This stretch will be the most crucial period during your first year. These first few months are what separate the real entrepreneurs from the “I have a great business idea” people.
Craft a Business Plan
Without a plan, your business idea can never be put into action. So think of your plan as the blueprint for everything that will follow. The Small Business Administration (SBA) recommends that you start your business plan with an executive summary. This section is where you’ll describe what your business does and how it is unique. In many ways, it’s like your elevator pitch.
Next, you’ll flesh out that executive summary with the following sections:
- Service or product
- Financial projections
- Market analysis
- Organization and management
- Marketing and sales
- Funding request
Every goal included in your business plan should be trackable. Describe how you’ll get there, when it will happen, and how you’ll know the effectiveness. These details elevate your plan and make it actionable.
While your business plan will serve as blueprints for your internal team, it will also be shared with an external audience. For example, many lenders will request your business plan if you’re seeking financing. Take the time to polish it and make sure your plan is as impressive on paper as it was in your head.
Get an EIN and Open a Bank Account
You’ll need an Employee Identification Number (EIN) to do business in the United States. Visit the application page provided by the IRS, and you can complete the application process without too much difficulty.
Armed with your EIN, you can open a bank account for your business. There are plenty of excellent banking options out there, but many entrepreneurs choose to use the bank where they hold their personal accounts. This choice streamlines the application process, as the bank will already have your personal information and insights into your creditworthiness.
Build Your Network
It takes a crew to bring your business to life. Start first with those closest to you, as your family and friends can provide irreplaceable support at this stage in the game. Whether it’s a sibling helping you with a project or your spouse patiently enduring a string of missed dinners, you’ll be set up for the most success when your inner circle is on board.
Moving out to the next sphere of influence, make efforts to connect with others in your industry. Look for partners who can help you build infrastructure and put your plans in motion. Networking events often provide opportunities to make the right contacts and get access to valuable resources.
The final component of your network is a solid mentor. Find someone who has walked a similar business path and can help you avoid both pitfalls and expedite success. You can find free mentorship through SCORE, or try to connect with someone using a platform such as LinkedIn.
The key ingredient to any good mentorship is mutual trust. When you know you can rely on each other to be honest and supportive, the stage has been set for a lasting partnership.
Hire an Accountant
There will undoubtedly be financial hurdles to clear as you work to launch your business. By finding a good accountant early on, you’ll be able to anticipate issues and apply proactive solutions. And you’ll greatly reduce your risk of getting burned by avoidable financial errors.
Choose a Location
Where will you base your business? If a home office will suffice, that’s obviously the easiest way to start. Just research the home business zoning ordinances in your area to make sure you do everything by the book.
Perhaps you’ll need office or retail space. This path requires more effort, as you’ll need to find a proper location and complete all the required paperwork before you move in. And you’ll need to budget accordingly, as it will cost more money from the onset.
Name and Structure Your Business
A lousy name can diminish even the best business ideas, so don’t rush this step in the process. Lean on your network to find relevant names that stand out in the right way. Make sure that your preferred name isn’t already in use by checking out industry directories and the website of the US Patent and Trademark Office (USPTO).
Once you’ve locked down your name, you’ll be ready to officially set up your business. There are multiple legal structures to choose from, each with their own benefits and drawbacks. Consult with your accountant or another trusted expert so you can proceed with confidence.
“Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company,” states a business structuring guide from Entrepreneur. “Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.”
Here’s a quick look at the most commonly used legal structures:
This structure is one of the simplest you could ever use for your business, so it’s no coincidence then that it’s also the most popular. As the name implies, a sole proprietorship has just one owner. If you’re going into business with partners, this won’t be an option.
As a sole proprietor, you’ll enjoy the most streamlined setup possible. You won’t have partner agreements to deal with, and all the requirements will be trimmed down because you’re the only person involved.
Financially speaking, you take full responsibility for your business with a sole proprietorship. All the profits come directly to you. The government will consider you and your business as one from a tax perspective, so profits will be passed through to your personal taxes. It’s worth noting that sole proprietorships have exceptionally low tax rates.
