1. Get Clear About Your WHY?
Why are you starting this business? How do you see your life now? Is it just because you hate your job or because you want to be the next tech star to cash out for big bucks? You can always get a new job. And more wannabe tech stars flame out than get a big payday. But if you want to start a small business because you have a purpose, want to serve, want to leave a legacy or want to fill an unmet need in the marketplace, then you’re on the right track. The latter will help you survive the hard days in business, so it’s time to develop a vision board for your new life as a business owner.
2. Look at Your Finances
The money to start a small business is going to come from your personal resources. So before you start your business, calculate your net worth, pay off credit card debt, get your credit score as high as possible and look at all of your available cash reserves such as your savings, your 401K or home equity.
3. Research the Business Opportunity
You might be excited about a new restaurant concept, but have you ever worked in a restaurant? Perhaps you should work part-time in a business like the one you want to start so that you can learn the real scoop on the industry you want to join. It’s best to have business experience before launching a new business. It will help you determine what skill you have and what ones you need to run your business.
4. Research the Market
You want to make sure there is a real business opportunity, so that requires research. Here are a few key questions that you need to answer. Who are the dominant players in your market? Who is going to be your target customer? Who is your competition? What are the current price points? What are the industry trends? What are the typical sales cycles?
5. Talk to Potential Customers
Once you identify your target customer, go and talk to them. Ask for opinions on your pricing and how they currently get their needs met. Ask about their budget cycles. Call competitors and ask for a quote. Go online and order a competitive product and return it to see their customer service. Use Spyfu.com to search competitor websites to see what keywords they use and if they use paid advertising.
6. Find an Available URL and Name Your Business
Your website is your #1 sales tool. Your business will feel very real once you name it. You want to be cleaver, but it’s not a good idea to use a word that is hard to say or spell. You need a name that is memorable and no more than three words. Use alliteration if you can. Try to avoid unusual spellings on common words or using numbers in place of words. You will be seen immediately as a small entity. You want to build a brand, not just establish a business. So it’s best to invest in a professional logo for your business too. Use 99designs.com or fivrr.com for a graphic design resource.
7. Establish Your Legal Entity
You need to incorporate your business as an LLC or S-Corp. Do not use your personal social security number for your business. You’ll open yourself up to legal liability. Try CorpNet.com to help you get your legal entity filed.
8. Secure an EIN Number and Business Bank Account
Once you establish your legal identity, go to IRS.gov and apply for an Employer Identification Number (EIN). You need everything about your business separate from your personal records, especially your finances. Once you have an EIN number, go to a bank and establish a business bank account. I suggest using a different bank than your personal bank to resist the urge to comingle funds.
9. Develop Your Signature Product or Service
You need to develop a product to test the market. Find a maker space or commercial kitchen and make a prototype or a batch of your product. If you are a starting a service business, develop your one-pager that tells people who you are and what you do. Be sure to highlight the benefits of working with you. If you are making an app, jewelry, or another product, you will need samples. Make some and set up a vendor both somewhere to get feedback from potential customers.
10. Set Your Price and Start Selling
You need to set a price, but you can’t do that until you understand your costs. Looking at labor, materials and shipping cost are easy, but you need to include a percentage of your overhead and a profit margin. If you don’t know how to calculate this, get an accountant to help you. You can also find a SCORE chapter and get a mentor to help you establish your business. Once you know your price, set up a vendor booth somewhere to sell and get feedback from potential customers. Set up a basic website using a resource like go centralfrom GoDaddy or an Amazon store to see if you can generate sales.
11. Write a Business Plan
Now that you have basic customer and competitive data, and a few sales, it’s time to develop a business plan to turn your idea into a real business. Go to bplan.com to research sample business plans and use software to complete your business plan. It might even be helpful to sign up for an online business plan course.
12. Launch While Working
Don’t quit your job to run this business, yet. It takes 12-18 months typically to break even, so you won’t be able to cover even a portion of your salary at first. You need to learn the ropes of running your business while you are still getting a check from someone else. Unless you are directly competing with your employer, run your business on your nights and weekends. Request telecommuting or flex hours, so that you can make business calls during the day for your business. Never use the company resources for your business—that’s a fast way to lose your job. You can sell to your co-workers though. They might be a great source of feedback.
There are a lot of things that go into running a successful business. If you start with these 12 elements, you will have a good foundation to start a small business and scale up. Hopefully, before too long, you’ll wave goodbye to corporate America and grow a business that will allow you to build your dream life and create wealth for your family. It can happen, but it’s going to take a lot of work. You can do it!