Starting a new business venture is exciting and sometimes scary. However, having determination, passion and staying focus is the key. Remember, every business is unique, from the products and services it sells to the customers it attracts.
7 Beginning steps to starting a prosperous small business:
Take one step at a time, and you’ll be on your way to owning a prosperous and successful small business.
Define your vision and build your foundation:
- Every business needs a vision. The vision tells your why and your purpose. Your mission statement is your foundation which identifies what your companies’ goals and steps in accomplishing those goals. Be very clear and passionate when writing this section.
Research is Key:
- Starting a new business is not just something that will happen overnight. It requires research, development of your product/service to make it unique, finding out about legal practices and financial stability.
- What hobby have you turned into a business? What are you selling? What’s your product? Is it unique? What makes it unique? How do you plan on differentiating it from your competitor?
- Understanding your target market. Who are you planning to service? What’s the demographics (age, gender, income, and location). Why?
- Competition & how much? Who will you be competing with and are they near your area? If there’s no competition, then usually that means there’s no demand for your product or service. How do you plan on being different, but keeping quality and making your service/product appealing? Understanding this, will help build your value for your new business.
- I always say, pairing yourself with another successful business owner along the way will help in the process. Your mentor will be able to keep you on track and provide you with some advice as needed.
Write your business plan:
- Having a solid business plan will help guide you through starting your business. You already have the beginning parts of your business plan. In addition to your vision, mission, and research, you’ll need in your business plan your current and future financial needs, cost/sales structure and how you plan on attracting investors and lenders.
- Finances are extremely important with starting a business venture and having a business. Making sure you have enough funding for startup cost and emergencies are key. Finding new startup grants that’s out there will involve more research and also incorporating some of your owners’ equity. Have a contingency plan and recognize what your cost is, and cash flow is while maintain it all.
Determine your business structure:
- How would you like to setup your business? Have you thought about taxes? Did you know that that way your business is legally setup can affect how much you pay in taxes, your personal liability, your ability to raise money and the amount of paperwork needed to file? Be wise when choosing your structure and understand each structure. However, you may be able to covert to a different structure in the future depending on your location and it may cause tax consequences and possible dissolution of the business.
- Legal business structure options:
- Sole Proprietor: is a simple, but most common way to start a business. This structure has is for a business owner who doesn’t have a lot or any liabilities (no employees, contractors, investments).
- Limited Partnership (LP) or Limited Liability Partnership (LLP): is for two or more people to come together and own a business together. LP’s normally have one general partner with unlimited liability and other partners have limited liability and control over the company. Profits and losses are passed through to personal tax returns and the general partners. LLP’s gives limited liability to every owner. An LLP is protected from debts against partnership.
- Limited Liability Company (LLC): protect the personal assets of a business owner from lawsuits. An LLC can have multiple members. This structure can be taxed 3 ways, as a sole proprietorship, an S Corporation, or a partnership.
- C Corporations also called C Corp, is a legal business entity that separate from the owner. C Corps are the best protection to owners from personal liability, however, the cost to form a corporation is higher. The actual corporation makes profit, is taxed, and is held legally liable, not the owner. Corporations in some cases are taxed twice; first when the company makes a profit, and then when dividends are paid to shareholders on their personal tax returns. Corporations require more extensive reporting, bookkeeping, and processes.
- S Corporations also called S Corp, is a legal entity that avoids double taxation. With S Corps, profits and some losses are directly passed through to the owners’ personal income without being subject to corporate tax rates. Different states tax S Corps differently. To receive S Corp status, you must file with the IRS to get approval. With S Corps, you’re not allowed to have more than 100 shareholders and they all must me US citizens.
- Nonprofit Corporation:: are organized to do charity, education, religious, literary, or scientific work. Nonprofits can receive tax-exempt status because their work benefits the public. Tax exemption is when the organization do not pay state or federal taxes. Nonprofits must file with the IRS to receive tax exemption, which is a different process from registering and incorporating with their state. Nonprofits are often called 501(c)(3) corporations.
- Now you can apply for an EIN on IRS.GOV.
The above are just basic steps in starting a new business. There’s a lot more to consider when entering into entrepreneurship.