Because of the personal nature of this structure, you’ll also be the name associated with any debts or losses. This business structure offers no liability protection, so your assets could be placed in jeopardy if your business fails.
Many entrepreneurs wish to create separation between themselves and their businesses, alleviating the financial liability mentioned above. A corporation makes this possible, as your business will be deemed a legal entity of its own. Any debt incurred by the business wouldn’t put your assets at risk.
Corporations are much more difficult to create than sole proprietorships because you’re creating something from scratch rather than just attaching a business to your already-established records. Plan on a large amount of paperwork and considerable setup costs.
Your profits won’t be able to pass through with a corporation, so you’ll pay a corporate income tax at both the state and federal level. You will also pay taxes at the personal level to take care of earnings that may have been distributed as dividends to shareholders. So, yes, you may need to pay taxes twice with a corporation.
Setting up a partnership can be a great route when your business involves multiple owners. Depending on your unique circumstances, you can choose from a couple of different options. First up are general partnerships, which put all the partners on equal ground. With this structure, each partner manages the business and has legal responsibility for its finances.
Limited partnerships, on the other hand, allow for a hierarchy. Select partners are given full responsibility for the business, along with the liability that comes with that. Other partners can opt to serve in an investor role and have a protective buffer between themselves and the business.
The same pass-through rules that apply to sole proprietorships also come into play with partnerships. You won’t pay corporate income tax, as you would with a corporation. All profits and losses instead pass through to the responsible partners’ personal taxes. It’s a much more user-friendly way to handle taxes.
Structuring your business as a partnership is a streamlined process, and the costs are relatively low. The main thing to remember is that in partnerships, most or all of the partners will shoulder the financial liability of the business.
This business structure combines some of the benefits of the options listed previously. Your business is set up as its own legal entity, as with a corporation, protecting you from financial liability. Additionally, you can include as many as 100 shareholders, which could potentially bring in more investors.
At the same time, all profits and losses in an S corporation pass through to the personal level of your taxes. As with a sole proprietorship or partnership, this structure makes your taxes easier to handle each year. Because it’s profits pass through, you won’t need to pay taxes twice, as you would with a corporation.
Anytime you’re combining elements of disparate structures, you can assume the complexity of the process increases. S corporations are difficult to establish, and the fees can quickly add up. Also, there are special requirements for the running of your business. For example, you must plan shareholder and director meetings, keep detailed minutes, and then allow shareholders to vote on big decisions.
Limited Liability Company (LLC)
This final business structure is also among the most popular. With an LLC, you get some of the key advantages found with partnerships and corporations. Namely, liability protection and pass-through tax rules for all earnings and losses.
If this hybrid approach sounds like an S corporation, that’s because the 2 structures share a lot of DNA. The biggest differences you’ll notice are that an LLC can have an unlimited number of shareholders and every person involved in the business can be involved in decisions.
While the pass-through style of taxes you enjoy with an LLC is highly attractive, you will also be responsible for self-employment tax. This additional element can make it so you owe more to the government each tax season.
Get Your Documents in Order
Regardless of which business structure you choose, there will be plenty of documents required to get your operation up and running. This step is where it’s beneficial to pump the brakes and make sure you give yourself adequate time to assemble all of the necessary documents. Even the smallest errors can come back to haunt you if they cause delays or incur unnecessary fees.
The following list includes many of the documents that could be required for your business:
- Articles of incorporation
- Business terms and conditions
- Employment agreements
- Contractor agreements
- Sales terms and conditions
- Services terms and conditions
- Intellectual property assignment agreements
Secure Your Business’s Online Presence
The research process you applied to coming up with your business name should have included making sure a related domain name was available. Now you need to purchase the domain immediately so it can’t be claimed by a competitor or cybersquatter (someone who buys domains and then tries to sell them to you at an elevated price).
Once you’ve bought the domain, take efforts to make sure you will never risk losing it by missing a payment. The easiest ways to do this are to sign up for autopay with the domain provider or to put recurring payment reminders in your calendar.
In conjunction with your domain, you’ll also want to begin building your social media presence. This strategy could include Facebook, Instagram, Twitter, LinkedIn, or YouTube. Even if you don’t yet know how you’ll leverage these social channels in the future, the important thing is to create the accounts so the names are forever in your control.
