6 Steps to Setting Up a Small Business
Thinking about setting up a small business can be daunting. Many would-be entrepreneurs don’t know where to start. But, by breaking things down into small actionable steps, building your business can seem more achievable.
Step 1: Do Your Research
You might think you have a fantastic idea for a business, but do your potential customers agree with you? Start off by talking to people who own similar companies. Ask them about their business – What are the challenges and rewards? Visit organizations in your area that specialize in assisting small businesses. Ask them questions about the local business climate. Consider doing a survey or more in-depth market research to learn whether or not the company you’re proposing will provide a product or service that actually serves a need for which your customers are willing to pay. If not, you might want to consider going back to the drawing board.
Step 2: Write Your Business Plan
Once you’re sure your business is providing something that your target market wants and will pay for, it’s time to write a detailed, thoughtful business plan. There are many books and online resources that can guide you to write an effective business plan. It should address your financial needs and forecasts, go-to-market strategies, and existing resources, among other details. Ideally, you should be able to project plans for the first 3-5 years of your business. Make sure you plan on how you’re going to pay yourself as the small business owner. Be as precise and detailed as possible – Making wild estimations that are not based on research will not help your company.
Step 3: Paperwork!
First, visit your local city hall in person or check its website to obtain any necessary paperwork to get your business licensed. Also, see if you’ll need any special permitting – For example, if you plan to serve alcohol, you’ll need to get a liquor license, or if you are opening a daycare center, you’ll need a childcare permit. Also, check the Small Business Administration website to see if you’ll need any state or federal permits.
Depending on your state, you may need to file a Doing Business As (DBA) name. If you plan to hire a manager right away or other employees, you’ll need to obtain an Employer Identification Number. Certain vendors, suppliers, or clients might require other paperwork or formal filings relevant to your industry.
Step 4: Choose the Legal Structure of Your Business
Determine how you’d like to structure ownership of your business. If you decide to have a sole proprietorship (one owner), you won’t need the help of an attorney for this step. But, if you opt to have a partnership, an S corporation, a limited liability corporation (LLC), a cooperative, or a non-profit, you will need to hire a lawyer to help you file legal paperwork detailing the ownership structure of your business. It is best to take care of this as early in the company’s lifetime as possible to avoid future confusion or disputes and to ensure you are taking advantage of any tax benefits associated with the structure you choose.
Step 5: Get Money
You’ve got to have money to make money. When setting up a small business, you’ll likely need to invest in some things to get you started, whether it’s special software, a new laptop, inventory, marketing collateral, or manufacturing equipment. While some entrepreneurs might have money to cover those expenses in savings, most do not. Some business owners choose to pull money out of retirement accounts and others might ask to borrow money from family or friends to start their business. Other financing options include small business loans, crowdfunding, credit cards, and selling equity to investors.
Step 6: Buy Insurance
To make sure that you, your employees, and your customers are taken care of, you’ll likely need to purchase plans for business insurance, employee health and disability, loss control, and workers’ compensation insurance. When setting up a small business, being better safe than sorry is a good way to think about insurance.
Now that you’ve followed these steps, you should be ready to dive in and get to work. Starting a small business can be difficult and time-consuming. It can be difficult for small business owners to create a work-life balance in the beginning. However, like anything that requires hard work, it’s usually more than worth it in the end.