So you think you’re ready to go into business? That’s great! Forbes contributor Jeff Rose calls entrepreneurship one of the best ways to build wealth fast, and if you make the leap, you’ll count yourself among the 28 million U.S. business owners who are driving 40% of all retail sales in the country.
But before you go all-in on your entrepreneurial vision, take a step back and check out the resources below. The U.S. Small Business Administration reports that 50% of small businesses fail within the first year. The more research you do ahead of time – and the more answers you come up with – the more likely you’ll be to fall into the 50% that succeed.
The considerations described below reflect decisions you’ll need to make before officially launching your business. It may be tempting to skip some of them in order to bring your idea to the masses as quickly as possible, but be careful. Failing to plan properly at this point in the process can result in disaster down the road.
Take the time to start your business off on a firm foundation with each of the following steps.
1. Choose Between Startups or Existing Businesses/Franchises
While many entrepreneurs begin their ventures to capitalize on their own “great ideas,” others cut the startup stage short by opening a franchise location or buying an established, independent business. Use Intuit’s guide to help make the decision: “Buying a Franchise Versus Starting Your Own Business.”
2. Conduct Initial Market Research
Whether you’re starting your own business or buying one, market research is critical. At a minimum, you need to know who your target customers are, what demand there is for your products and services, who your competitors are in the space, and what your costs will be to bring your idea to market. For more on conducting pre-launch market research, check out Business Know-How’s resource: “How to Conduct Market Research the Right Way.”
3. Identify Your USP
According to Brenda Do of BL Copywriting:
“If your ideal customer walked up to you and asked, ‘Why should I buy from you instead of the other guy?’ Can you give a compelling answer in ten words or less? That’s what a unique selling proposition (USP) does.”
If you can’t yet answer these questions, take a look at Fizzle.co’s “The Ultimate Guide to Finding Your Unique Selling Proposition.”
4. Name Your Business
Your business’s name can make or break your success. It’ll either stick in the minds of prospective customers, or it’ll be forgotten among the myriad other advertisers competing for their attention. Pick the right name using The Balance’s guide: “5 Tips for Choosing a Great Small Business Name.”
5. Look for Grants or Financial Assistance
With the average startup capital requirements of a new business sitting at $29,000 across industries, any amount of free money you can find can help ease your financial burden. Check out Fundera’s comprehensive list for options: “Want Free Money? Check Out This List of 108 Small Business Grants.”
6. Write a Business Plan
While a business plan isn’t strictly necessary if you won’t be pursuing funding or financing, a well thought out document can help you hone in on the customers you’ll serve and how you’ll support them (in a financially savvy manner). Get started with Discover Business’s guide: “How to Write a Business Plan.”
7. Sign a Commercial Space Lease
Again, you may or may not need this particular resource. If you do, however, need commercial space, be aware that real estate leases contain new terms and provisions you may not understand if you’ve only ever dealt in residential leasing. For more on lease terms and terminology, take a look at Fit Small Business’ report: “How To Lease Commercial Real Estate.”
The thought of hiring a business lawyer – who may charge anywhere from $150 to $1,000 a hour – can be daunting when you’re in the first stages of your company’s startup.
Remember, however, that an ounce of legal prevention is worth a pound of cure. Paying a lawyer to help establish your business correctly will cost you significantly less than making legal changes (or worse, fending off a lawsuit) down the road.
8. Decide on a Legal Structure for Your Business
From sole proprietorships to LLCs, and from partnerships to corporations, different legal structures exist for businesses that all confer different advantages and disadvantages. Do your research ahead of time to figure out which one will best suit your needs, and consider seeking legal advice to make the right decision. Alex Katz’s Entrepreneur.com article “Determining the Best Legal Structure for Your Business” can help.
9. Get Your Business Licenses
Some, but not all, businesses require applying for and receiving licenses – either state, federal or both – before beginning operations. Generally, they’re required for businesses handling sensitive items (such as alcohol or firearms) or for service-oriented businesses that must meet certain professional standards (such as doctors, lawyers or contractors). The SBA’s guide to “Business Licenses & Permits” is a good place to start.
10. Register Your Business
Once you’ve chosen a legal structure and a name, you’ll need to register it with the appropriate authorities (who may include name registries, taxation authorities, employer databases and others). Again, the U.S. Small Business Administration has you covered: “Choose & Register Your Business.”
