Are you eager to be your own boss one day and have a business of your own? Do you have a brilliant idea and a healthy dose of passion, self-confidence, and grit?
If you answered yes to either of those questions, you are well on your way to starting your own business. But, before you dive head first into the deep end of business ownership, it's important to realize that the process of creating a successful and sustainable business is more involved than you might think.
Whether it's determining your business structure or designing a detailed marketing strategy, the workload can quickly pile up on the unprepared business owner. Today, we'll discuss the first 5 steps you'll want to take to ensure you and your business succeed.
1. Conduct Market Research
You can determine the demand and level of existing competition for your product or service by conducting market research and thus mitigate your level of risk. If a specific market is oversaturated, it may not be wise to invest your time and money funding that product or service unless you can articulate what makes your product or service different from the others.
You'll also want to make sure you are including interviews in your market research. Once you define your target market, go talk to those within that target market and confirm what you are planning will actually be desirable for its intended customer.
2. Write a business plan
Now that you have your idea, it's time to write a business plan explaining the purpose of your business, your short- and long-term goals, who are your target customers, and how you will finance your start-up costs. When first starting, your business plan doesn't need to be completely flushed out, but you should start putting pen to paper. You'll want to regularly review your plan and update it as you go. (Check out this link to learn how you can create a one-page business plan.)
The business plan will become the foundation of your business and the roadmap to help you make decisions on how to operate and grow your business. Further, investors may want to see your business plan to assess your potential profitability and how thorough you thought through your ideas. A strong business plan can also help attract additional partners and employees.
Although you may be tempted, do not skip this important step.
3. Finance your business
Once you establish your business plan, you can focus on acquiring the money you'll need to start the business. If you don't have the necessary funds, you'll need to either raise or borrow the capital.
While start-up costs often prevent aspiring business owners from pursuing their dreams, there are many ways to fund your business, such as self-funding, angel investors, small business loans, and crowdfunding. Each of these options come with their own set of pros and cons so be sure you do your research before committing to a specific path.
4. Determine your business structure
One of the most critical decisions in starting a new business is determining the business structure. You'll want to make this decision with your end goal in mind - what are you aiming to build? At a minimum, your business's structure will impact your business registration requirements, what you need to do to keep corporate formalities intact, how much you pay in taxes, and your liability if something goes wrong.
The four most common business structures are:
- Sole Proprietorship: This is where you own the business entirely by yourself and plan to be responsible for all debts and obligations.
- Partnership: This means that two or more people are held personally liable as business owners.
- Corporation: Many people who wish to separate their personal liability from their company's liability will choose to form either a S, C, or B corporation. Each type of corporation has different guidelines, but this structure ensures that the business is a separate entity from its owners.
- Limited Liability Company (LLC): An LLC is one of the most common structures for small businesses because it provides the legal protections of a corporation and the tax benefits of a partnership.
5. Choose your business location and name
Whether you will be a brick-and-mortar business or an online store front, the choices you make for your business's location will affect your taxes, legal requirements, and profit - just to name a few considerations.
Equally important is the name of your business. As a business owner, you'll want to ensure that the name of your business reflects your brand, values, and the services or products you plan to provide.
Once you have a location and name, check with that state's filing office to ensure that the business name you want isn't already taken. You will also want to make sure no one has already filed trademark rights on the name with the U.S. Patent and Trademark Office.
If all is not clear, you will have to choose a different name. This exercise will also help you think through how important and/or urgent it is for you to protect your chosen business name – whether or not you want to trademark your business name and/or purchase a recognizable version of it as a domain name for your future website and social media channels.
As you can see, starting a business is no small feat and involves a lot of decisions. It takes a determined and resourceful aspiring business owner to start and follow through in making their dream a reality.
Check out our next blog next week where we'll continue sharing the next five steps in starting a business.
Until then, we want all business owners to know that you don't have to create your business on your own. At R&R Legal Advisors, we guide business owners every step of the way. Reach out to us today for a consultation and we'll ensure you and your business are set up for success.