At some point in your life, you’ve probably had a great business idea. We get the idea in our heads, think about them for a few days or maybe a few weeks, tell some friends or family about it, but then get busy with other life activities and this idea becomes forgotten. Many people don’t turn these ideas into actions. The amount of time and effort and money can definitely discourage people from following through with their business plans. However, these are necessary hurdles that many business owners or entrepreneurs have to go through; they are no limitations.
The pandemic, state of the economy, debt, and lack of travel has hit many small businesses hard. Of course, these are aspects that you should take into consideration, but they shouldn’t stop you altogether. Many people get bogged down and stop at just the idea of starting a business.
The overall picture or plan can look intimidating at first. There is no way around that. However, by breaking the large end goal into concrete steps, we can better see the path to where things are going and will probably be more motivated to take action. Write out a to-do list at the beginning of every day with specific tasks that will help your idea become a reality. It is important to remember that there is no perfect or exact template or plan that you should follow when starting a business. Everyone’s path, the steps they take, the hurdles they run into, and the timeline in which they do things may differ. You might have to start over, skip some steps, backtrack, and/or revise. With all of this being said, here are some concrete steps that you can take for your idea to become a reality:
1. Come up with an idea
Many people come up with half-baked ideas whenever they see something in society that is needed and is not there, or a solution to something that is currently not being done efficiently. However, many people will forget about their idea soon after it passes through their heads. To make sure that you remember your idea, write it down. Put your ideas on a wall or somewhere you will see them every day. The act of writing it down makes the idea more real. As you work on adding to your idea, think about what background or skillsets that you have in the area that your idea pertains to. Do you have any connections? Are you passionate? Is the idea feasible? Will people buy it? You will need other people’s opinions as it is crucial to get feedback from others to revise your idea.
2. Research the market
You will next need to conduct market research to turn your idea into a business model. In the process of research, you might find out that your idea is not as new or novel as you once thought it was. However, even though someone else might have started a similar business, don’t just throw away all of your plans. This just means that you have competition and you can build off of what they have already done and make it better.
You will also want to look at who your target audience might be, customer demographics, price points, suppliers, etc. Sites such as the Federal Reserve, Bureau of Economic Analysis, Bureau of Labor Statistics, and the U.S. Census have data on trends of U.S. consumers like demographics, income, credit, location, spending, etc. Another tool to look at is Alibaba, Chinese e-commerce and retail sales company. They are important if you want to make connections with international manufacturers and suppliers. One last helpful site is SizeUp. They provide you with business analytics and they allow users to find suppliers, customers, advertise more efficiently, and compare the competition.
3. Create the business plan
Yes, some businesses might have started without a business plan and became successful. However, they got lucky in many ways. It is always a good idea to plan if you want your business to be successful. Don’t focus on sales and financial projections when writing up a plan. Instead, write a plan that connects with possible investors and shows who you really are, on top of the numbers. You will want to have a rough idea of what your startup costs will be such as business insurance, how financial projections could affect the business’s future, and how long it might be until the business is profitable. Paint a big picture. Make sure to include the people involved in the business such as yourself, other cofounders, and other people who are managers.
Second, make sure to explain the product and/or service and who will buy it, highlighting customer demographics, competitors, and price points. Third, make sure to include regulations, laws, and economic trends that could have an impact on the business. Fourth, use numbers and describe the worst-case scenario and how you plan to get through a situation like that.
4. Choose a location
Two large considerations when choosing a location are the local government and the economy. Every place is going to have its own income taxes, tax credits, minimum wages and fees, regulations, etc. You need to pick a location that is friendly to your business. You also need to think about how affordable the cost of living is, how high earnings are for self-employed workers, what the unemployment rate is, etc.