11. Find a Lawyer
Business lawyers don’t come cheap, but they can be your greatest allies in keeping your fledgling company operating smoothly. A lawyer can advise you on everything, from registering your business to protecting its future assets and services – just be sure you choose the right person for the job. Nolo’s article, “How to Find an Excellent Lawyer,” will help you find affordable, effective representation.
12. Protect your IP
If your company is founded on intellectual property that’s unique to your organization, protecting it should be one of your top priorities. Kelly Fitzsimmons’s Inc. article on “10 Ways to Protect Your Intellectual Property” will walk you through some of the careful considerations that must be made.
13. Create Contracts
Foster Swift’s Andrew Vredenburg sums up why contracts are so important in business transactions:
“The reason that verbal contracts can be problematic is that parties change, memories fade and, yes, people lie. Without a written agreement, a judge or jury will have a hard time determining which version of events to believe in a “your word against theirs” scenario.”
Review his full article on “The Importance of Written Agreements in Business,” and then consult the lawyer you’ve connected with on what specific contracts may be necessary for your company.
14. Buy the Necessary Business Insurance
Even with the best legal protections, lawsuits and losses can – and do – happen. Protecting yourself could require everything from liability insurance, to inventory protections, to errors and omissions (E&O) insurance that covers the work you do. John Boitnott’s Entrepreneur.com article, “7 Types of Insurance You Need to Protect Your Business,” has more on the subject.
15. Know Your OSHA Requirements
Depending on the type of business you run, you may be subject to OSHA requirements. For current information, check out Niall O’Malley’s post: “Right to Know vs. Right to Understand: Is OSHA Changing Its Standards on Training?”
Your business’s finances aren’t something to mess around with. In this section, we’ll walk through the critical considerations you’ll need to undertake to ensure your money is managed responsibly, from where your money is stored to how you handle your cash flow.
16. Set Up a Business Bank Account
Do yourself and the IRS a favor: do not use your personal bank accounts for business purposes. Set up new business accounts and keep all transactions separate to simplify things, come tax time. AJ Agrawal has more on what to look for in a business bank account in his Inc. article, “How to Open a Business Bank Account for Your Startup.”
17. Choose an Accounting Program
Once your account is opened, select a specialized accounting program to keep track of every dollar that goes in and out. Excel just doesn’t cut it anymore! You’ll find suggested programs based on your size and requirements in Business News Daily’s guide to the “Best Accounting Software for Small Business 2017.”
18. Choose a Payment System
Another critical question startups must answer before launching is how they’ll get paid. Will you accept credit cards? Use an e-commerce shopping system like Shopify or Bigcommerce? Oliver Rist of PCMag offers a helpful side-by-side comparison of different options: “How to Choose an Online Payment-Processing Service.”
19. Find an Accountant
Accounting software programs simplify the financial management process, but you’re still better off seeking the support of a professional accountant. As David Hill shares:
“These days it’s useful to think of an accountant as a business consultant who specialises in areas concerning finance, like taxes, budgets, business operations, business equity, business management and money management. As anyone who’s ever tried to go into business would agree, crunching the numbers yourself in these different fields is something that can be difficult, particularly when you have business development concerns and other matters that urgently require your attention.”
For more, check out his full article on “Why Every Business Needs a Professional Accountant.”
20. Manage Your Cash Flow
Data from CB Insights suggests that cash flow management is the second most common reason startups fail. To learn the strategies needed to keep your small business safe – or to check-in on how well your current practices are working – take a look at Nellie Akalp’s SmallBizTrends article, “How Well Are You Managing Your Business Cash Flow?”
21. Finance Your Invoices
If you do encounter cash flow challenges (or if you think it’s likely you will in the future), look into invoice factoring or working capital loans that may be able to help you cover the gap between when expenses hit and when payments from your customers come through. Jeff White’s FitSmallBusiness article can help: “What Invoice Factoring Is & How It Works”
Benjamin Franklin is famously quoted as having stated, “In this world nothing can be said to be certain, except death and taxes.” Proper tax management and planning is crucial at the early stages of your business, as errors made in collecting and/or remitting the appropriate amount of tax could put you out of business.
