Steps and Considerations When Starting Your Business
There are two parts to this post. A section for the points you’ll want to consider before you start. The second part focuses on the steps to starting a business.
It would make sense to start with the consideration section; once you have gone over those critical issues, you move on to each step you’ll need to follow. Let’s get started.
Considerations Before You Start Your Business
When starting a business, you should know how it operates or have a strong industry background.
It wouldn’t make sense to get into a business that you don’t know how to run. It’s like buying a car without knowing how to drive. You usually learn how to drive before you buy a car.
There are important steps to consider before you start your business. Have a look at each of the points. Note that not all the steps apply, and in other situations, more steps are required, for example, if you’re setting up a manufacturing plant.
1. Identify if Owning and Running a Business Is Right for You
The first consideration is making sure you know what you’re getting into, identifying if becoming a business owner is right for you.
You may think you want your own business, but it’s not for everyone.
Some people want to be the boss, but being the boss is not always fun. Others want to do what they love, only to find they are managing a business instead of doing what they enjoy. Others think once you have a business, your income will skyrocket, and your future is set. This one-sided thinking is considering the benefits and not looking at the risks involved.
There are pros, cons, and valid reasons for running and owning your own company. Ensure you’re starting for the right reasons and that it’s a good match for you.
Have a look at the articles below that will help you see what’s best for you.
2. Do You Have the Skills To Be Successful?
You need to identify if you have the skills necessary to run a business.
If you don’t have the right skills, you can always hire someone, but it’s much better to depend on yourself than on someone else to take the reins.
When you have the skills, you’ll handle the problems that show up and direct operations as necessary. Another reason to build your skills is you may decide to hire a manager to manage the operation, and if things don’t work out, you still have the skill set to take over.
Whether you plan to run your business or hire someone, you should have the skills required or be willing to learn them. You may have some of the skills and take on new ones. Learning new business skills and updating the ones you have is a good management practice.
For more, see our resource page: Essential Business Skills You Need To Succeed.
3. Determine the Sort of Business You Want To Start
You need to identify what sort of business you want to start. One key to succeeding in the business world is to choose a field your passionate about.
Passion is a driving force to keep you motivated. If you start with a business opportunity you’re not passionate about and only looking at the financial gains. You’ll get discouraged when problems occur; you’ll be looking for a way out rather than looking for a solution.
For more on finding a business idea that’s a good fit, see How To Find a Business That Is a Great Match for You
4. Is It Better To Start or Buy a Company?
It’s quicker and sometimes better to buy a business that is already established and making money. On the other hand, you may end up buying other people’s problems.
Setting up a business and getting customers can be a long process. Finding a company that is already running and is for sale is one way of getting into the business you are considering. The company already has a history, and you’ll know what you’re getting into and how well it performs.
On the other hand, it may be easier to start from scratch than to change the direction of an existing business.
There are pros and cons to starting your own business or buying one that’s already up and running. You may want to have a look at our post Buy a Business or Build one From Scratch.
5. Should You Consider a Franchise?
There are pros and cons to owning a franchise. When getting into a successful one, you have a proven business model and creditability in the market, but there are also fees and restrictions.
By using a proven model, you have increased your chances of success. You no longer have the thought of failure in the back of your mind. You already know it works. All you need to do is follow the operating procedures, ensure you hire the right people, and make sure you’re located in a good area. Once you have that in place, you need to manage your finances and run your operations accordingly.
The restrictions of running a franchise are plentiful. You can’t run the way you want. You can’t change the look, layout, products, and services you offer. You will also need to follow their SOPs (Standard Operating procedure)
For More See, Here’s What You Need to Know About Owning a Franchise
Steps to Starting a Business
Now that you have looked at the considerations above and have time to decide if owning and running your business is the right move for you let’s go over the main steps to starting and running a business.
These are the common steps. They may not all apply to you. For example, when starting an online business, some steps may not be needed. On the other hand, if you’re starting a manufacturing business, you’ll need to do more than the steps listed here. These steps will get you on the right path. Use them as a checklist for starting a business.
