10 things you need to build a small business
Starting a business can be daunting-- there's so much to think about! Here's a list of 10 key items to consider before striking out on your own, and to help avoid headaches on the road ahead.
Starting a business can be daunting-- there's so much to think about! Here's a list of 10 key items to consider before striking out on your own, and to help avoid headaches on the road ahead.
The most daunting part of creating a business is deciding where to start. It can be hard to imagine taking your ideas to the next level when there’s so much advice to sort through. To help you on the journey of building your business, here are 10 things you need (and some bonuses to think about) when preparing to get started:
Welcome to the very beginning! To start a business, you’ll need a skill, passion, or idea that motivates you so sincerely that it will carry you through the tough work ahead. This is the most important step. While it can be fun to come up with ideas, being clear on your reasons and motivation will help you when you hit the inevitable hard day.
Are you looking for more ways to pay the bills? Do you have a marketable skill or hobby that you’re willing to turn into your job/career? Maybe you’ve been passionately perfecting a hand-crafted a good, and are ready to take it beyond friends and family. Or perhaps you’ve been freelancing, and want more autonomy than a typical 9-5.
Every business owner has different reasons for getting started, so it’s important to consider what motivates you and how you’ll incorporate this into your current personal and professional obligations.
Once you have your idea, one of the best things you can do is create a business plan. This helps to keep your own headspace organized, and is also critical if you ever seek outside investment. The process of writing your executive summary and doing a market analysis are labor intensive, but worthwhile. Setting achievable goals for your business and defining key benchmarks of success can make you more appealing to investors. There’s no one right way to write a business plans, but the main ingredients are:
This should be sorted out in your business plan, but you can’t have a business without customers to sell to. When deciding on your target market, consider the following information:
Creating a small business can be stressful. It’s a learning experience where you’re creating something from scratch and experiencing failures as you go. Make sure you have a community you can lean on when times get rough.
Depending on the business you’re starting, you might need specific federal, state or local permits and/or business licenses. The licenses you’ll need on the state level will depend on your business and your business location, and fees vary across the country. You can learn more about what permits you need for your type of business, and apply for them through the federal government and county offices. If you’re wondering when to incorporate (either LLC or C corporation), unless your business may expose you to a lot of liability (like construction, physical store, etc.) you can generally stay a sole prop until your business is on solid ground and will be open for a while. You will definitely want to incorporate before you start to hire employees or seek formal funding.
If you’re running your business as a part-time side hustle, incorporating as an LLC or corporation could be overkill, and may not be worth the ongoing fees, effort, and upkeep.
While there are lots of ways to fund a business, the type of funding you’ll need depends on the type of business you’re looking to build. Will your business be capital intensive and require cash to purchase inventory, hire employees, or rent a location? Or can you get started for little to no cost if you’re offering an online service like consulting or web design?
According to the Chamber of Commerce, 75-80% of small businesses in the U.S. are self-financed, but if you don’t have a mountain of personal savings to self fund, you can look to the following options to fund your business with external resources:
Starting a business generally requires more money than you’ve budgeted, and having a little cushion can help absorb surprise expenses.
I cannot emphasize enough how important it is to have a website, especially in light of COVID and businesses moving their operations online. This is true even if you don’t intend to set up an online store! A website is how new customers will learn about you, no matter what you do. Think of it as your face and voice when you’re not able to be there in person.
One of the first things to purchase is a domain. For people selling physical goods and merchandise, platforms like Shopfiy or Etsy allow you to run online shops efficiently. If you’re selling a service, setting up payment methods for your clients is important. Do you take payments through your website or through invoicing software? Having clear communication about your fees and how payment is fulfilled will do wonders for your business relationships and keep clients up to date and coming back.
While attorneys seem like they are only necessary in the event of a lawsuit, they’re a great resource for preventing legal complications before they begin, and making sure your business is up to regulatory standards. They can help with forming your business, creating the infrastructure, and selling your business if that’s something you eventually do.
Just like funding, finances are an important part of your business and it’s easy to get lost in the weeds. In order to protect yourself and alleviate stress, hire a trustworthy accountant. Accountants can guide you through tax season, what expenses to keep track of during the year and money management so you can focus on running your business.
Small business insurance can protect you, your investment, and your future. In most cases, policies are required by law (even if you’re a sole prop) and are generally easy to get, but the tricky part can be selecting what kind of insurance you need and then evaluating your needs every year going forward. Remember, insurance is tax deductible, so long as the coverage is for operating costs. If something unfortunate and unexpected happens (injury, destroyed property etc), you can file a claim to cover costs up to a specific amount (depends on your policy). There are seven kinds of business insurance that you might need depending on the size of your business:
Starting a small business can be daunting and exciting, but securing these 10 things will help set you up for success. Not all of them need to be done at once, but taking one step at a time will lead you to greater peace of mind down the line. Stay tuned for additional deep dives into each of these topics, with helpful tips on each.