Now that you’ve set the foundation, it’s time to supply the fuel that will help your business move forward.
Get Your Finances in Order
At this point, you’ve already paid fees for activities like hiring an attorney and incorporating your business. Now it’s time to get detailed so that you can figure out how much money is required to keep the momentum going. Focus on specific dollar amounts and then develop a timeline for when you will need to acquire the money.
Your list of upcoming expenses might include permits, licenses, insurance, professional fees, inventory, supplies, equipment, vehicles, marketing, rent, or payroll.
Obtain Necessary Financing
Knowing how much money you need is the single most important part of finding the right loan. And the second-most important aspect is the timeline for when you’ll need that money. Equipped with the information you gathered in the previous step, you should be ready to seek financing if it’s required.
The good news is that a vast array of financing options is available to small businesses. Here are 11 of the most popular choices:
- SBA loans
- Business term loans
- Short term loans
- Business lines of credit
- Startup loans
- Equipment financing
- Merchant cash advances
- Commercial mortgages
- Business acquisition loans
- Accounts receivable financing
- Business credit cards
You may also want to pursue a microloan as another avenue for financing. Popular examples include Kiva loans, Opportunity Fund loans, and Accion loans. The dollar amounts may be smaller with a microloan, but they are often easier to qualify for and may provide just the jolt you need.
Finally, don’t forget to check for grants your business might be eligible for. The obvious advantage here is that grants never need to be repaid. The challenge is that free money is incredibly popular, so it can be difficult to find a relevant grant and then have your application accepted.
Regardless, it’s wise to survey all your options. Start by visiting Grants.gov to find out what grants the federal government offers. You’ll also find the eligibility information on the website.
You can also look into grants from other sources, such as the Halstead Grant, IdeaCafe Grant, Amber Grant, and National Association for the Self-Employed (NASE) Micro-Business Grants.
When you’ve found the financing product that best matches your needs, set aside plenty of time to accurately complete the application. In the rush to get funding, many small business owners fail to give this process the attention it requires. Doing so will only cause problems. Lenders pore over applications like detectives, looking for indicators of your financial reliability. One of the best ways to showcase it is by submitting a polished application that includes every document and detail they requested.
Enlist Some Digital Help
There are simply too many responsibilities for you to handle every aspect of your business manually. Luckily, technology has reached a point where you can automate and streamline many of the tasks that were aggravating entrepreneurs just a few short years ago.
The main objective here is time management. Any tool that saves you time will also save you money.
“Is the saying, ‘Time is money,’ true?” asks an entrepreneurial resource from the SBA. “If your business runs out of money, you always have the opportunity to get more.
More money is ‘simply a sale away.’ On the other hand, once time is past you can never get that time back nor can you add more hours to a day. Yes, poor time management can cost you and your business tremendous amounts of money. Realize, however, that the better you manage your time the more money you can earn. With time management, business owners maximize how much they get done each working day.”
So just how do you reclaim more time each day? Here are some digital tools you might want to consider:
Marketo: This tool helps you engage with your audience and track the impact by combining your email, social, digital, and mobile marketing efforts in one place.
Deluxe: Payroll can be a nightmare for small business owners, but Deluxe automates many of these tasks and helps reduce errors.
QuickBooks: This powerful tool does most of the legwork for you when it comes to tracking mileage and handling expense reports.
Mailchimp: Email marketing is an important strategy for most small businesses. Mailchimp elevates your efforts by automatically sending messages for you and providing tracking.
Hootsuite: For your social media efforts, consider a tool like Hootsuite. It gives you a hub from which to post on all channels, which automates and simplifies the process.
RescueTime: This app is engineered for time management, tracking your online habits, and enabling you to set realistic goals for improvement.
Slack: Not only will this app make your company communication smoother, but it also enhances your project management efforts.
Square: This handy card-reader plugs directly into your phone or tablet. And it saves you time and effort on the backend by emailing or texting a receipt directly to the customer.