1. Researching Your Business Idea
Whether you’re familiar with the industry you’re planning on getting into or not, you will want to do your research to gain a strong understanding of the business you’re considering.
For example, it’s the year 2007, and you’re looking to start a DVD rental business, and it sounds like a good opportunity.
If you do your research into the industry, you’ll come across the Netflix story and how they rent DVDs by mail and are moving into a new streaming service. Researching this industry, you’ll gain an idea that in a few years, DVD rentals are on their way out, and streaming services will take over.
Without doing any research, you wouldn’t know that the future of DVD rentals is in jeopardy. You might have invested your life savings and opened your DVD rental business only to find out the industry dies by 2014.
It’s important to look into trends and find out all you can about where the industry is headed before you get into it. At times there is a shift in the industry.
Let’s look at the newspaper industry.
The newspaper has been on the decline since the popularity of the internet. The news industry is still alive, and well, it’s the delivery of the news that has shifted, from a physical newspaper to delivering the news online. With industry trend information, you can make better decisions. For more on this topic, see Researching Your Business Idea – Don’t Start Without It!
2. Writing a Business Plan
A business without a plan won’t do well, and your success can be enhanced when you have a business plan in place.
When you create and study your business plan, you have a clear idea of your business’s direction. Because a business plan has many sections and very detailed creating one makes you think and plan. Think of it as a report you have to submit. You fill in what you know, and for those issues, you don’t have answers to, you’ll need to do some research.
The recommended sections of a business plan by the SBA are as follows:
- Executive Summary
- Company Description
- Market Analysis
- Organization & Management
- Service or Product Line
- Marketing & Sales
- Funding Request
- Financial Projections
So as you can see, it’s a detailed outline for every part of your business. Every section requires thinking and developing strategies. Once you’re finished, you’ll have a detailed road map for your operation.
You can use business plan software, a template, or a professional to help you create the plan, but you’ll want to be involved in the process. Naturally, you can update it as necessary, and be sure to review it every few months so that you are always on track. For more, see my post How To Write A Business Plan.
3. Fund Your Business
One of the key ingredients to succeeding in your company is getting the startup and operating funds. Capital is usually a problem for many startups. From the time you open your doors until your business becomes stable may take a long time. It’s important to plan your startup capital accurately. Many companies fail because they run out of money before the business can turn a profit.
When you are declined many times for a business loan, it may be a blessing in disguise, and the lenders see something you don’t. That’s when it’s time to look at their concerns and try to address the risks involved.
All in all, getting a loan does require some prep work. A business plan is one of the most important documents you’ll need when applying for a commercial loan. See the article, Need A Small Business Loan? Check out our In-depth Reference Page for more on this topic.
4. Choose a Location
Your business location is extremely important. Choose a deserted location, and it doesn’t matter how good your product or service is, your business will fail.
Choose a prime location, and you may not be able to make enough to cover the lease payments.
Choose a location that is far away from your customer base isn’t a good idea. It’s important to choose the best affordable location close to your target market. For more, see Choosing the Best Location for Your Business.
5. Choose a Business Name
Your business name is an important part of starting a business. Choosing the right name will contribute to your success. Choosing the wrong name could be a contributor to failure.
The name you choose today is the name you will have for years to come. Take the time to choose the one that feels right.
You need a name that will allow growth in the future without making your name so broad that you lose the essence of what your business provides.
Once you have a name, you want to make sure it’s available for registration. Another point to consider is you want your business name and a domain name that match. For more details, see Choosing a Good Name for Your Business.
6. Define the Type of Company You Will Form
Your business needs to be legal before you start. There are different types of structures you can benefit from in terms of liability and tax structures.
For example, you can start as a sole proprietorship which is the easiest and cheapest to set up but offers the least liability protection and tax advantages.
Other types of structures you can form include a Limited Liability Company (LLC) or a Corporation. There are pros and cons to each type of business structure, and depending on your current situation and future needs will determine what type of business to form.
