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Starting a Business
The idea for starting a business comes from previous work
experiences, education, training, hobbies, talents, personal interests, or maybe
you got down-sized and you feel working for yourself is a better plan than going
out and finding someone else to work for.
After making this decision, you will need to take time to plan and
organize.
What service or product will you be offering? How are you going to
offer it? Will your business be an internet-based business or are you
going to follow a traditional off-line business model?
Regardless of what business model that are several common thing that must be
accomplished.
WRITING A BUSINESS PLAN.
This should be a well thought out plan to build
profits and ensure success. A business plan is a look at where you are and where
you hope to go. A business plan should look at the future and detail the steps
to take to get to where you want to be. It communicates business goals and will
help keep the business on track. It should address how the business will be
operated, managed, and capitalized. The plan also can be used to obtain outside
capital from investors or lenders if needed. A business plan, therefore, should
be well researched, thorough, professional, realistic, and revised as needed. It
should include a description of the business, a marketing plan,
a financial management plan, and a management plan.
The description of the business should include a summary of the goals-both
long-term and realistic short-term goals-and principle objectives of the
business. It also should include information about the type of business it is (eg,
service, retail, manufacturing); an explanation of its products or services;
details about the location, which should be based on your customers' needs; and
specifics on the days and hours of operation.
The marketing plan should identify customer needs, target markets, and how
the business will satisfy those needs. This plan should provide information on
market growth and its potential for continued growth and expansion, a definition
of market segments, strategies to maintain market share and promote sales,
methods for pricing products or services, information about the competition, and
a plan for advertising or networking to promote the business.
The financial management plan is a vital part of the business plan. Many
businesses fail because of mismanaged finances or a lack of money to keep the
business going. This section should contain information on the required start-up
investment, additional funding that may be necessary in the future,
profit-and-loss forecasts and cash flow analysis for several years, and a
detailed examination of the amount of sales required to break even or turn a
profit.
The management plan describes the day-to-day management required to operate a
business. This part of the plan should include biographical information about
the managers) of the business, the number and type of staff members needed,
compensation plans, employee benefits, and any employee recruiting or retention
plans.
DETERMINE CAPITAL NEEDS.
How much money do you need to start a business? Start-up costs include
equipment, professional and licensing fees, inventory and handling costs, and
other costs. Factor into these costs money needed to live on before you can
expect to draw a salary from your business. This is an important step because
the reason most businesses fail is under-capitalization. If you need capital to
start your business, explore the following sources to obtain money:
- lending institutions (eg, local bank),
- the Small Business Administration,
- state or local programs for small businesses,
- family members, and
- credit cards.
DECIDE ON A BUSINESS NAME.
A business name should help customers understand what the company does. The
name should be something customers can remember easily or relate to in some
manner. After naming the business, register the name with the state business
office. You will need approval from the state before you can use the business
name. Contact an attorney to help you with this process or contact the state for
assistance on how to do it yourself.
DECIDE ON THE STRUCTURE OF THE COMPANY.
Deciding on the type of company ownership is important
because it determines how the company will be structured. The four most common
forms of legal ownership for small businesses are sole proprietorship,
partnership, corporation, and limited liability company. Each form of business
has its own set of benefits and disadvantages; therefore, in making your
decision, it may be helpful to consult an accountant and attorney to help you
select the right form of legal ownership. This decision will be based on the
- vision, size, and nature of the business;
- desired level of control;
- type of business operation;
- business' vulnerability to lawsuits;
- types of tax advantages and disadvantages;
- capital needs;
- earnings distribution; and
- legal restrictions.
LICENSING AND CERTIFICATE REQUIREMENTS.
Obtain business licenses and/or permits that may be imposed by state and
local governing authorities, as well as federal authorities. To accomplish this,
- check with the state to determine whether you are required to have a
business license;
- check with the local government to determine which licenses your
small business will need -- city or county, or both;
- check on applicable city zoning regulations and ordinances;
- find out whether any federal permit or license is needed to operate the
business;
- obtain a Federal Employer Identification Number from the local US Internal
Revenue Service office; and
- obtain a state sales tax number from the state
government offices.
OPEN A BUSINESS BANK ACCOUNT.
After obtaining a federal tax identification number, set up a business bank
account with a local lending institution. This establishes a relationship with
the lender and will be a benefit should you have financial needs as your
business grows. Any business transactions now are separate from your personal
banking account and will be easier to control and manage. It may be helpful to
consult an attorney or accountant to determine the implications and potential
tax consequences of this.
PRICE YOUR PRODUCTS OR SERVICES CORRECTLY.
This step is vital when starting a business. Pricing is based on the cost and
time involved in operating a business and meeting customer expectations. Knowing
competitors' pricing also will help determine the right price for your product
or service. An accountant can help you determine the appropriate formula to
verify that your pricing is set correctly. Evaluate all pricing initiatives on
an ongoing basis. To begin, make sure you have set your product or service
pricing correctly, and create price lists or service contracts to share with
customers.
PURCHASE BUSINESS INSURANCE.
Ensure that your business insurance coverage meets your needs. Contact your
insurance agent regarding insurance needs, including increasing or adding
insurance coverage for office equipment; liability insurance for products sold to customers;
property insurance needed to replace or rebuild, as well as limitations or
waivers coverage; paying fixed expenses if you cannot operate the business due to damage
caused by such things as fire, weather conditions, or vandalism; "key man." insurance to cover you if you are so critical to the
operation of the business that it cannot continue in the event of your illness
or death; or "non-owned automobile coverage" if you use your personal vehicle
on company business-this policy covers any damage incurred during business use.
SET UP AN OFFICE.
It is important to plan where and what you will need to set
up office space. Carefully organize and locate the office to facilitate your
ability to conduct business. Also ensure that you have the right equipment and
items to perform daily business activities, including a computer; a fax machine;
a printer; a desk, filing cabinet, chair, and storage units; and the necessary office supplies and software.
BUY STATIONERY AND BUSINESS CARDS.
Professional-looking stationery and business cards are a must. These can be
ordered through most office supply stores or, if you have the right equipment
and paper, you can make them yourself. Do not be frugal when it comes to these
items. Think carefully about how the stationery should look and what it should
communicate to others about the business. Also, make sure that the format and
design of all of your business documents are consistent. A graphic designer,
desktop publisher, or professional print shop can help you develop stationery
that appropriately represents your business.
INSTALL TELEPHONE LINES.
Establish a dedicated business telephone line. This gives the business a
published telephone number. It also simplifies tracking business telephone
expenses for tax purposes. You may find that your call traffic is
sufficient to justify the purchase
of a multi-line phone system.
GET A POST OFFICE BOX.
If you are not comfortable receiving mail at your business address,
consider setting up a post office box for your business address. This can be
done at your local post office or a business that helps you with your mailing
needs.
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