How do you start a business? In seven easy steps, that’s how! (In part one of this article, I covered steps one and two).
Step 3: Write a business plan: You will need a business plan for a couple of different reasons. The first is that it is needed in order to get any type of financing. If you will be going to a bank to get a conventional loan, your banker will want to see your business plan. If you will be looking for a business partner, he or she will want to see it as well.
That said, more importantly, you need a business plan for one other person: Yourself. I like to analogize an entrepreneur’s business plan to a pilot’s flight plan. A pilot would never get in a plane from, say, Los Angeles and fly to Chicago without creating a flight plan first. The flight plan will help the pilot know exactly what direction to head in, how much gas will be needed, and so on.
A business plan is essentially the same thing. It is your plan for how you will get from where you are to where you want to go. It will force you to think through things like financing, the competition, marketing, and all the rest. You will be far more likely to succeed if you analyze these things thoroughly up front.
Step 4. Make it legal: Once you know what the business is and how you will proceed, then the next step is to get the legalities out of the way.
Your business can take one of four legal forms. It could be
- A sole proprietorship
- A partnership
- A Limited Liability Company (LLC)
- A corporation
The right structure for your business depends on many things and is a decision that should be made in conjunction with your attorney.
Beyond the structure of your business, at this stage you also need to get appropriate permits from local authorities, as well as a tax ID number, and open a bank account in the name of the business.
Step 5. Get funded: Your business plan will help you figure out how much initial capital you will need, but as a general rule, you need at least enough to open the doors and stay open for six months (the minimum amount of time needed to find customers and to begin to generate revenue.)
There are many ways to fund your business. You basic options are these:
- Self-funding: Your own savings, selling assets, cashing out an insurance policy, etc.
- Help from friends and family
- Conventional bank loans
Step 6. Set up shop: This is the fun stuff. Here, the things to do are:
- Find a location. Retail business probably need to be in a high traffic area (where rent will be higher), while other businesses do not necessarily need a great location
- Get your Web presence established. You will need a great website, and you will also need to set up social media profiles in the name of your new business
- Prepare marketing materials
- Hire staff
- Have a “Grand Opening” party
Step 7. Trial and error: When it comes to owning your own business, no matter how much you read and research, nothing beats experience. The learning curve, especially in your first venture, is fairly steep. But that trial and error phase is critical. The key is to try and make sure the mistakes are not too costly.
And, most of all, enjoy the ride. There are few times in life when the stars align just so such that you are afforded the opportunity to start your own business. Savor it.