5. Join the community and know what resources are at your disposal
After you have chosen a location of where to run your business, getting to know the community in which you are situated and where to turn for resources is essential. Here is a list of some of the main resources that each have a local chapter:
Chambers of Commerce
The U.S. Chamber of Commerce is not a government agency to many people’s surprise. It is the largest business lobbying association in the world with more than 13,000 Chambers across the nation. Members get perks such as industry reports and statistics, networking events, and their publication called Free Enterprise.
American Advertising Federation
The AAF is over a century old and runs as a nonprofit membership organization with more than 200 chapters across the country. They offer resources such as networking events, workshops, continuous education, discounts, and access to consumer data from industry reports.
Small Business Administration
The SBA is a government agency that assists small businesses in the U.S/ through small-business loans, e-courses, free counseling, open data, and other services. They also partner with Score and the Small Business Development Center to make sure that mentoring is available across the country.
This nonprofit has local chapters in every state. Each of the 320 hosts events, workshops, mentoring programs, conferences, and their website offers webinars and e-courses. Their business mentors are volunteers who can meet in person and online to give business owners free advice.
Small Business Development Center
The SBDC partners with government agencies, private firms, and universities to provide business owners with free consulting and e-courses. The local centers run low-cost workshops and networking events and the center publishes studies and hosts conferences and trade shows.
6. Raise startup funding
Funding is essential in launching a new business. Each source of people you are going to try to fund from, however, requires a different approach. Some people will turn to family and friends and others will turn to investors or fund their idea themselves. If you want to rely on lenders, a business plan is key because it shows that you are organized and work hard. Lenders are crucial to success because many people don’t have thousands of dollars lying around. After the 2008 recession, it has become almost impossible to get a bank loan to fund a startup. Banks usually want to see a constant revenue stream before approving a loan.
However, you can take out a personal loan and use this money for your business. These loans are usually going to be $50,000 or less and banks will want to see your outstanding debt, anything that can be used as collateral, and your credit history. There are also things such as crowdfunding with websites such as GoFundMe that allow you to ask the public for financial help. This only really works if your business or background appeals to many people. Another method is finding angel investors. These are people or firms that want to help startups. One last method for funding is applying for a grant or money you can get for meeting certain criteria whether it be personal or industry-related.
7. Choose the legal structure of your business
Every structure is going to be different depending on the business. You will want to consider what kind of structure best protects you and which structure will save you the most money. The best choices for legal and personal protection include corporations and Limited Liability Companies (LLCs). These protect the owner’s personal assets from business debt, but the structure is usually more complicated and expensive in business taxes. Other options are nonprofit corporations, partnerships and sole proprietorships, and cooperatives. However, the only structure completely exempt from federal and state taxes is a nonprofit. All business earnings are reported to the IRS if the business is a sole proprietorship or partnership, but they don’t necessarily pay taxes themselves. Taxes are passed on through the owner or partner’s personal income tax so the business itself is not paying taxes.
8. Pick a name
There is a lot that goes into coming up with a good business name. You want the correct perception and type of culture you are gearing towards to come off in the name of the business. You want the name to be original, informative, and sound good.
9. Create a website and social media accounts
Most people are on social media these days, so a new business needs to create a profile that users can have access to. Once you have come up with a name, make sure it is available on Instagram, Twitter, Facebook, and LinkedIn. Having the same handle across platforms will make it easier for clients to find you. Also make sure that the domain name, or name for your website address, is available. This will cost money, but it is just as important. Make sure to post content regularly to connect with customers.
10. Register your business
The last step is making it official. This requires paperwork such as registering as a business entity with the state government and filing any related patents or trademarks for your business name and products. Some industries need you to apply for permits and business licenses, especially if you are dealing with alcohol, wildlife, transportation, food, energy, etc. If you need to pay employees, you also have to register as a corporation or get a federal tax ID or Employer Identification Number from the IRS. If the state you are in requires employment or income taxes, your business will also need a separate state tax ID. Don’t do all of this paperwork by yourself. Make sure to hire an accountant and use the resources listed above. It might cost you a little extra money, but filing everything correctly will save you a lot of time and money in the future.