It can be argued that America is a country of entrepreneurs. From rebellious Founding Fathers forming their own nation to innovative thinkers pioneering the Industrial Revolution to leaders passing legislation to empower small business owners, our country thrives on the entrepreneurial spirit. In 2010 alone the Small Business Administration (SBA) reported there were 27.9 million small businesses in America. Do you have an idea for a company you’ve been eager to materialize, but haven’t had the time, resources, or know-how to bring it to life? We’re here to help. Here are our top 4 steps for starting your new business, with each containing a slightly deeper dive to help get you started:
1) Develop and Evaluate Your Business Idea
- Choose a financial business type (e.g., venture-backed startup, bootstrapped small business, etc.) that best fits you and your interests
- Use a break-even analysis to determine how, when, and most importantly, if your business can cover all its expenses in order to make a profit
- Create a business plan that includes:
- Profit & Loss Forecast- using a set of estimates (future revenue, gross profit, fixed costs, headcount, etc.), predict your net profit and project how much money you will bring in by selling products or services. We suggest using our basic financial model.
- Cash flow analysis- How long will your business be able to last with the initial capital injection that you anticipate using to get the wheels moving?
- Headcount detail- Will you remain a team of one or do you already know which roles your first 3 hires will be?
- Search for start-up financing sources such as government-backed loans, venture capital, and research grants. It’s important to remember that you are going to need a pitch deck when meeting with investors, we have a few tips and tricks on how to create one.
- Build a basic marketing plan- Will you acquire customers through email campaigns, Facebook advertising, word of mouth, or does your customer base already exist?
2) Select a Legal Structure for Your Business
- Prepare airtight answers to the following questions before getting your articles of incorporation: “How many owners will the business have?”, “What type of legal protection will my business need?”, and “Would I rather be taxed at the corporate or individual level?”
- Register for state and local taxes (upon receiving your articles of incorporation, you should also get your Federal Employer Identification Number, or FEIN, the “Social Security Number” of your business)
- Understand the different ownership structures (Sole Proprietorship, Partnership, LLC, C Corporation, S Corporation) to confirm your business is appropriately structured
3) Choose a name and location for your business
- Pick a name that represents your business positively and will attract an audience
- Make sure your name is available as a domain name for emailing and online purposes
- Register your business name to avoid any copyright issues
- Find an office location that is within your budget, yet still has a significant location to grab people’s attention and serves as a professional setting to meet with customers and investors.
4) Prepare organizational paperwork
- Obtain the appropriate business licenses and permits (we highly recommend that you meet with a small business lawyer; they should lay out everything you need to do here)
- Complete the appropriate agreement paperwork depending on your business’ ownership structure (once again, have a lawyer review this!)