TripIt: Manage your travel and improve team coordination with this convenient resource. It’s a great way to manage crucial details and keep everyone connected while on the road.
Quip: By improving collaboration, this tool makes it easier to hit important milestones. Quip really helps your team get on the same page and manage workflow.
17hats: This app can improve your efficiency and data security by serving as a hub for your contracts, invoices, and workflow.
Now is the time to focus on sustainability. Many of the tasks specific to “starting up” have been handled, paving the way for strategies that will carry your business well into the future.
Revisit Your Business Plan
Your business plan should contain descriptions of your business, your plan for financial management, your plan for business management, and your marketing strategies. Take stock of how you’ve done so far, then create a strategic plan for your next 12 months.
First off, what do you most want to accomplish? Identify a BHAG (Big Hairy Audacious Goal) for your business, then outline the steps necessary to help you reach it. You’ll also need to establish methods for tracking your progress. For convenience and accuracy, consider using one of the digital tools mentioned in the earlier section.
Each month, take stock of your progress. If you’re struggling to stay on track, consider modifying the goal to ensure it remains attainable. What’s important is that you stay focused on the future and continue to push yourself.
Put Your Marketing Plans into Practice
Using your business plan as a road map, start courting the customers who will become the lifeblood of your business. Here are 4 possible strategies for building your customer base:
- Provide Free Resources
Most customers love perks, so don’t be afraid to entice people to your website with a free resource. If you’re positioning yourself as an industry expert, consider giving away a white paper. If you sell a product, you could provide samples in exchange for filling out your online form.
- Partner Up
In these early stages, your budget could be small and your customer list even smaller. By joining forces with a noncompeting business in your industry, you can gain access to a new audience and get more bang for your marketing bucks.
- Socialize More
Facebook is usually the prime social channel for your marketing efforts, but there are plenty of other channels for you to explore. Put yourself in your customers’ shoes and think of where they spend their time online. If you can build a presence on a lesser-known but equally relevant channel, the impact can be substantial.
- Create Some Fans
As you reach more people, it’s important to do things that get them excited about your business. You might want to provide special promotions or rewards to those who are on your email list or follow your social channels. Whatever you decide, make sure there’s a clear benefit for those who have been kind enough to connect with your communications.
Focus on Service
Getting a customer to visit your store, office, or website is great. But it’s the repeat visits that will make or break your business. Customer service is where you can distinguish yourself and convert the casual shopper into a longtime supporter.
Research shows that if an individual has a positive customer experience, about 70% of the time they’ll recommend that business to their friends and family. On the flip side, bad customer experiences cost American businesses about $41 billion each year. Modern customers have numerous options to choose from, so they simply won’t settle for lackluster experiences. This power to choose means that more than 90% of consumers will take action if they are dissatisfied with the service they’ve received.
Congratulations on making it to this milestone! Your first year in business will bring plenty of ups and downs, but you should celebrate the fact that you were in a position to experience them. Remember, most people have business ideas. But you were one of the select few who had the determination and creativity necessary to make your business a reality.
Here are a couple of final recommendations for your first year:
Build Out Your Infrastructure
Now is your chance to refine your operations and ensure you’ve made the necessary connections with suppliers, contractors, partners, and employees. It’s important to continue attending industry networking events, as they’ll help you meet individuals who can elevate your business with their services and skills.
Make Your Presence Known
You’ve already set up social accounts and launched your marketing initiatives, but there’s still more to be done. Blogs may get a bad rap in some industries, but they’re a reliable way to reach your audience and provide SEO benefits. Also, take the time to add your business to relevant directories and listings. These entries will help you appear in online searches and stay top of mind.
Consider writing a press release that can be sent out to the news outlets in your region. Getting an article published in the right place is an excellent way to bring legitimacy and respect to your business even before you’ve had a chance to build your reputation.
Now that you’ve finished the initial tasks of starting a business and have a plan for the coming year, it’s time to focus on execution. Entrust all the small and recurring tasks to automated tools so you can dedicate time to the differentials that will truly set your business apart from the competition.
This business is your baby. You brought it into the world, and now you have the opportunity to watch in wonder as it grows.