22. Determine Your Eligibility
There’s no escaping the need to pay taxes as a small business owner. Get it right from the start by determining your eligibility for sales taxes, use taxes, income taxes, self-employment taxes and other responsibilities with the IRS’s “Business Taxes” guide.
23. Find Your Filing Dates
Besides figuring out what you’ll owe and to whom, make a note of when you’ll need to pay, as penalties and interest rates for missed taxes can be steep. Your accountant may be able to help you figure this out, or you can check out the IRS’s “Tax Calendar for Businesses and Self-Employed” (take advantage of its helpful event filtering tool to find the dates and deadlines that apply to you).
24. Set Aside Money
The time to raid your business bank accounts for the taxes you owe isn’t the day they’re due. Instead, take advantage of services that withhold your estimated taxes as you get paid. Painless1099 is a great option for self-employed workers, while payroll services like Gusto and Wagepoint can withhold your employer taxes. Most shopping carts can help manage sales taxes, but confirm that yours does before depositing your payments in full into your checking account.
25. Claim Your Deductions
Tax deductions abound for small business owners, but you’ll find that it’s easier to plan ahead and capture these expenses from the start than it is to play catch-up at tax time. Wagepoint’s guide – “The Comprehensive List of Small Business Tax Deductions” – is a great starting place.
To some degree, the steps covered in this first section of this guide – “Startup Considerations” – will inform your business’s strategy plan. Identifying your USP, for instance, will influence how and when you find your product-market fit, detailed below.
However, strategy planning is about more than marketing and positioning. It encompasses every aspect of your organization’s operation, and as such, it deserves your attention early on in the startup process.
26. Create Your Plan
Remember that data from CB Insights we referenced earlier that stated cash flow management was one of the biggest causes of startup failure? The only challenge listed as a more common breaking point for small businesses was “no market need.” An astonishingly large number of companies launch without a true strategic plan. Sandy Huang expounds on the error of this way in her article, “Why Does a Growing Business Need a Strategic Plan?”
27. Find Your Product-Market Fit
Determining whether you’ve arrived on a product or service your market is actually interested in is an important step in the strategic planning process. Clate Mask offers suggestions on finding product-market fit in his SmallBizTrends article, “Invest in Your Success: Strategic Planning for Small Business.”
28. Set Your Pricing
Having something the market wants is only half the battle. If you aren’t offering it at a price they deem appropriate, you don’t have a viable business. Craig Simpson, of Simpson Direct, Inc., discusses the factors that make a price appealing in his Entrepreneur.com post, “Why Some Prices are More Right Than Others.”
29. Plan for Growth
Explosive success is the dream of many entrepreneurs, yet scaling quickly comes with its own challenges. That’s why it’s worth thinking, from the start, about the systems you have in place for scaling your supply chain, customer service processes and other factors. Fundable offers great tips in its guide to “Growth vs. Scaling.”
Marketing, Branding & Advertising
Marketing, to the layman, seems quite complex. Where should you advertise? What ads should you run? How can you be sure that the messages you’re paying for are actually connecting with your prospective customers and encouraging them to take action?
Your success as an entrepreneur, however, depends on your ability to find answers to these questions and more. The steps described below will help get you started, but keep in mind that your company’s marketing, branding and advertising strategy is something you’ll test and iterate over time.
30. Create a Brand Identity
Some estimates put the number of advertising messages a person is exposed to each day at nearly 5,000. As a new company entering the ring, you need a unique and consistent brand that’ll help prospective customers remember you amidst all this noise. Whether you’re an experienced marketer or a branding newbie, Column Five Media’s complete resource – “A Step-by-Step Guide to Creating a Powerful Brand Identity” – will show you how to get started.
31. Set a Marketing Budget
To ensure you don’t go overboard promoting the brand identity you just created, set a reasonable marketing budget from the start. Kinesis Inc.’s Wendy Maynard offers tips for small businesses to multi-million dollar corporations in her article, “The Right Way to Set a Marketing Budget.”
32. Build a Company Website
No matter what type of advertising channels you plan to pursue in the future, you need a company website. Luckily, with today’s technology, you don’t need to be a coding genius to put up an attractive, yet functional offering for future customers. Michel Therlaut’s Forbes article on “Key Steps to Building Your First Small Business Website” will show you what you need to do, as well as what needs to go on your pages to keep visitors happy.
