How To Start a Business
Becoming an entrepreneur is a dream of many, but wanting and becoming are two different things. Pursuing this dream requires effort, in all possible aspects. We have countless examples of successful entrepreneurs who started from scratch and are now successful billionaires.
Before you Google a business plan template and start plugging in the information or building a website, you need to understand your vision. What is your why? Why do you want to start a business? Do you understand the difference between a hobby and a business? Do you know that starting a business is a commitment and requires extra time, attention, and resources? What are you hoping to achieve by starting a business?
Here’s where people get it wrong:
- They start posting on social media about their website.
- They skip the business plan.
- Go out and buy a logo without creating a brand story and brand assessment.
- They skip the business entity registration and liability protection setup.
Starting and operating your business in the incorrect order is not only costly, but you spin your wheels trying to figure out why people aren’t buying your products, why you can’t get start-up capital, or why your friends and family aren’t supporting you. You have to take business ownership seriously. Here are critical areas of your business that you cannot miss when starting your new business:
You do not want to spend thousands of dollars building a brand over time just to receive a cease and desist. Before you commit to a company name, head over to the USPTO.gov and search the business name, any tag-lines associated with the business, or any name associated with the business name.
A Business Plan
Any successful Entrepreneur will preach the importance of writing down your goals and plans. The business plan should is a framework of:
- How the business is to operate.
- The business idea and vision.
- The potential target market.
- The marketing strategies to be used.
- The business budget and source of funds.
- A profitable product/service.
- Ways through which the business idea can be converted into a running business that generates profit.
- The company team and hierarchy.
- Identify the back-end systems you’ll need to run your business effectively (email marketing, website, CRM, client onboarding, calendar scheduling, and management, sales funnels, hiring and setup, accounting and taxes, etc.).
Your business is a separate entity from you. It has its own personal identifier known as an Employer Identification Number. You can apply for an EIN at no cost on the IRS website. It takes about 5 minutes to apply.
The purpose of an EIN is for the IRS to track business activity for tax reporting. You’ll need an EIN for the following:
Open a business bank account
Hiring employees and benefits programs
Set up a trust or an estate
Build business credit
Business grants or loans
A Legal Entity
Starting a business is exciting, but something that one cannot do alone. Incorporating your business creates immediate separation between you and your business. Per the IRS, your business is a separate entirety from you and should be operated as such. Incorporating your business also removes personal liability from you as the business owner. Here are the common types of business entities:
LLC (single-member or multi-member)
You also need to create an operating agreement and articles of organization. Each legal entity has its own tax advantages. Consult with a local tax accountant or tax professional prior to registering your business. The wrong entity can cost you thousands in unnecessary taxes.
A business attorney is an important asset to your business. A business attorney helps you:
Protect your company’s assets (copyrights, trademarks, patents, etc.)
Handling outstanding customer invoices
Mergers and acquisitions
Lawsuits and more
Protect you business as much as possible. People can be malicious, lawsuit savvy or something can go wrong BUT you need to be protected at all costs. Here is a list of insurance policies to consider:
General liability insurance
Error & Omission insurance
Business owners policy
Professional liability insurance
Home-based business insurance
Business interruption insurance
Product liability insurance
Business Bank Accounts
No more co-mingling personal money with your business funds. Open a separate business bank account. Your business is a separate legal entity from you and should operate as such. If you have multiple businesses, each should have its own set of business bank accounts, and it is essential to reconcile them each month. Here is a list of business accounts I recommend:
- Business operating checking account - daily business transactions.
- Business payroll account - 10+ employees.
- Business inventory account - if you have a HUGE product-based company.
- Business tax savings - save 15% - 25% of profits to anticipate taxes.
- Business tax savings - to be used for long-term savings and investments for the company.
Funding the Business
Your startup costs are listed in your business plan. Bootstrapping your business is not enough. You need sufficient capital. Consider a business credit card or a personal line of credit. Use the personal line of credit to loan your business money. I funded my business 100%. I loaned my business money because I wanted to control the interest rates and payback terms. Later in business, I applied for SBA loans and a secured business credit card.
As a business owner, you want to “raise capital” for your company. Whether it is through family and friends, a Go Fund Me, or an Angel Investor, you’ll need to gather funds. If you have assets such as computer equipment, a vehicle, a building, or cash to invest, you can sell the assets to the company. This helps build the company’s liquidity and equity. This also helps you during tax season.
S.M.A.R.T. Money Tools
Accounting software is essential for any business. New and existing businesses must accurately track their business finances. This not only helps with tax reporting but helps the business keep track of available cash on hand and measure the company’s profitability. Here is a list of amazing accounting software tools for your business:
Marketing is key for any business, new, or established. Marketing is how you sell to your clients. Remember, your family and friends did not sign up to be your customers. Do not be upset if they do not support you yet. There are millions of people in the world who are already buying your products and services from other sellers. Research consumer spending behavior using different consumer purchase websites. I research the labor of Statistics reports weekly.
Here are a few tips I learned from my marketing coach:
Research your target client. Who do you want to sell to?
Identify your unique selling position.
Clearly communicate the problem you are solving for them.
Test different marketing channels. Run analytics to determine where you receive the most engagement.
You need to market your business in front of new businesses every single day. Create a cost-effective marketing budget.
With the right marketing plan, you can position your products and services in front of them and become their new go to seller.
Our book, “Chasing Papers” is great for new businesses starting up or for existing businesses who are looking to build a solid financial foundation. You can purchase here:
Remember, every dollar counts.
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