How to Start a Small Business

Small businesses are the back bone of the economy and owning one is the American dream. Many small businesses fail because they were not started properly. Here are some simple steps to follow to help ensure success for you business by providing a solid foundation to build upon.

A great small business always starts out as an idea, but you have to transform that idea into action. That’s where many individuals can start to feel overwhelmed. It’s understandable to freeze up at the deluge of things that are required to get a business started, but getting going is actually easier than you might think.

Like any big goal, if you start by breaking it down into smaller tasks, you’ll be able to tackle enough of the actions necessary to get started. Here are six ways to break down the process and simplify getting started with your own small business.

1. Write a one-page business plan.
The key to a successful small business, especially in the startup phase, is to keep things simple and costs low. Costs don’t just mean your monetary costs, but also your time.

Many would-be small-business owners fall into the trap of trying to create the world’s biggest and most robust business plan. You’re only going to need that if you’re seeking investment or financing, and even if you will be seeking either of those things down the road, I always recommend small-business owners start out with by testing their ideas first before investing lots of time and money.

So to get started, create your own simple, one-page business plan that is a high-level overview of the small business you’re about to start.

  • Define your vision. What will be the end result of your business?
  • Define your mission. Different to a vision, your mission should explain the reason your company exists.
  • Define your objectives. What are you going to do — what are your goals — that will lead to the accomplishment of your mission and your vision?
  • Outline your basic strategies. How are you going to achieve the objectives you just bulleted?
  • Write a simple action plan. Bullet out the smaller task-oriented actions required to achieve the stated objectives.

That’s it. It might be longer than one page, but it will surely be more organized and shorter than a full business plan, which could take weeks to write. If you need more information on the one-page business plan, or want to write out a full-blown finance-centered business plan, you can check out the book I co-wrote with my brother that has a robust explanation of both, Small Business, Big Vision: Lessons on How to Dominate Your Market From Self-Made Entrepreneurs Who did it Right.

2. Decide on a budget.
While I highly recommend you keep your costs as low as possible, you’ll still need to determine a budget to get started and how much you’ll be able to spend. If you’re self funding, be realistic about numbers and whatever you anticipate your budget to be. I’ve found that an additional 20 percent tacked on for incidentals is a realistic overage amount that helps you plan your burn rate.

Your burn rate is how much cash you’re spending month over month. It’s an important number for you to figure out to determine how long you can stay in business before you need to turn a profit.

You should set up your business with profitability in mind the first 30 to 90 days. It’s possible. But have a budget reserve so you can survive if things go leaner than expected.

3. Decide on a legal entity.
Filing paperwork to start a business costs money. Often, depending on your state, it can be a lot of money. You’ll need to account for city or municipality licensing, state incorporation or business entity fees and more. Do a thorough search ahead of time to determine what the filing fees are for your city, county and state before starting any business.

Often in the initial “test” phase for your small business, it can be wise to start as a sole proprietor, as it means less paperwork and up-front expenses. That can save you some big-time cash while you determine the viability of your business. Do be aware though that acting as a sole proprietor can put you at personal risk, so you’ll want to weigh the benefits vs. risks and then speak with a local attorney or tax professional to decide which is smarter for your short-term vs. long-term goals.

You can always file for a business entity once you’ve proven in the first three to six months of business that you’ve got a viable, sustainable model.

Read more at: http://www.entrepreneur.com/article/248802

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