So you've got a great business idea? That's awesome! But before you can start selling your products or services, there are a few things you should do to get your business off the ground.
Brainstorming Your Start-Up: Planning is Critical
Get together with a few friends/advisors, and talk out how things can go, both good and bad.
What is your business idea? What product or service will you offer? What problem will you solve for your customers?
Who is your target market? Who are you trying to sell to? What are their needs and wants?
How will you make money? How will you generate revenue? What are your costs?
What is your competitive advantage? What makes your business unique? Why should customers choose you over your competitors?
What are your financial projections? How much money do you need to start your business? How much money do you expect to make in your first year? If you think you might lose money in the first few years, this could affect you decision about the most advantageous business structure.
What can go wrong? About 45% of new business fail in the first 5 years. What’s your Plan B if projections don’t pan out, if sales growth does not materialize, or if the long-expected recession actually happens?
Housekeeping: Before You Open the Doors
Once you have a solid business plan in place, you need to take care of the following requirements before you can open the doors:
Business formation: You need to choose a business structure, such as a corporation, S corporation, limited liability company (LLC), partnership, or sole proprietorship. Each business structure has its own advantages and disadvantages, so it's important to choose the one that's right for you.
Insurance: You need to obtain insurance to protect your business and your assets. The types of insurance you need will depend on the nature of your business. Pay attention to workmens’ compensation, disability, and paid family leave coverage, as there can be stiff penalties if this coverage is not in place. Talk to you insurance agent early and often.
Licenses and Registrations: You need to register your business with the state and maybe with any local governments where you will operate. The registration requirements vary from state to state, and from county to county, so it's important to check with your local authorities. NY has a website (https://www.businessexpress.ny.gov/) to help identify these requirements. Warning: If you are required to collect sales tax, you must have registered before you can open your doors.
Banking: You need to open a business bank account. This will help you keep your personal and business finances separate. Consider separate bank accounts to track sales taxes and payroll taxes.
Taxes: You need to obtain an employer identification number from the IRS. If you chose a corporate or LLC structure, there are certain elections to file with the IRS and the state, and these elections must be made fairly soon after you form your business. Establish a calendar of tax return due dates based on the various taxes you will be filing.
Here are some additional tips for starting a business:
Do your research. Before you start your business, it's important to do your research and understand the industry you're getting into. This includes understanding your target market, your competition, and the legal and regulatory requirements.
Get help from experts. There are a number of experts who can help you start and grow your business, such as lawyers, accountants, and business consultants. Don't be afraid to ask for help when you need it. I am a big advocate of the “Take your Accountant to Lunch” business strategy.
Network with other entrepreneurs. Networking with other entrepreneurs can be a great way to get advice, support, and even new business opportunities. There are a number of online and offline resources where you can connect with other entrepreneurs.
Be persistent. Starting a business takes hard work, a lot of time time and effort, and a lot of risk. The more you anticipate, the more you plan, the better your chances of success.
And, of course, a bit of good luck couldn’t hurt.
