The prospect of launching a new company is exciting and intimidating. A misstep can lead to multiple headaches later, but these can be avoided or quickly corrected with thorough planning and persistent effort. Follow these suggestions to give your company a stable start.
Determine What People Want
Good products are worthless if no one wants them or can use them. Do a market analysis to find what solves consumer needs and desires. Avoid a crowded market where you must fight for attention to break through.
Search for unique solutions or a distinctive combination of features. You will probably find someone who has done something similar but has not marketed it well. Add the missing elements to create a winning formula.
Create a Business Plan
An outline of what you want to accomplish and how you plan to achieve your goals keeps you on track throughout growth. The plan unifies team members about objectives and provides answers to investors about your next steps and how you intend to expand.
Your plan needs these vital elements:
- Executive summary
- Business name and description
- Your services and products
- Organizational structure
- Market analysis
- Sales and marketing strategy
- Operations and logistics plan
- Five-year financial plan and funding strategy
Your business plan gives you a clear perspective on how much money you need, helping you to avoid waste. Keep a separate business account to simplify bookkeeping. Access cash from other sources before asking for a traditional business loan or pursuing support from investors.
For example, consider a student loan refinance or home refinancing to free up capital. A home equity line of credit or borrowing from your retirement plan can be a cost-effective method for funds as well. Research government grants, especially if you are a woman, veteran, or of nonwhite ethnicity.
Crowdfunding and crowdlending are innovative ways to gain funds and promote your company. These methods are handy when giving an introductory discount for an exciting new product. Wise use of financing from initial sources gives experienced investors confidence to work with you later.
Form Your Business
Register your business name and secure any necessary licenses. Select a business structure that offers you legal protection and space to grow. Review the following common entities:
- Sole proprietorship: An individually-owned company takes the least effort since you don’t have to file any documents. If you wish to hire employees, you’ll need an EIN (employer identification number). The main drawback is that you are personally liable for the business, so your property is vulnerable to cover any legal action or tax issues.
- Partnership: A company with two or more owners also doesn’t require filing documents. However, without any official contracts, disagreements can arise and become contentious. Partners are liable for the business.
- LLC (Limited liability company): The business has one or more owners and is formally registered within a state. Owners are not financially responsible for legal claims against the business. An LLC is one of the most common entities for small business owners who want to protect themselves and establish a business.
- S corporation: This entity is a particular corporation that has chosen a special tax status with the IRS. S corps offer limited liability protection and must be filed with the state. Shareholders own the corporation, which in turn, owns the business. Shareholders elect a board of directors. The board then chooses officers to manage the company. This structure can allow for greater growth and additional tax advantages while the company is in its growth stages.
Purchase Business Insurance
Filing for a business entity can protect you against liability claims, but you still don’t want to lose your business assets if something goes wrong. Purchase any protection required by law and consider adding coverage that guards you against risks typical for your industry.
Starting a business takes a lot of work but can garner an outstanding return when you put in the work. Get started on crafting a plan to launch a successful business today.