33. Choose Your Advertising Channels
“Being everywhere” simply isn’t feasible for most new businesses. To choose how to allocate your marketing budget by channel, Guerric de Ternay of Boost Companies suggests asking four questions:
- Who is your target audience?
- How are you exploring your next marketing moves?
- Do your customers really embrace new trends?
- How do you take advantage of the abundance of channels?
For a complete discussion of each question, take a look at his full article: “Are You Sure You Advertise on the Right Media Platforms?.”
34. Identify Resources Needed to Execute Your Plan
OnStrategy’s Erica Olsen shares a disturbing statistic: 86% of business owners and managers spend less than one hour per month discussing strategy. As a startup, you can’t afford to operate in the dark. View her full guide on “Strategic Implementation” to determine how best to launch the advertising channels you’ve chosen for your company.
35. Measure Your Results
Finally, take a lesson from Peter Drucker, who famously stated: “What gets measured, gets managed.” Ensure that every dollar you commit to your company’s marketing campaigns is producing a positive return, using the tips shared in Angela Stringfellow’s round-up: “Marketing Effectiveness: 30 Experts Reveal Their Top Ways to Measure the Effectiveness of Marketing Campaigns.”
Far too many business owners treat customer service as an afterthought – something they’ll handle as orders come in.
The most successful companies, on the other hand, know that customers are their most precious resources. In an effort to retain them (and, perhaps, to get them to refer others to the business), they look at customer service as an opportunity to delight their clients and build the positive relationships needed for a company’s long-term success.
36. Set Your Returns/Refunds Policy
40% of online shoppers say they struggle to find return policies on retailer’s websites. Make it easy for your customers to find the information they need, and use your return and refund policies to eliminate any fear they have about purchasing from a new merchant.
If you own an online business, check out Quaderno’s “The Digital Business Owner’s Guide to Refunds.” If you’re running a brick-and-mortar location, take a look at QuickBooks’s article, “How to Create a Return Policy for Your Small Business.”
37. Identify Channels for Customer Service Requests
Email support is a give-in, and having a phone number is expected in most industries. But what about other channels, like social media or forums? Len Markidan, in his Groove guide, “What are the Most Effective Channels for Customer Support?,” notes, for instance, that companies who ignore support requests on social media see an average churn rate that’s 15% higher than companies who don’t. Check out the full guide for seven customer service channels to consider.
38. Respond to Customers Quickly
Drew Hendricks, writing for SmallBizTrends, shares that:
“91 percent of customers don’t complain when they are unhappy because they think that taking the time to provide feedback isn’t worth the time because the business simply doesn’t care. But if the customer knew that there would be an immediate response, 81 percent claimed that they would provide the business with feedback.”
39. Invest in Onboarding
Onboarding isn’t just for employees. When used to get customers quickly acclimated to a new product, onboarding has the potential to increase satisfaction, lower churn and drive referrals from happy customers to new prospects. Lincoln Murphy from Sixteen Ventures has more in his article, “The Secret to Successful Customer Onboarding.”
Inventory & Fulfillment
Questions of inventory and fulfillment won’t be pertinent to all businesses, but for those that plan to use physical goods (either as products themselves or as supplementary service items, such as plates and cups in a restaurant), the considerations posed below are of vital importance.
40. Identify Potential Suppliers
The suppliers you choose to partner with have the potential to make or break your business. You need partners that can provide you with consistent product, in the quantities you need, at a price you can afford. Tom Greco of Thomasnet.com offers valuable startup advice on finding prospective suppliers in an article titled, “11 Tips to Help Identify a Reliable Supplier.”
41. Select Your Suppliers
Once you’ve identified possible suppliers, you’ll have to decide which ones to move forward with as you launch your business. Greg Hong, writing for Entrepreneur, suggests considering four factors in your decisions: alignment, length of commitment, honesty and expertise. More detail on each of these can be found in his full article: “4 Keys to Choosing the Right Vendor.”
