Would you become an entrepreneur? One of the most commonly touted “selling points” of entrepreneurship is the ability to be your own boss. While many individuals do become entrepreneurs for this reason, it’s not always necessarily their motivation. People start their own businesses for a variety of complex reasons. Sometimes it’s a surprising, unexpected event that drives them to take the leap into startup life.
Before starting a business, you should ask yourself the following questions:
- Is my product viable?
- Have I thoroughly researched my target market?
Many entrepreneurs focus on having a solid business plan and raising funds. They later discover they were not psychological prepared to run a business. It’s easy to confuse “being psychologically ready” with “being ready to escape corporate life.” There’s much more to entrepreneurship than the freedom to be your own boss.
Become An Entrepreneur
Entrepreneurship is spreading at a time when people are increasingly unhappy or unfulfilled in their 9 to 5 jobs. This is leading to an oversimplified notion that becoming a business owner is the answer to all their problems. While one of the many joys of being an entrepreneur is the ability to manage your own time. The ability to play with this possibility is only half the picture.
There’s a lot to consider and plan before you launch. It’s important to prepare yourself for the journey ahead. If you think you’re ready to start your first business, here’s a step-by-step overview to make it happen.
Refine your idea:
Ready to start a business? You should have an idea of what you want to sell and the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing and figure out how you can do it better. Your business should be able to deliver something other companies don’t. Can your company deliver the same thing, but faster and cheaper? Guess what? You’ve got a solid idea! You’re ready to create a business plan.
Write a Business Plan:
Now that you have your idea in place, ask yourself a few important questions:
- Can you describe the purpose of your business?
- Who are you selling to?
- What are your end goals?
- How will you finance your startup costs?
All these questions can be answered in a well-written business plan. A business plan can help you figure out where your company is going. It can also explain how it will overcome any potential difficulties and what you need to sustain it.
Assess your finances:
Starting any business has a price. So, you need to determine how you’re going to cover those costs. Do you have the means to fund your startup, or will you need to borrow money? If you’re planning to leave your current job to focus on your business, do you have some money put away to support yourself until you start making a profit? Financial assistance may be necessary. A commercial loan through a bank is a good starting point. Although these are often difficult to secure.
Unable to take out a bank loan? Try applying for a small business loan through the Small Business Administration (SBA) or an alternative lender. Startups requiring a lot more funding up front may want to consider an investor. Investors usually provide several million dollars or more to a fledgling company, with the expectation that the backers will have a hands-on role in running your business. Alternatively, you could launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers.
Determine your legal business structure:
Before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong. If you own the business entirely by yourself and plan to be responsible for all debts and obligations, you can register for a sole proprietorship.
Alternatively, a partnership, as its name implies, means that two or more people are held personally liable as business owners. If you want to separate your personal liability from your company’s liability, you may want to consider forming one of several different types of corporations. This makes a business a separate entity apart from its owners, and therefore, corporations can own property, assume liability, pay taxes, enter into contracts, sue and be sued like any other individual.
One of the most common structures for small businesses, however, is the limited liability corporation (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
Register with the government and IRS:
To become an officially recognized business entity, you must register with the government. Corporations will need an “articles of incorporation” document, which includes your business name, business purpose, corporate structure, stock details and other information about your company. Otherwise, you will just need to register your business name, which can be your legal name, a fictitious “Doing Business As” name (if you are the sole proprietor), or the name you’ve come up with for your company. You may also want to take steps to trademark your business name for extra legal protection.
After you register your business, you may need to get an employer identification number (EIN) from the IRS. While this is not required for sole proprietorship with no employees, you may want to apply for one anyway to keep your personal and business taxes separate, or simply to save yourself the trouble later if you decide to hire someone else. The IRS has provided a checklist to determine whether you will require an EIN to run your business. If you do need an EIN, you can register online for free. You also will need to file certain forms to fulfill your federal and state income tax obligations.
The forms you need are determined by your business structure. A complete list of the forms each type of entity will need can be found on the SBA website. You can also find state-specific tax obligations there. Some businesses may also require federal or state licenses and permits to operate. You can use the SBA’s database to search for licensing requirements by state and business type.
Purchase an insurance policy:
It might slip your mind as something you’ll “get around to” eventually but purchasing the right insurance for your business is an important step that should happen before you officially launch. Dealing with incidents like property damage, theft or even a customer lawsuit can be costly, and you need to be sure that you’re properly protected. If your business will have employees, you will, at minimum, need to purchase workers’ compensation and unemployment insurance.
You may also need other types of coverage depending on your location and industry, but most small businesses are advised to purchase general liability (GL) insurance, or a business owner’s policy. GL covers property damage, bodily injury, and personal injury to yourself or a third party. If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business.
Build your team:
Unless you’re planning to be your only employee, you’re going to need to hire a great team to get your company off the ground. Here’s some qualifications to consider ensuring that you hire the best candidates to create your start up team:
- They have experience in areas that you and the rest of the team don’t.
- You know them well (or they know each other).
- They can afford to work for a limited salary at first.
- They want to use your product.
Choose your vendors:
Running a business can be overwhelming, and you’re probably not going to be able to do it all on your own. That’s where third-party vendors come in. Companies in every industry from HR to business phone systems exist to partner with you and help you run your business better. When you’re searching for B2B partners, you’ll have to choose very carefully. These companies will have access to vital and potentially sensitive business data, so it’s critical to find someone you can trust.
Brand yourself and advertise:
Before you start selling your product or service, you need to build up your brand and get a following of people ready to jump when you open your literal or figurative doors for business. Create a logo that can help people easily identify your brand and be consistent in using it across all your platforms, including your all-important company website.
Use social media to spread the word about your new business, perhaps as a promotional tool to offer coupons and discounts to followers once you launch. Be sure to also keep these digital assets up to date with relevant, interesting content about your business and industry.
Grow your business:
Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. It’s going to take time and effort, but you’ll get out of your business what you put into it. Collaborating with more established brands in your industry is a great way to achieve growth.
Reach out to other companies or even influential bloggers and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization and volunteer some of your time or products to get your name out there. Starting a business can be risky and challenging, but armed with the proper tools and information, you can put yourself on the path to entrepreneurship.
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