Do you know How to Start a Small Business? Think it is time to get that idea off the ground or put to practice your freelancing efforts? Then starting your own business is surely the right move for you.
Though there are some major key factors you should consider before diving into such a life-changing decision. Read this article to get guidance on tips to follow when starting up a small business.
How to Start a Small Business
According to the United States, Small Business Administration Office of Advocacy, small businesses are responsible for creating over 1.9 million net new jobs in the year 2015.
The culture of entrepreneurship is trending as a more permanent part of the economic landscape. So, if you have an idea that you think is worth monetizing, then here are some steps to start making your business idea a reality.
Step One: Make a plan
It is very important to draft out a business plan first, even if it’s a quick one-pager that demonstrates all of your ideas into one place. By doing this, you can gather your thoughts and prep your “elevator pitch” for generating potential customers, investors, and lenders. Drafting a business plans test the feasibility of your ideas and can help to secure funding when needed and necessary.
As the business grows, another thorough draft of business plan (one that projects the business insights like the organizational structure and key performance indicators of your business) could help as a roadmap to keep your business in track so as to hit pre-determined milestones.
Potential lenders and investors may request to see your business plan if interested to help them measure the viability of your business. So, it is worth your time to create a solid document that has both short- and long-term implications on your business.
Step Two: Map out your finances
It takes a great amount of passion to start a business, but one key factor to get it on the run is finance (money). Always monitor your business finance. You can get to create a business budget, monitor your cash flow opportunities and challenges, and determine the minimum revenue amount needed on the business. It is important also to set earnings goals up front and be realistic about potential, by taking into account budget reserves if things do not go according to the initial plan.
Keep the business cash flow in a business account separate from personal checking and savings accounts. Not only will this make monitoring your finances easier at tax time, it can also help to ease your expenses so you can have a clearer image of your total revenues.
Step Three: Choose the Right Legal Entity (structure)
A business legal entity or structure varies depending on some factors which includes industry, location, and growth potential. Each factor has its own benefits, tax implications, fees, and shares of ownership. So, ensure to carefully check on your options.
Below are some of the common business legal entity options:
- Sole proprietorship: This is the simplest business entity. It is owned and operated by one (sole) person. There are no legal distinctions between the owner and the business.
- Partnership: This is a business that includes two or more owners who agree to cooperate to advance their mutual interests.
- Limited liability company (LLC): This ensures that business and personal assets remain separate so that the owner’s personal assets are not put to risk.
- S corporation: With a max of 100 shareholders, the S corps are taxed on a “pass-through” basis and offer limited liability protections to business.
- C corporation: With also offering limited liability protections, the C corps are open to unlimited shareholders and profits can be subject to double taxation.
Step Four: Register your business
After you have decided on the right legal entity, then it is time to register the business with the IRS. The level of detail required by the government depends totally on which state your business is located. And the type of business legal entity you have chosen. Below are the requirements needed:
All businesses are required to have a business name. But ensure that the chosen name is not already taken by another business. Single business owners can set up their business with a name so they don’t have to use their personal names. You may also want to consider trademarking your business name for added legal protections.
You are required to fill out some details and information about your business, industry, products, and services.
Legal and tax professionals
As this is not mandatory, seeking legal advice is highly recommended, especially for business entities that are larger than sole proprietorships.
Click this website to register your business with IRS – https://www.irs.gov/businesses/small-businesses-self-employed/state-and-federal-online-business-registration
Step Five: Build your Team
As the business starts to grow, you should consider hiring a team (employees) to help you keep the growth. Also, team members can help to improve efficiencies and boost business sales. But ensure you hire your team based on needs that are ongoing and not temporary.
New and small business owners have challenges when working to attract and retain top talent. Though they can offer key incentives above base salary that are out of reach of larger businesses. Actions like bringing pets to the office, working remotely, equity, volunteer opportunities. And greater access to creative strategy can differentiate small businesses from their corporate counterparts.
Step Six: Grow and scale your business
Growth and scale of a business is likely to take up the majority of your time as a business owner. The growth potential of a business is based on the goals set at the start of the company.
You would want to maintain a business that delivers comparable profits year over year. Or you should have an exit strategy that will help you to sell the business for a pre-determined price at some pre-determined time.