Do These 3 Things Before You Start Your Small Business
Is 2017 the year you bite the bullet and start your own business?
Here are three things you should consider before you start your small business.
1. Write down your business plan
It all starts with a plan. This is especially true for a small business startup. Your passion and enthusiasm are great, but you need to channel that idea into a solid, written plan. And when you do, keep it simple. This includes your costs and time. No matter how amazing your idea, your small business won’t be a success unless you have a plan for how to start and run it.
To begin, a popular strategy is to limit yourself to a one-page small business plan that covers what you offer, who you’re targeting, how much you’ll charge and what you’ll do to make it happen. Your plan will change as you launch your business, so it’s best to keep things minimal to start.
Diving right into the full plan is a common pitfall of new small business owners, but starting small allows you to focus on the backbone of your small business. You’ll want to flesh your one-pager out until a full plan later on, but that may take weeks to throw together.
From Entrepreneur, here are five things to include in your one-page business plan to give a high-level overview of the small business you’re about to start:
- Define your vision. What will be the end result of your business?
- Define your mission. Different to a vision, your mission should explain the reason your company exists.
- Define your objectives. What are you going to do – what are your goals – that will lead to the accomplishment of your mission and your vision?
- Outline your basic strategies. How are you going to achieve the objectives you just bulleted?
- Write a simple action plan. Bullet out the smaller task-oriented actions required to achieve the stated objectives.
This is a great outline to follow to start, rather than going for a full plan right away.
Eventually, however, you will want to flesh out your one-pager into a full-blown business plan, especially if you want to attract investors. A full small business plan will be a crucial part of your pitch. This plan will include your mission statement, a company summary, an executive summary, service or product offerings, a description of your target market, financial projections and the cost of the operation. You’ll also want to include more detailed information, such as a break-even analysis, a profit-loss forecast and a cash-flow analysis.
Visit SBA.gov for help on how to write your business plan.
2. Determine what type of business you want
Have you considered whether you want your business to be an LLC, S corporation, C corporation, sole proprietorship, etc? You need to settle on which form of ownership is best for you.
It’s important to know where to start here, as you may want to change things later on, and some types are more flexible than others. For instance, an S corporation can be easily converted later into a C corporation. LLCs are probably the most popular type of small business, but they can be overly complicated.
Although it may have been part of your motivation for starting your own business, it’s often recommended to avoid partnerships and sole proprietorships because of the potential personal liability to the owners of the business. Starting as a sole proprietor means less paperwork and up-front expenses which can save you a lot of cash while you determine the viability of your business. But it does also leave you at risk. Make sure you weigh the potential benefits vs. risks of having sole proprietorship and then speak with a local attorney or tax professional to decide which is smarter for your short-term and long-term goals.
Keep in mind, you can also wait to file for a business entity until after you’ve tested the waters. If you have faith that you have a sustainable business after three to six months of running it, then you can decide which type to file for.
You’ll also need to consider in which state to register your business. Filing paperwork to start a business can cost a lot of money, depending on your state. This will include city or municipality licensing, state incorporation or business entity fees and more. You’ll need to do your homework and search ahead of time to determine what the filing fees are for your city, county and state before starting your small business. You can incorporate in any state but there are pros and cons to understand. You can choose to be a domestic LLC in your home state or a foreign LLC in another state. For businesses with storefronts or ones that transact mostly in their home state, the former usually makes the most sense.
If your business has no physical facility or storefront—a consulting business, for example—or if you plan on conducting the majority of your business out of state, you should consider starting an LLC in a state other than your home state. Read why Delaware, Nevada, and Wyoming are popular foreign LLC filing states.
If you are starting your business in January, it makes sense to file your paperwork in December with a January 1 start date. This will ease the process of filing taxes next year.
Confused? Don’t worry, there are plenty of resources online to help you, and you can even consult an attorney. For starters, Legalzoom has a simple breakdown of an LLC vs. corporation.
3. Select your business name, register it, and launch your website
This is the fun part: What are you going to call your small business? Pick a name that’s meaningful to you and that will resonate with your customers. Your company name should give priority to real words or combinations of words over made-up, meaningless words. Avoid numbers or initials, as they lack meaning to customers. You can invent a word known as a coined name, which is not a defined word in a dictionary, but sounds familiar enough to evoke a feeling or idea. For example, the coined name Acura has no definition but suggests precision engineering with the root “acu”. It also may be tempting to include your city or region in your name, but this could be **limiting **if you want to expand geographically. The same goes for mentioning a specific product or service, as you may want to diversify later. Lastly, don’t use “Inc.” after your name unless your company is actually incorporated.
Feeling stuck? Here’s a handy business name generator that lets you check domain availability instantly.
Once you’ve settled on a name, do a trademark search. You may want to consult a trademark attorney or search firm to make sure you don’t infringe on another business’s trademark. Check to see if the domain name is available online, as well as if it’s free to use in your county, state and in the country. If your desired .com is taken, it’s also acceptable to go with a .net or .co or even a .ly depending on your type of business.
If it’s available, register your business name with your county clerk, then get it trademarked at the state and federal levels. Then, secure a domain name (URL) for your business.
Regardless of what your small business does, you’ll need an online presence. There are several cheap options to purchase a domain name. And if you plan to do sales online, you can also tie it to an online shopping cart and storefront for a low monthly fee.
Bonus: Get Help
This should go without saying, but you don’t have to know everything. Since you’re not an attorney as well as a business owner, it’s much easier to ask for help than try to learn everything yourself. An attorney in your area can help you get acquainted with the laws that impact your small business and will make sure yours is up to snuff. The SBA also offers training for new small business owners.
Remember, you don’t have to do this alone!
And make sure to keep checking back to our small business blog for more tips on launching and running your business.
When you’re ready to start taking calls from customers, get the best small business phone service at the lowest rate.