The good news is you can change your business structure. For example, you set up your business as a sole proprietorship, and once your business gains traction, you can incorporate it.
Consulting a specialist such as a lawyer and an accountant isn’t a bad idea. Either way, you should be aware of your options and the pros and cons of each type of business structure. See Registering a Business – Here are the Types to Consider for more on this topic.
7. Get your Tax ID
Your tax ID is a critical part of making your business official and legal. Compare it to your Social Insurance Number.
It’s the identifier the IRS uses for your tax account. Applying for a tax Id is not a long or difficult procedure, but you need to have other issues in place, like your business’s legal name, etc. For the ins and outs of getting your tax ID, have a look at, Here’s How To Get A Business Tax Id For Your Business.
8. Permits, Licenses, and Registration
Licensing is an essential step in starting any business. Each country, state, or province has similar laws, but there are differences.
The same goes for your local municipality. It’s important to get in touch with the proper authorities and get the information you need.
Most businesses will only require a standard business license. Then you have those that will require additional licensing, such as the food industry. Businesses that deal with chemicals and hazardous materials, plus those that have to do with safety, may be subject to further regulations.
9. Create Your Corporate ID
Your Corporate ID or stationery is important. Your stationery gives an impression of how professional your business is.
Your Corporate Identity may include your logo, letterhead, business cards, envelopes, etc. Also, note your stationery should match your website and corporate signage.
Your corporate ID is an important part of your brand. I would suggest using a professional service because this is your business’s face and you will want to make a first good impression!
For More See:
10. Choose Your Business Sign
Choosing a sign should complement your business name and reflect the products and services you offer. For example, if you open a pub with a 16th-century theme, a handcrafted sign made out of oak may go well with your pub.
In addition to your business name, you want your business sign to reflect the products and services your business offers.
To gain ideas, you’ll need to define the type of sign you want, and from there, do some research for sign ideas. For More See Need the Perfect Business Sign? Have a Look at These Ideas.
11. Choose a Bank
Banks have similar rules but not identical. The bank you deal with will impact your day-to-day business operations. You need to choose a bank that works best for you and will cater to your needs.
The relationship you build with your banker can make a difference in how you operate your business. When your banker understands your business and has a good working relationship with you, they can help you out when you need it most. And for those times they can’t help with funding, they can tell you what to do to improve your situation and get the funds you need.
For More See:
12. Acquiring a Merchant Account
If you are collecting any funds, you will need to look into getting a merchant account. Without it, you can’t accept money unless it’s cash or a check.
Depending on your business, you may get around having a merchant account; for example, if you collect money online, you can accept funds using a service like PayPal, which has higher transfer fees but no monthly fees.
Make sure you look into the restrictions for merchant accounts. I applied once and found out there was a limit to how much in total sales I could process during a short period. If you have a big sale, you may not be able to process all the payments. The limit may only be for a short time until you establish your business. Another issue to look at is the processing fees. A few percentage points can make a large difference in overall costs.
See, How To Open A Merchant Account for more information and companies that offer merchant services.
13. Office Setup
Your office setup is important, especially if you spend a lot of time there. It should be comfortable, visually appealing to you, and you need a practical setup.
Depending on the type of business you have, and especially if you have a lot of client interaction, you’ll want to make your office look professional and reflect your industry style.
If all your work is from your office, you’ll want to make sure it is highly functional and comfortable, considering you’ll be doing most of your work from there. An organized office will help you improve your productivity. See The Setup of Your Office for more.
14. Checklist for Setting Up a Retail Business
There are hundreds of details you need to attend to when opening a retail store. From setup to ensuring everything is safe and to code.
I have put together a page to help you go over the issues you need to consider before opening your doors. See the Retail store startup checklist, so you don’t forget Anything.
15. Accounting System Considerations
Whether you are doing your taxes or having your accountant take care of it, you still need to have a system so you can keep track of your numbers.
You could be running in the red and not even know it.
Your accounting system can be a high-end professional system that accountants use, or it may be as simple as using a spreadsheet you submit to your accountant. Either way, the most important part of your accounting approach is accuracy and being organized.