42. Manage Supplier Relationships
Signing off on an initial purchase order isn’t the extent of proper supplier management. Investing in the relationship you have with your suppliers is just as important as it is to build connections with your customers. Spencer Smith of TechTarget shows you how to do it in his piece, “Vendor Relationship Management: Best Practices for Solution Providers.”
43. Manage Your Inventory Properly
You’ve chosen your suppliers and received your inventory. Now what do you do? Life Storage offers a great discussion on everything from creating inventory management systems to storing your goods properly in their article, “How to Effectively Manage Small Business Inventory.”
44. Practice Good Inventory Control
Inventory control is not the same thing as inventory management. According to Fishbowl Inventory’s Robert Lockard, “Inventory control involves tracking your items, inventory counts, and generating reports to help you cut costs, increase inventory turnover, and save money.” For more on the subject, take a look at his video: “Whiteboard Wednesday: What Is Inventory Control?”
45. Expedite Fulfillment Processes
What good is having a great product if your customers have to wait weeks to receive it? Make them happy by expediting your shipping processes, drawing on tips found in Monica Orrigo’s Handshake article, “How to Improve Your Order Fulfillment Process.”
46. Understand International Import/Export
International import/export may be something that your company gets into; though international production certainly isn’t a requirement for running a successful business. If you do decide to take the overseas route, familiarize yourself with the general process using an article published on The Balance by Laurel Delaney on “How to Start an Import/Export Business.”
Becoming an Employer
Down the road, you may decide to bring on employees to expand the amount of work you’re capable of doing. If you’ve been funded with venture capital, that day may not be that far in the future, as your backers will expect you to build the team needed to realize your vision as quickly as possible.
Regardless of your timelines, successfully becoming an employer – like so many of the other categories described here – requires time and preparation. Allow time to address each of the following steps appropriately, rather than hastily rushing through them when your first employee walks through the door.
47. Write an Employee Handbook
An employee handbook might seem like an unnecessary effort – especially when you’re first starting out. Quite the contrary, it’s actually a powerful legal tool that sets the standards of employment within your company, protecting both you and your employee. If you’ve never written this type of document before, you’ll find Square’s article “Employee Handbooks – How to Write One and What to Include” to be a helpful resource.
48. Check the Legality of Your Employment Policies
If you do decide to draft your own employee handbook, have a lawyer look over it and any other employment contracts you use. Depending on your state, legal structure and size, you may, for example, need to use specific wording with regard to your non-discrimination or right-to-work practices. Nolo’s guide to “Hiring a Lawyer for an Employment Issue” can help you find the appropriate attorney.
49. Hire the Right Workers
Hiring the right workers is about so much more than posting a job listing and choosing the first applicant to walk through the doors. For instance, you’ll need to:
- Determine what roles your company needs to fill first.
- Develop job descriptions that will help you find the best employees to meet these needs.
- Post your job to the services that are most likely to reach your ideal candidates.
- Interview promising candidates.
- Make formal job offers to preferred candidates.
There’s a reason professionals devote their entire careers to managing human resources. You’re at a disadvantage managing the process on your own – on top of the other responsibilities required by your company – but you can speed up your learning curve with Adam Bryant’s guide on “How to Hire the Right Person,” published by the New York Times.
50. Keep Proper Employee Records
Heaven forbid your company face a future wrongful termination lawsuit or other legal action; if it does, you’ll be glad you took the time to create an employee record-keeping system. Susan Heathfield of The Balance offers some tips in her article, “Employee Records: What Employee Records Should Employers Maintain?” Take them to heart, and make constant documentation a regular part of your internal processes.
51. Improve Your Management and Leadership Skills
Being a great entrepreneur and a great manager are very different things. Just because you have a great idea doesn’t mean you’ll automatically be able to enroll your workers in your vision or engage employees to produce their best work.
If you aren’t confident in your managerial skills, take a look at MindTools’s “Team Management Skills: The Core Skills Needed to Manage Your Team” and WagePoint’s “The Epic Guide to Employee Management” for guidance. Or, if you want to improve your leadership potential, visit Xero’s small business guide on “How to Be an Effective Leader: 10 Tips.”
52. Understand Employee Discipline
If you have employees, you will eventually encounter situations that require you to discipline them. Make sure your discipline policies and procedures are appropriate with BizFiling’s article on how “Disciplining Your Workers Requires a Legally-Sound Policy.”
