Basic
Steps to Starting a Business
Everyone asks how to start a
business and for someone like me it seems like a crazy question
because I think "Just do it!".
But other people think there
is a structure to starting a business and what to know what that
is. Unfortunately, the businesses that people start just to have
a business are usually the ones that fail.
The ones that grow from ideas
and develop as a passion of the owner are the ones that succeed
and typically don't have any type of business structure for many
years until they become profitable.
So from my standpoint if you
have something to sell and someone to buy, you have a business.
But newbies are looking for the legal issues, tax issues and
practical application of their business model, so lets explore
those ideas.
Step 1: The
Business Concept
Step 2 The
Business Model
Step 3: The
Business Structure
Step 4: The
Business Plan
Step 5:
Business Implementation
Step 1: The
Business Concept
The first think you need to
start a business is an idea. That seems simple enough right?
But how do you come up with an
idea that will be cost effective, have long term growth and
profit and be something you can execute. Of course, everyone
wants to be the next facebook or google, but do yo have the
resources to execute that idea and the finding to accomplish it?
In most cases, NO.
So you have to try to
work within your resources and ask yourself:
What can you
afford?
What do you
know how to do?
What do you
have experience at?
What do you
enjoy doing?
What resources
do you have?
Just because you see the
restaurant down the street making a huge profit does not mean you
can do it without some understanding and experience in the
business. Now if you worked at a restaurant for many years, then
you have a better understanding of what is required. Trying to
run something you have never done is a big mistake.
The costs of running something
like a restaurant are staggering. You have liability insurance,
licensing and code standards to meet. So jumping into the
industry without any background could be a waste of money.
This will be the same for any
business, if you don't know the business, don't attempt it.
I always laugh about people
trying to get into affiliate marketing. They want to build a
website, add a few banners and make millions of dollars with no
experience. For some reason they think they can just buy a $20
website and compete with the millions of experienced webmasters
and take away some of their sales.
It is as bad as thinking you
can buy a $20 website and compete with ebay, amazon or facebook
by working a few hours a week. If you think that is possible then
you know for sure you don't belong in an Internet business.
The same way if you believe
that it will be easy in any business you are in the wrong
business. Staring and running a business will not be easy as 1-2-3
and if you understand the business you will understand how much
work is ahead.
Just deciding on the concept
for your business will be a big job. Making sure there is a
profit to be made and that you can adequately fund and manage the
business.
Once you decide on the concept,
then move on to step 2.
Step 2 The Business
Model
You have a concept,
now create a business model.
If your concept is to be in
the food industry, will you run a restaurant, deliver to homes,
businesses or maybe sell products online? How do you make a
profit from your concept?
Obviously, the Internet is an
amazing market, space is cheap and the customers on it are almost
limitless while a physical location is expensive and the customer
potential is extremely limited.
Of course if you plane to run
a restaurant then it becomes hard to serve food online, but if
you sell gourmet premade products the Internet may be a better
options for your base sales.
Of course whatever business
model you decide on you will need some type of Internet presence,
so don't look at this as one or the other, just a discussion
different models.
Will there be enough profit to
manage a location and all of the overhead. You have to look at
costs of licensing and insurance, having a staff, an attorney to
keep your legal matters under control and an accountant to manage
your financial matters.
You have to think about
customer acquisition costs and marketing budgets. How much can
you spend and what is available to you in your field?
Even printing the name of your
business on your car and driving around costs money. So you have
to think about whether you can afford to get the customers you
need to create a profit and cover your overhead.
Once you have established a
working business model, move to step 3.
Step 3: The
Business Structure
You will want to consult an
attorney and an accountant on this one so you get it right. You
can opt for no business structure at all and just declare the
income as personal income or set up a corporation to protect
assets and isolate risks and finances.
There are benefits and
liabilities with each structure type.
For example: if you use a
DBA, Trade Name or Fictitious Name, depending on the state
you reside, you can run a business and just declare all the
income as personal income and file taxes just the same way
you do now. But, should there be any claims against the
business, yo risk all your personal assets. You can even get
a resale TAX ID from your state which is typically the same
as your social security number.
Where as a corporation
will segregate assets and liability and isolate your home,
car and personal belongings from any legal risks. But, there
are filing requirements, reports and procedures that must be
followed to meet the requirements of a corporation. You will
also need to file corporate taxes, pay yourself as an
employee, file tax paperwork each quarter and so on.....
There will be benefits of each
business structure type depending on what your business model is,
so determining your business model first is paramount to choosing
a business structure type.
(more information on business structure types)
Step 4: The Business
Plan
Choosing a business plan or
should I say, creating a business plan? No 2 businesses should
have the same business plan and I am not talking about writing
down one paragraph that says, "I plan to make money".
You need a
comprehensive plan written down on paper that outlines:
Your
Objectives
Your Budget
Your Profit
Financing
Your Backup
Plan
You need to write down
everything that you can think of, not to get a loan from the SBA
or a bank, but so you know that you have covered all the bases.
So that you have an outline and a provision for everything that
might occur.
You need to think this
business through until your brain hurts, then take a break and
think some more.
Plan every aspect of your
business and if when you get done you are looking at one or two
page, you are definitely not prepared for being in business.
Having a plan is the most
important aspect of starting a business because if yo have not
planned for even one unexpected expense, that could put you out
of business.
You need to do research,
consult with experts. Are you regulated by OSHA, think not? You
better think again, every business that has even one employee is
regulated by OSHA and failure to meet requirements could mean the
end of your business when the shit hits the fan.
Make sure you understand your
legal requirements and financial requirements. If you don't have
a plan and just run off the cuff you will end up failing for
something stupid that you never realized even existed.
Step 5: Business
Implementation
The last step is simply doing
it! Start your business. Take that business plan and begin to
execute the plan.
This should be the easiest
step if the business plan is detailed enough to follow. Since you
should have already considers all of the possible outcomes for
each step of your plan you will have a solid road map to follow.
Of course, now you face
managing employees, hiring people, dealing with the daily grind
and all the other joys of being a small business owner.
But ultimately, it
should be a great experience and one you will hopefully enjoy.
That is why it is most important that you find a business concept
in market that you do enjoy, because it is impossible to break
your back for years doing something you don't like to do.
For more information about the
legal requirements of starting a business in your state consult
the resources provided by your state government. Here is a list
of all the states resources and business starter kits.
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