Increasing numbers of people are coming to realize that corporate America has changed. Job security is largely a relic, benefits are not nearly what they used to be, and starting your own business is looking a lot less risky.
If you're amongst the majority of Americans who'd like to attain gainful self-employment, here are our seven key steps to starting your own business without wasting precious time and financial resources.
Make Sure Entrepreneurship Is What You Really Want
If you are thinking of starting a business because you lost your job and are having trouble finding a new one, then think about doing a better job search. Hire a career coach or get some training. Starting a business is much harder than getting a job, so it's worth the extra effort to look for employment in a better way if that's your true preference.
Also, think about whether you have what it takes to start a business in these terms: No one will tell you what to do (except your customers). You have to be self-motivated, willing to make many sacrifices and be able to last for the long term while your business goes from startup to maturity.
Decide What Kind of Business You Want
Franchise or independent? Service or manufacturing? Brick-and-mortar retail or online? Consumer or business-to-business? There are dozens of different types of businesses, each with its own benefits and drawbacks. Like to work with the public? A retail store might be right for you, but you will face the tradeoff of having a lot of overhead (rent and utilities for example).
Want to keep your business small with low overhead, and sell your expertise? Being a consultant might suit you, but there are only 24 hours in a day and that could limit your income.
Research Your Idea
The most important thing to remember if you are considering starting a business is this: It's not a race. People who rush get penalized in the marketplace much more severely than people who take their time. You may hear the words "first-mover advantage"—the idea that you get a big head start by being out with a product before anyone else. But that idea is overblown, especially for small businesses. Emerge too soon and you could squander precious resources.
It's far better to methodically, diligently research your idea. Is anyone else doing it? What's the competition like? Do consumers and businesses have viable substitutes if they don't choose your product? Does your product really solve a pesky problem? Is the demand going to be great enough in the future, not just for a year or two? Once you're completely convinced you have the virtual better mousetrap, then you can proceed.
Write a Business Plan
With the dozens of business-plan-in-a-box resources available online, there is no longer an excuse not to write (not think, write) a business plan before you launch your business. Why write a plan even if you are the only person who works in the business? Because it forces you to answer critical questions that you must not ignore if you want to have a strong chance of success. It doesn't have to be long.
Make it a single page if you don't have the patience to do more. But it should answer these questions:
- What is the purpose of the business?
- Who are my customers?
- What problem does my product/service solve?
- Who is my competition and why is my product/service's advantage?
- How will I price, position, market and support my product?
- What are my financial projections for the business for the next 3-5 years?
Choose a Business Structure
According to small business CPA Michael Hanley, "The foundation for tax planning begins even before your first day of business operations. Of all the decisions a business owner will make, very few will have as great an impact as entity selection.
Deciding whether to become a Sole Proprietorship, a Partnership, a traditional Corporation, an S-Corporation, or a Limited Liability Company (LLC) will have a long-lasting effect on the future tax implications of your business.
You can learn about the benefits and tradeoffs of each plan in a number of places and there are excellent, brief books on the subject, too.
Assemble Your Team
While your team consists mainly of employees, think more broadly. You will need trusted advisors including an attorney, a tax accountant, an insurance advisor/agent. You may want to consider hiring a Virtual Assistant who's experienced in startups to handle the administrative tasks that come with launching a business.
Handle the Paperwork
Along with starting a business come a variety of paperwork requirements that can't be overlooked, including:
- Filing for applicable licenses and registrations from your state's government. Get guidance from your state's Office of Taxation website on which forms you will need to complete.
- If proprietary intellectual property is an important asset to your business, you need to protect it immediately. Even though filing for trademarks and patents is expensive, it's far more costly to battle someone over rights down the line. Also make sure you acquire Internet domain names that may be important to your business (.com, .net and .org at the very least and consider .biz and others, too).
- If you form a minority or women-owned business, you may qualify for special government programs that can provide startup capital.
- Purchase appropriate business insurance before you begin operations.
Final Thoughts on Starting Your Own Business
No matter what type of business you start—selling physical products, offering up your services on a contract basis, building a digital product, or launching a startup—there are going to be ups and downs.
When going into business for yourself, it's incredibly important to set realistic expectations so that you're not winding up disappointed with your progress after the first few months of growing your customer base.
Do your homework on your industry, gain momentum on the side before quitting your full-time job, and launch once you're already generating revenue for your business. Then, you'll be poised to grow from there.