Entrepreneurs know that establishing your identity as a business involves more than a website, a shop, and a sign. In fact, your business has several different identities: legal, financial, market, and operational. For a successful business enterprise, you will need to establish all four, and in a particular order. However, before you “set up” your business, you should take some preliminary steps first.
PRELIMINARY STEPS
Setting up your identities should really only happen only after you determine you have a feasible business to establish. So, your first move is to “think it through” via a business plan. You’ll need to examine your own personality and goals versus the roles you have assigned yourself in the plan. Will you like what you have to do? Will you be good at it? What evidence shows that? How will you get the skills and experience that you’re missing?
Your second preliminary step is to sell something, and then revise your plan based on what you learned. Why did the customer switch suppliers and choose you? What convinced him? How long did it take? What does that mean for your sales forecast and how much time you or others must spend selling?
Part of the plan is the cash flow projection. By doing that, you can see how much financing you need before the business can support itself. The last preliminary step? Get the financing! Without it, you don’t have a business to establish.
Once you’ve determined you have a feasible business, you can actually begin the “startup” of your business through the establishing of your four business identities.
ESTABLISHING YOUR IDENTITIES
- Legal Identity: Choose a name, get legal advice, choose your “form of organization” (S Corporation, LLC, sole proprietor), register the name and form the company legally.
- Financial Identity: Apply for the business federal tax ID (FEIN), use it to open a business checking account, and apply for a business credit card. These help avoid the mistake of mingling business and personal funds. Then get some accounting software to keep your records, and choose an accountant.
- Market Identity: Choose a website name and a host, and an email address using that site. Get your business phone/fax number (also part of operations identity). Choose a professional website developer, and have him or her develop your logo. Then get business cards with the logo, and begin developing content for the website.
- Operations Identity: After getting the phone numbers, set up your home office or rent another business location, or both. Buy the office equipment. Now define your most important policies and processes using one flowchart for each. Examples: lead qualification and follow-up; sales; production; delivery; invoicing, collections, and payment processing (including handling sales tax); inventory replenishment; returns and other customer service policies. Then get any software or equipment you need to carry out the processes you designed.
NEXT STEPS
- More Legal Identity: Get any state/local licenses and permits such as zoning. Register as a sales tax collector. Work with your lawyer to draft sales and employment contracts, and/or quote sheets. The terms in these contracts will reflect your operations thinking on policies and processes.
- More Financial Identity: Get business insurance. Set up your accounting software to track sales tax and inventory. Use other functions if you like, such as writing checks and producing invoices.
- More Operations Identity: Once you have insurance, design your business location to fit the processes and then implement with leasehold improvements and furnishings. Hire staff, and obtain your initial stock of inputs (raw materials) and goods.
- More Marketing Identity: Develop and reproduce your sales materials, and make sure they are used on your website. Finalize the website. Launch your marketing plan and your business.
The sequence is important, and so are the relationships you form with lawyer, bank, accountant, website professional, insurance agent, lessor, software suppliers, and other suppliers.
Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, a Certified SCORE Mentor and author of the new book Business Techniques in Troubled Times: A Toolbox for Small Business Success.
