification if you conduct business in multiple states. Review the necessary steps in your area.
6. Apply for permits and licenses
Ensure you apply for any necessary permits and licenses that you may need.
7. Open a business bank account
A business bank account gives your business credibility and helps to mitigate liability and identity fraud issues. It puts your business’s name on the credit cards and the checks and helps to build trust with customers and business associations. You are also building a relationship with that financial institution and building credit for your new business. Also, from a tax perspective, having a business bank account helps to simplify the process of paying your taxes.
8. Secure funding to get it off the ground
With necessary funding, a business, particularly a small business, may find it easier to grow and expand. Without the proper funding, businesses could struggle with their market position and become idle as their competition grows around them.
9. Conduct market research to differentiate your business from the competition
Market research allows you to learn about the market, like how much market saturation exists, how customers react (consumer behavior) to certain advertising and product developments, or fluctuations in the market (economic trends). These may provide vital insight into new approaches to help your business compete. Some other things to consider when researching include:
· Market size
· Pricing competition
· Demand for your product or service
· Economic indicators like customer income and employment rate in your area
10. Consult a financial professional
Starting a new business is not easy. According to the Bureau of Labor Statistics (BLS), 20% of new businesses fail within the first two years, 45% during the first five years, and 65% during the first 10 years. Regular consultations with your financial professional can help create strategies for managing your finances, making sound financial decisions, modifying existing plans and mitigating risks or unforeseen obstacles.