Due to the vast opportunities available today, financial independence has become a dream for many. The technological ecosystem, coupled with easy access to information, has got us all thinking of starting a business, at least at some point in our lives.
The idea of being your own boss is quite fascinating; however, starting a business from scratch, even a small one, can be overwhelming. But if you’re willing to put in the hard work, you can achieve your dream of financial independence.
To get you going, we have compiled fundamental steps you need to know to tread the uncharted waters of setting up a small business.
Table of Contents
1. Be Aware Of The legal Requirements to Ensure Regulatory Compliance
Understanding federal and state business laws is necessary for any business to run smoothly. In the United States, Small Business Administration (SBA) and Internal Revenue Service (IRS) are two bodies you must be familiar with. SBA is responsible for helping small businesses and entrepreneurs secure finances and comply with regulations. The function of the IRS is to collect federal taxes and enforce the internal revenue code.
If you plan on hiring employees, you must have an Employer Identification Number (EIN) and, to that end, know how to apply for an EIN, as it helps you submit payroll taxes, open bank accounts, and apply for credit. Even if you are not an employer, an EIN will help you establish correspondence with IRS for various filing purposes.
2. Generate A business Idea that You Genuinely Like
One fundamental step in any startup is to have a fair idea of what your business will be. Knowing what you are good at, observing the greater business environment, and how businesses function would enable you to reach a unique, appealing, and viable business idea. Additionally, it is important to give your passions and goals their well-deserved regard while formulating your business idea. It would lead to consistency in all business affairs and enable you to be persistent through thick and thin.
People who tend to jump into the market without the necessary soul-search and research mentioned above have much less chance of success as they give up at the sight of the first few setbacks.
3. Devise a Business Plan
A business plan is a vital document that summarizes the objectives of a business and lays down a roadmap to achieve the business’s goals. It allows you to attract outside investors and ensure a unison of strategic actions from all executive teams. A well-structured business plan is a must-have for all businesses, regardless of size. It is especially needed when starting a new business.
While devising your business plan, you should avoid using generic templates and provide a specific picture of your company’s aims and core activities, your marketing strategy, including the product or service offered, and your forecasted financials & relevant budgets.
4. Decide On The legal Structure of The Business
The next step is to decide on the legal structure of your business. You have a variety of options from which you can choose. Most common legal structures include sole proprietorships, general partnerships, & LLCs. Each of them has a different set of tax implications and management structures.
In addition, it is also instrumental to get your business registered with the concerned government authorities and receive the necessary license and registration documents from them.
5. Identify sources Of Funding
One of the most important decisions to make is to decide the source of funding for your business. From a financial perspective, you can either use debt or equity. Each of these has certain associated costs.
Debt financing can be a good option for businesses that need a large amount of money quickly, but it can also be risky. If the business is unable to repay the loan, it could go into default, which could have serious consequences. Equity financing can be a good option for businesses that need a large amount of money, but it can also dilute the ownership of the business.
The decision of whether to use debt or equity financing is a complex one, and there is no one-size-fits-all answer. The best way to make the decision is to carefully consider each option’s pros and cons and choose the one that best fits the specific business.
6. Build A dedicated Team that Delivers
Building an amazing team of highly capable individuals is crucial to any business. This step can make or break a startup or even a full-fledged business. To put together an effective team, you need to find capable people and provide them with a good enough reason to work for you. Find people with the same goals and ambitions as you who possess a skillset aligned with your business objectives. Although success is never 100% guaranteed, a team of motivated individuals bent on making things work increases the likelihood of success.
7. Pilot Test
A good way to gauge the effectiveness of your product or service is to try it out for yourself and encourage your team to try it as well. In doing this, the aim should be to form an unbiased opinion. Also, it helps differentiate what works and what doesn’t, helping you make necessary tweaks.
After you are satisfied with how the product or service looks and what it does, launch it in the market. At this stage, you must be open to constructive criticism and value customer feedback to ensure your business’s longevity, growth, and stability.
Starting a business needs to be an informed decision as it comes with many responsibilities and financial consequences. Along with a solid plan and well-thought strategies, commitment to making things work is a must.
A strong will to deal with unexpected problems and challenging scenarios combined with a dynamic approach towards developments in the business environment constitute the recipe for success for small-scale entrepreneurs.