Ten Important Steps to Starting a Business

Hey Baby Boomer!

Yes, I’m talking to you. Is retirement right around the corner and you are worrying that you won’t have enough money? Or are you already retired with too much free time on your hands? Do you miss being a vital part of a business project? If you have answered yes to any of these questions then starting your own business can be a great way to take control of your life and earn additional income. In the United States, there are over 500,000 small businesses started every month. Many retirees who have worked for others all of their lives find the idea of building a business that reflects their interests and values to be exciting. Whether you want to purchase a franchise, do consulting, have a brick and mortar store, or a home based business, there are many things to consider. Are you ready for the challenge of starting a new business? We have put together a list for you of 10 Important Steps to Starting a Business:

1) Is Entrepreneurship for You

Starting a business is not for everyone. Experts agree that successful entrepreneurs share certain qualities. Some of these are self- confidence, self- motivation, resourcefulness, the ability to make decisions, and a passion. The Small Business Administration (SBA) has compiled a list of 20 questions to ask yourself before starting. Click here to view these questions.

 

2) Decide on a Legal Business Structure

Choosing a Legal Structure (also called a business ownership structure) is one of the most important decisions you will make when forming your new business. The most common types of business structures are sole proprietorship, partnership, corporation, and limited liability company (LLC). The type of business structure you choose will depend on several factors such as legal liability, taxation and record keeping, but the key is to find the best fit for your new undertaking. Keep in mind that your initial choice of a business organization doesn’t have to be permanent. You can start out as a sole proprietorship or partnership and later, if your business grows or the risks of personal liability increase, you can convert your business to an LLC or a corporation. Click here for a breakdown of the most common business structures and the advantages and disadvantages of each type.

 

3) Choosing a Name for your Business

Name selection is often an overwhelming process. The name of your company can have a tremendous impact on how customers view you. A strong name should be simple and not too long. Make it easy to spell and pronounce, and meaningful to your audience, not just to you. It is helpful that your name be informative so customers will know immediately what your business is about. In the internet world of today don’t choose a name that is spelled differently than it sounds because it will make it difficult for people to find you in a web search. Be sure to consider how the name you choose will appear as your domain name. After you have decided on a name, check with the Secretary of State’s office in your state to see if it is already in use. Click here for some useful tools to help with your name selection process.

4) Getting a Federal Tax Identification Number

A Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws. A federal tax identification number (also known as an employer identification number or EIN) is a number assigned exclusively to your business by the IRS and is used to identify your business to federal agencies responsible for the regulation of business. The difference between EIN and TIN is the way the company uses the identification number; if it is used for tax purposes, it is TIN, and if it is used for employment purposes, then it is EIN. You can apply for a tax ID number by phone, by fax, by mail or online. The IRS prefers that businesses apply for tax ID numbers online according to the agency. The online tax ID application process is available for all recognized legal forms of businesses established in any US state or territory. In most cases, the online application process takes less than 20 minutes. Normally approval is immediate with the business assigned a tax ID number as soon as the application is submitted online. Go to IRS.gov to get started.

5) Your Business Accounting

Your accounting system is the key information tool that indicates how your business is performing. It tells you how you are managing your money. The reports will show you how your money is coming in and where it is being spent. It is possible to set up an accounting system with a ledger book only but most people use an accounting system that runs on their home or office computer. An accountant or tax adviser can be a great help in the early stages of this process. For information on accounting software systems click here. You should always keep your business and personal finances separate and open a bank account for your new business once you have decided on your legal business structure. Contact your bank for the corporate documents required to open a new account.

6)Financing Your Business

When starting a business you are going to incur some expenses. The amount of startup money you will need depends on the nature of your new business. For instance, if you are buying a franchise or a brick and mortar business, it may be necessary to secure a loan for such things as equipment, rent, inventory, payroll, etc. If you are launching an internet based business from your home, your startup costs may be lower. You have a variety of options when it comes to financing your small business. Most entrepreneurs start their businesses with savings; they put startup costs on credit cards; or they get loans from friends and family. There are several Crowdfunding groups such as Kickstarter which allow you to ask the public for funding and the government provides opportunities for small business loans through the Small Business Administration (SBA). Click Here for a link to the SBA Loan Application Checklist. This checklist will also be useful if you are applying for a business loan from your financial institution. You can also Click Here for a guide from our friends at Lendedu. They are dedicated to helping consumers and small business owners with their finances by providing information on the best small business loan opportunities available.

7) What You Need for your Small Business Office

Your office may be located in an extra bedroom or in a rented space, but all offices need the same basic tools (you may already own many of them). Your work space should have a desk, a comfortable chair, and in today’s world, a computer is essential. It is your personal preference whether to use a desktop or a laptop. New laptops are now just as powerful as desktops and offer the bonus of portability. Desktops offer the ability to reconfigure the equipment over time as your needs change. All in one printers that offer printing, scanning and faxing are a good choice for the small office combining three pieces of equipment into one. Laser printers offer a lower printing cost per page but if you need color your most economical choice will be an ink jet printer. Consider using your local copy shop for color printing if you have only an occasional need.

8) Do I Need Insurance for my Business

Operating a small business involves a considerable investment. Business owner’s insurance is the most convenient way of protecting the physical and financial assets of your business. This coverage protects businesses from losses due to events that may occur during the normal course of doing business. It protects your investment by minimizing financial risks associated with unexpected events such as a death of a partner, an injured employee, a lawsuit, or a natural disaster. If your business is an LLC or a corporation, your personal assets are protected from business liabilities; however, neither business structure is a substitute for liability insurance, which covers your business from losses. Business insurance is generally not required by law unless you are an employer. Your state, county, city, and even your financial lender can determine insurance requirements for businesses. Most states require businesses with employees to pay for worker’s compensation insurance, unemployment insurance, and state disability insurance. Your state may require insurance for specific business activities. For example, if you own a car or truck and use it for business purposes, you may be required to purchase commercial auto insurance and your financial lender or investors may require you to maintain life, business interruption, fire, flood or other types of insurance to protect their investments.

9) Should You have a Website and Social Media Presence

Many small businesses question the need for a website or social media presence. The best reason to have a website is that it gives your business wider accessibility. More and more consumers are using an internet search for a product or service. If your business is not found in their search, they will go to a competitor that has a website with the information they need. Websites and social media are particularly useful for home based businesses that do not have a physical location. In addition, social media gives you instant feedback. By regular monitoring of your social media sites you are the first to know if there is a problem with your product or service and have the opportunity to correct it. Remember – Your website is working for you 24 hours a day. Social media, and Facebook in particular, have become very important tools for business. Some interesting numbers:

  • Facebook has more than 400 million users worldwide with over 100 million in the US.

  • The average Facebook user spends 55 minutes a day on the site and has more than 125 friends.

Click here for more information on the most popular social media sites.

 

10) Marketing Your Business

Marketing is a form of communication between you and your customers with the goal of selling your product or service to them. Smart marketing can ensure the success of your business by attracting new customers and retaining your existing customers. Whether you own a dry cleaner or an online business, you need solid marketing strategies. Some low cost ideas are: create a cool giveaway, send a weekly e-mail, sponsor an organization, or use social media to engage with your customers. A distinctive logo and attractive business cards can enhance your business image as well. The internet can be a valuable tool for helpful resources to develop your marketing strategy.