Starting a small business may feel like shooting in the dark because for a person on the other end of the dark tunnel, to know if his target has been hit, he has to travel through the tunnel. Same applies to the person who is thinking about starting a small business. From having an idea of putting it into reality, the person has to walk through the various steps of setting it up. No wonder the risk is high, but there are various advantages to it.
To share a few is, the owner is his boss and can work as per his timeline. He will be creating more employment and will also be a responsible citizen by contributing to his local economy and community. So without wasting much time, let’s begin with the first step of the staircase leading towards establishing a small business.
Explore around to look for the perfect business idea
A person thinking about starting a small business may have a fantastic business idea but is reluctant and does not know the process of launching it into a new business. Market research is a crucial step for such individuals, and they may skip directly to that. Market research is an essential component of business strategy in which information is gathered about target markets or customers to ensure that they will buy your business idea.
There may be an individual who is adventurous, ambitious and passionate to start something to get out of his daily 9-5 job but does not know how to do that. Looking for the business idea, an idea that is out of the box is the first step. A list of the questions has been prepared that will guide to find the perfect business idea.
Make a list of your skills
Identify your skills, expertise and strengths. Maybe your hobby, college major, expertise from a previous job or natural talent can turn into a perfect business idea. A business idea can be a combination of multi-skills gathered from a group of people intending to start a business together.
Identify resources
In order to start a successful business, there is a need for a significant amount of investment in resources. If one has enough or sufficient resources at his disposal, he can think of a business opportunity with minimum expenses and maximum profit.
Scan the environment
Individuals should try to identify any product or services that need to be filled around his environment. Sometimes these little requirements can be converted into small businesses. Scan the environment to identify what must be supplied to make the life of people better, identify that business or service and turn it into your business idea.
Competing with an existing business
Can you compete with an existing business, if a person thinks that he can bring a better product or service to the existing one? There are numerous examples of this type of category of businesses. Just look around and analyze and research what different the latter businesses has done than the previous ones that the customers accepted them.
After identifying a good business idea, one should do market research to find the target customers and check how they will accept the idea. There are numerous methods for conducting an evaluation of the business idea; for example, online surveys, phone campaigns, focus groups. Along with the understanding of the customers’ reaction, one should also analyze market trends, economic data and statistics and how this will affect your business. These all constitute a crucial part of a business plan.
Write down the business plan
As you have identified the business idea and done some market research, the next step is to write the business plan. A strong business plan is vital to start a small business successfully. Though it will look like an unnecessary step, actually it is the most crucial step of launching a business. Studies have presented that businesses with a strong business plan have shown better growth than the one without it.
The business plan can be broken down into a handful of steps. It could be 30-50 pages long or ‘a lean startup’ business plan. These plans convey a direct message to your investors, banks or business partners. Let us look at some of the questions that a business plan should answer.
- What is the purpose of your business? The product or service that the business offers will answer this question.
- What is your target market? This is a group of people that the business will serve
- Who are the competitors? Identify the leading competitors and try to find out the difference and similarities of their business.
- What is unique about the business? Customers will be attracted to your business over the competitors.
- How will you market about the business? So that customers could find about the business. It could be social media, word of mouth, paid advertisements.
- What resources are required? This may include equipment, space, employees and others. It is always good to enlist all the one time and recurring expenditures to calculate the cost of the business.
- How will the business make money? It includes revenue generation, profit-making and covering expenditure.
- What will be the ethics of the business? The values that the business will never compromise.
- What is your final goal? Outlining the business long-term goals will be the answer to this question.
The legal Structure of your business
Now, as significant planning is done, it is time to start with the minute details necessary for setting up a small business. This step involves all the paperwork and legal formalities that the business has to undergo. Decide the business’s entity structure which includes filing various types of taxes, the role of team members and respond to any legal claim filed against the business. Consulting a business attorney will help to solve these puzzles. There are a variety of business structures like Partnership, Sole proprietorship, Corporation, LLC.