53. Conduct Employee Performance Reviews
If you’ve worked as employee, you know that there are certain things those in the working world have come to expect: performance reviews (and often, compensation increases that are tied to them) are just one of these elements. Giving helpful, constructive feedback may not come naturally to all entrepreneurs. If you count yourself among this bunch, give Sharlyn Lauby’s “Six Helpful Tips on How to Conduct a Performance Review Meeting” a read.
Managing payroll could be encompassed by the “Becoming an Employer” section above, but we felt that, because it’s so important to get right – and so foreign to many new business owners – it deserved special attention on its own.
54. Know your Legal Filing Obligations
Did you know that, when hiring new employees, you may be required to report them to your state in case they’re on the hook for wage garnishments? Or that you may need to keep paper copies of I-9 forms or identity verification documents? The SBA’s guide to “New Hire Reporting for Your State” will help you set up the appropriate systems.
55. Set Up a Payroll System
Now that you have employees, you’ll need to pay them. Payroll systems take much of the complexity out of the process; learn more with Wagepoint’s article on “Getting Started with Small Business Payroll – 7 Simple Steps.”
56. Choose the Benefits You’ll Offer
The benefits you include in your compensation packages must be considered from both a financial and a legal perspective. Offering more options or more coverage could increase your costs, of course, but it could also enable your business to attract and retain top talent. Weigh the pros and cons of different benefits with the Harvard Business Review’s guide to “The Most Desirable Employee Benefits.”
57. Find HR/Benefits Service Providers (health insurance, disability, etc)
Once you’ve settled on specific benefits – whether health insurance, disability protections, 401k accounts or broader employee assistance programs – you’ll need providers to administer the required plans. Christy Hopkins offers a comprehensive guide to plan management in her “Guide to Providing Health Insurance for Small Business Owners” on FitSmallBusiness.
58. Determine Who Will Pay for Benefits
Your benefits providers will help you determine the final costs of implementing each of your proposed programs, based on any group or policy discounts you may be eligible for. Now, it’s time to decide what your company will cover versus what you’ll ask employees to pay. Hopkins’ additional FitSmallBusiness report – “Employee Benefits: The Ultimate Guide for Small Business Owners” – can help you answer this question, among others.
Cyber security isn’t only a concern for big multi-nationals. These days, nearly every business stores some type of private consumer data – and that puts every business at risk of having that data breached.
Without hiring top cyber crime experts, there may be no way for business owners to guarantee their data won’t be hacked. That’s what makes the following steps so important.
59. Purchase Cyber Insurance
In 2015, according to Symantec’s “Internet Security Threat Report,” 318 security breaches exposed more than 429 million identities. And with the hundreds of millions of new malware variants added each year, per the same report, it’s unlikely that these types of cyber-crimes are likely to go away anytime soon.
Cyber insurance may offer some reprieve, should the worst happen to your business. According to Australian IT developer Kiandra, “Cyber insurance offers a business the assurance that if it can’t prevent a cyber attack, it can at least insure itself against some of the repercussions.” Learn more about the subject in their article, “The Importance of Cyber Insurance in 2017.”
60. Take the Necessary Steps to Protect Your Customers’ Private Data
Of course, you shouldn’t rely on cyber insurance alone to cover your business. It’s far better to prevent attacks than to insure against one, why is why it’s worth taking the necessary steps internally to protect your digital assets. Indusface’s Venkatesh Sundar offers one such strategy in his article, “Here’s How You Can Secure Enterprise Mobile Applications.”
61. Have a Plan for a Data Breach
Should the worst happen, you’ll be able to respond faster and more appropriately if you have a plan in place before the breach occurs. Crest’s comprehensive Cyber Security Incident Response Guide can help you put one together.
Planning Ahead for Small Business Success
This guide doesn’t cover all the necessary considerations to undertake when starting a new business; the scope and complexity needed to do so for all businesses, of all types, would be monumental.
What you’ll find, however, is that working through the topics listed above will leave you and your growing company in a much stronger position than entrepreneurs who dive in feet first without proper planning. Use this list as a jumping off point. Pick the resources that suit your needs, and make note of any additional questions your research raises for future investigation.
With a bit of advance effort, you’ll be well-positioned for future success in your new industry.