My approach is to focus on my business and leave the accounting details to my accountant. My part is to document everything and back it up with receipts.
My accountant will take the right deductions. When I have an important expenditure or expense, I run it by my accountant before making a decision.
It’s up to you how you want to handle your accounting. My advice is to organize all your sales and expenses and document them while keeping an eye on your numbers.
16. Choosing Suppliers
Good suppliers will enhance your operations and help you succeed, while poor suppliers will hamper your business operations. It’s important to choose the right supplier and build a strong business relationship.
For example, let’s say you have a retail business and you have one supplier. It’s important your supplier is reliable, offers you good pricing, and will support you during your busy season.
If you only have one supplier, then that supplier has a certain degree of control over your operations. For More See, Here’s How To Choose Suitable Suppliers For Your Business
17. Create a Team for Your Startup
Your team is the backbone of your operation. Your support staff is an essential part of keeping you in business.
You can’t do everything yourself, and it’s important to work as a team. The better your team, the better the outcome. Your team can consist of people on your payroll, or people you deal with, consultants, lawyers, bankers, suppliers, etc.
For more, see, How To Build A Business Team That Works Well For Your Startup.
18. Hiring Employees
Hiring employees is a critical step in running a business. You are only as strong as your weakest link. If you hire employees who are not fit for the job and keep them, you are in serious trouble. It’s important to hire the best employees for the positions you need to fill.
Keep in mind hiring an employee is a large undertaking. Let’s take a simple example.
You hire for a position that pays $15; it cost you the hourly wage plus 18% for payroll taxes and benefits—costing you around $17.70 an hour. Your employee puts in 38 hours a week multiplied by 52 weeks equals 1,976 hours worked, including paid vacation.
Multiply 1,976 by $17.70 equals $34,975.20 which adds up for a $15 an hour job.
When you look at the overall cost, you may look at the person you are hiring and ask yourself, would I invest 35K in this person?
For more on hiring, see How and When to Hire a New Employee.
19. Marketing Your Business
You may have the best service in the world, but if no one knows about it, then you can’t expect any success.
In addition to having great products and services, you have to find a way to get the word out!
Marketing is something you must know about as a business owner. You may have a marketing team or outsource your marketing to an agency, or you may do it yourself. Whatever your strategy, you need to have an understanding of marketing. One bad campaign can tarnish your reputation.
Marketing is expensive, and running a lot of failed campaigns can hurt your operating budget.
One of the keys to successful marketing is to run small test campaigns while tracking results. Do more of what works and less of what doesn’t. Never roll out a large untested campaign.
See our collection of posts that offer tips and insights for marketing your business.
20. Setting Up Your Online Presence
Almost any business today has an online presence. You need a website, as well as a presence on social media.
You don’t have to do all this yourself. You can have someone else take care of it for you, or you can have someone build your online presence, and you can keep an eye on it; either way, it’s a part of doing business today. See How to Build a Website Using These Unique Resources for more.
21. Having a Grand Opening
A grand opening allows you to show your products and services to the public. It’s your time to shine and impress your customers.
There are many ideas to create a grand opening that can be memorable. Your goal is to introduce your business, your products, and your service to your potential customers.
One essential thing you must do is to promote your grand opening. There is no use in having one unless your target audience knows about it. For more see, How To Have A Grand Opening That People Will Talk About
22. Make Sure You Haven’t Missed Anything
With so much at stake, you want to make sure you don’t miss anything you’ll regret. A good way to make sure is to use a checklist.
See the post below that offers several checklists you can use when starting your business.
Resources For Starting Your Business
Business Startup Ideas
Get an overview of various business ideas, and see if you want to look into them. See this list of business startup ideas.
Acey Gaspard’s Guide to Starting a Small Business
There are many considerations for starting a business. A lot of the steps are similar.
I have created a guide that doesn’t focus on the fine details but offers an overview of the process and focuses on reasons and the importance of taking certain steps. Click here to read my guide for starting a business,