Register the business
There are a lot of tasks that need to be done to establish a business legally. The few and most important ones are as follows:
- Registering the name of the business. If a trading name is used for the business, then filing for ‘doing business as’ or DBA is required.
- Get a tax identification number.
- Registering for taxes.
Licenses and Permits
A few additional legal requirements are left after step four, but these will ensure complete compliance of the business legally. Get a business license if the law demands it. Make sure the business fulfils all the rules and regulations. If any permits are desired to start the business, get that. In case the business revolves around a new business idea or invention, file for the patent or trademark.
Fundraising
Once the above steps are done, finance the business comes into the question. Money is needed to start a business and to continue it. It is needed to meet the short term challenges and to reinvest in the business for its growth. Money can be raised from friends, family, investors and banks. A list of various financing options that can be considered are:
- Term loan
- Equipment financing
- Invoice financing
- Business lines of credit
- Small businesses can consider investors to help cover the initial cost. Some funding alternatives that can be considered are angel investorslike successful entrepreneurs. Venture capital firms further purchase a percentage of the business during each round of funding.
- Crowd funding: These platforms are great for small businesses looking to offer product samples or other goodies in exchange for a contribution.
Team Assembly
An organization is as effective as its people. So the next step in the business is planning for the team that is needed and then hiring the people that will help you carry out day to day activities efficiently. When the business just starts, there will be clarity on who can help and who cannot in taking the business to the next level. Also, the hires can be part-time or full-time, depending on the requirement.
The team can consist of consultants, contractors, freelancers and virtual assistants. Any person or business who is driving the business towards its mission should be a member of the core team, including investors, accountants, and business partners. Furthermore, time will be dedicated to creating job descriptions and interviewing candidates. In a startup, only interviewing will help in getting a better idea about the people’s attitudes and their comfort level.
There may not be enough budgets to hire many HRs at the beginning of the business, so only one HR can also be hired to take care of the legal work. If hiring HR is causing trouble, then a professional employer organization or staffing agency can also be considered. It is also important to be unbiased during the hiring process.
Business Bank Account
Now when the team has been assembled for the business, it is the time to take care of the business’s finances and get set goes. For finally running the business, choose a bank and open the business account in it. Opening a business account is essential in starting the business and for the financial growth of the business. A business account will be used to pay the bills and receive the payments from the customers. This account will also separate the personal finances from the business ones.
The business account helps in separating the expenses, protecting personal funds and assets, and ultimately saving time and effort for taxes and bookkeeping. For small businesses, take a look at all the available options as opening a business checking account could be good for the business as compared to the business saving account.
Managing finances
No doubt the business account has been opened and various other steps have also been taken care of, but there are still a few essential steps left that will help in managing the business properly. Even if there is an accountant to care of the finances, few concepts should be clear to the owner as well like:
- How to set up a primary account document?Regularly maintenance of account documents is good for the financial health of the business. Take care of the three financial statements-a balance sheet, income statement and cash flow statement.
- Hire a bookkeeper or use software to manage the financial documents.
- Be regular with the Business tax obligations. Make sure to file the business taxes on time as failing to do so can have deteriorating effects on the business. One can lose business and may face criminal charges.
Run and promote business
Having followed all the steps, it’s time to start running the business. Now the tasks that need to be completed will majorly be specific to the operation of the business. At this point when market research has been done, finances have been taken care of, highly enthusiastic teams have been recruited, taxes are taken care of, and bank accounts have been opened.
As the business is open officially, make sure to follow the business plan and maintain a positive attitude towards any challenge that comes on the way. Also, along with running the business, promoting the business is vital for its growth. Find the channels that will be used to promote the business, the methods and strategies that will drive the customers to the business and get it moving.
An overview of the matter
The steps necessary for starting a small business are thoroughly discussed above, following each step religiously is essential for the venture. Just ensure that as the business will start running and cash will start flowing, adopt a few marketing plans, keenly analyze and adjust them according to the response. Once these plans start working and the customers are driven towards the business, it is easy to settle on the usual operating activities of the business, managing the day to day work of the business and planning for the growth and financial forecasting of the business.
