Ready to take the plunge and start a business? Congratulations. Be aware of what you’re getting into before you spend time and money.
You have a great idea, and you are ready to start selling it. But before you jump in, take a step back and review this checklist to ensure that you have done the proper research and planning for your new business. Otherwise, you might be headed to the small business graveyard, similar to 50% of small businesses in their first five years of operation (SBA).
1. Why Do You Want to Start a Business?
If you’re looking for an easy way to make money, or a way to keep from going back to work, a small business is not the way. Small businesses require an inordinate amount of time and effort, especially up front. If you envision working two-hour workdays and frolicking the rest of the week, you will be disappointed.
Instead, if you are truly passionate about your business concept, you have a much better starting point. But passion isn’t enough. You should have a complete understanding of how your small business concept will operate, and what you can expect in terms of results. Will this be a lifestyle business, or can it grow into a multi-million dollar company? Knowing these from the outset can help you (and your family) maintain realistic expectations.
2. What’s the Industry Like?
You probably consider yourself an expert in the field in which you want to start a business, but remember not to take anything for granted. Every industry changes, and it’s important to do your homework before launching a business, learning industry trends, opportunities and threats, and your market niche.
Read everything you can about the industry, including articles and books written by people who have started similar businesses. Understand the pitfalls, and make a plan for handling them.
3. What’s Your Plan?
While it’s not necessary to write a 12-chapter tome for your business plan, it is necessary to have one. Without it, you won’t know your target market as well as you could. Moreover, a business plan will build a plan of action to reach your target market, and develop a 1, 3 and 5-year plan. The business plan can always change, and should adapt to new information, but putting a plan in writing is extremely important.
4. How Will You Fund?
New businesses cost money. How will you pay for it? Do you have enough savings to cover business expenses as well as your salary for the next year or two (until you turn profit)? Will you seek funding from investors or banks? What percent equity are you willing to give up in exchange for start-up capital?
If you work with investors, it’s key that you realize that they will want stake in your business. They might want a say in how you run your business. Does the idea of losing partial control frighten you?
5. How Will You Market Your Business?
One of the top reasons businesses fail is that they do not allocate enough resources to marketing. Marketing is what generates and grows sales. Even by investing a few hundred dollars per month into marketing your small business, you will increase business traffic to your site and drive sales. Without marketing, your business will quickly fail.
Spend time researching marketing methods as part of your business plan’s marketing section. Understand the options available to you, and which you can afford on a small budget. You may manage your own social media marketing campaign at first, then branch into press releases and media relations as well as advertising as your budget grows.
6. How Many People Do You Need to Operate?
Like most small businesses, you’ll likely start out doing most of the work yourself. But as your business grows, you need a plan to add part-time and full-time employees, as well as freelancers and outsourcing firms to help manage the ever-growing list of work.
7. What are the Legal and Tax Implications?
To start your business, you need to register certain paperwork with your state. Find out the steps for filing your articles of incorporation or partnership documents and note the deadlines for quarterly taxes on your calendar. Missing a step here could cost you legal fees, so be extremely organized.