Entrepreneurialism is a state mind or what you put in your mind when you are considering launching a new business. Hundreds of thousands of Americans start new businesses every year with just about as many closing down. The problem for many entrepreneurs is that they may have an idea that does not realistically consider how their enterprise will be operated as they move forward with their plans. We will take a look at the planning process and what it takes to successfully launch and manage a new business.
1. Identify — What kind of business do you plan to start? Will it be an online or a retail shop? Will you have employees or will you start off as single owner proprietor? What kind of business do you want to operate? What customer base are you trying to reach? Answer these questions and you are on your way to identify your business model and then you can formulate a plan.
2. Advise — If you do not know how to run a business, you will need to get some training under your belt first. If you are buying a franchise, the franchisor will provide the bulk of that training. For everyone else, seeking a mentor is important. SCORE is an excellent organization for finding the right person to guide you.
3. Structure — The legal structure of your business is important, therefore a tax accountant should be contacted for guidance. Your options include a sole proprietorship, a partnership, a limited liability company, an “S” or a “C” corporation and other options.
4. Location — Unless your business is exclusively online, you will need a location to launch your business. At home, businesses may get started in a garage, a spare bedroom or in a basement, but for everyone else commercial property is needed. Work with a commercial real estate representative that knows your business and can advise you on locations. If you need a store, this professional will show you mall, retail strip outlets and downtown locations. If you need an office building, you will be shown a variety of locations to meet your current and future needs. For a manufacturing operation, similar professional guidance is needed.
5. Finances — How much will it cost you to start a new business? Figure that you will need enough cash on hand for at least six months, assuming that your business will not turn a profit until past that time. If you do not have cash on hand, your bank might be willing to extend you a loan. Your tax accountant can advise you on your borrowing options including your retirement account. Angel investors may be willing to back your business plan too.
6. Registration — Your business will need to be registered with your state and it may need local licensing and a federal tax identification number. File your paperwork with your state’s department of corporations.
7. Compliance — You want to operate your business, but it must comply with local zoning laws and it may need additional approval if you operate a food-handling or liquor-dispensing enterprise. Beyond business licenses and permits, your business will be expected to pay quarterly taxes and will have to pay employee taxes, workmen’s compensation and disability insurance if you hire people. Expect that if you collect sales tax, your state will be looking for you to send funds in on a regular basis.
8. Hiring — Businesses that plan to hire people to launch a new enterprise will need to put in some effort to identify qualified people and interview them. You will need to review resumes and applications, conduct interviews, do background checks, make offers and train your new workers before your business is opened.
9. Launch — Prior to launch day, contact local media and your Chamber of Commerce to announce your opening. Plan a ribbon-cutting ceremony, inviting your town’s mayor to be on hand and to offer his remarks. Hang up signs, blow up balloons and distribute novelty items. Run specials to attract customers. Collect names and email addresses for your mailing list. Work with broadcast media to get the word out.
10. Management — Have a plan in place to review your business’ progress on a daily, weekly, monthly and quarterly basis. Keep a close eye on your bottom line, updating your profit and loss statements to keep tabs on how your business is faring. Set benchmarks for growth and adjust your business to compensate for the unforeseen or unexpected. Seek professional assistance from an accountant, your attorney or business professional to handle matters that are beyond your ability to resolve on your own.
A lot goes into planning a new business, but not every contingency can be anticipated. Flexibility on your part can certainly help you navigate through the toughest times. You can avoid coming in on the wrong side of statistics that show that about half of new firms are gone after five years by working with professionals that understand your needs and have the experience to make a difference as you pursue entrepreneurialism.
U.S. Small Business Administration: FAQs —