How To Start A Small Business From Scratch
Over the last few decades, there has been a decline in new business formation. Federal and state governments have used a variety of incentives to encourage entrepreneurs to build new businesses. Yet, that trend continued. It took the global health crisis to trigger a surge in businesses. The pandemic was a doubling in the number of new businesses compared to the previous year. It’s no surprise then that you are thinking of starting a new business from scratch. Like many pandemic-era entrepreneurs, you see the immense opportunities ahead as the world transitions into a new order, the likes of which we have never seen.
Develop a Business Plan
You cannot go where you want to go, without mapping your route there. The business plan is not just a collection of essential facts for you, your backers and the bank. It’s a guide to how you will fight to get to the target that you are aiming at. In it, you explain the challenges ahead: the regulations you have to comply with; the competitors you will have to beat; the products and services you will have to surpass; the product life cycles that will keep you innovating to stay ahead. In it, you explain just what the market opportunity you see is, showing the vital evidence for this opportunity, the value proposition you feel gives you an edge, and why you believe you have or will have product-market fit. The business plan is a map that you and your backers will use to guide you toward your vision. Not only that, it is the most important document you need when it comes to raising fresh capital, either through equity financing, or through loans from banks, federal and state agencies and other organizations.
Choose a Business Structure
You need to turn your business idea into a legal business entity. There are a number of business structures, or business entity types, the most popular being the sole proprietorship, partnership, corporation and S corporation. The limited liability company (LLC), is a business entity type permitted under state statute. The choice of business structure has legal and tax implications, so the decision must be taken carefully. You can incorporate your business in states that provide you with certain legal and tax advantages, even if your business is not based there. For instance, Wyoming is a great place to incorporate an LLC. This makes Wyoming very attractive to many entrepreneurs.
Get an Employer Identification Number
More often than not, you will be obliged by federal or state law to have an employer identification number (EIN). An EIN allows the federal government and state authorities to identify your business for tax purposes. Think of it as a social security number for businesses. Even when you are not legally obliged to have an EIN, it is useful to have one. Typically, sole proprietorships or zero-employee LLCs are not required to have an EIN. Many banks require an EIN in order for them to open a bank account for your business.
An EIN is issued by the Internal Revenue Service (IRS).
If you do not plan on having any employees, you can instead apply for a Tax Identification Number, which is also issued by the IRS. The Social Security Administration also issues out TINs.
Secure Permits and Business Licenses
In some instances, you may be required to have a business license or permits in order for you to legally operate your business. Whether or not you will need to secure permits and licenses, depends on federal, state, municipal and local regulations and these depend upon the industry your business is in.For instance, a dentist needs a business license in order to practice. You will have to find out from a business-formation agency or the federal, state, municipal and local regulators, whether your business requires any business licenses or permits.
Develop Your Company Brand
Branding goes beyond having a nice logo with a standard suite of colors that you apply across your promotional material. Although that is an important element of branding, in many senses, it is the cherry on top and not the cake. The words a company uses, the tone it sets, are just as much part of a company’s brand as the visual elements of the company. The emotional tenor of the company is something that is often neglected in the branding process. Think of your company as a person. Unless a person is crazy, there is a great deal of stability about how a person behaves. At the heart of a brand are the company’s values, it’s vision and its strategy. All these must be transmitted through the branding. When customers experience the company brand, they must instinctively understand it as your company’s, even when there is nothing explicitly telling them that your company is involved. For example, nobody needs to tell you that a product is an Apple product, when you’re holding it in your hands. Even if there was no logo, you’d know. Apple has a personality that’s consistent in everything they do. That’s branding.
Build Your Company Website
A website is more than just a box you have to tick. In a world increasingly shifting to digital, a website has taken the place of a brick-and-mortar office. This is where your customers and potential customers will likely first interact with your business. They will form their impressions about your business’ quality and standards, and about whether or not they want to do business with you, from your website. In the digital era, it’s virtually impossible to build a l;arge customer base without having a website. In as much as in the past, no respectable business person would operate without an office, today, no respectable business operates without a website.
Open a Business Bank Account
You have to segregate your personal accounts from your business accounts. This is just a point of professionalism. The other reason that you need a business account is that in order to accurately respond to your tax forms, you need records that clearly show the financial transactions and position of your business. If your business finances are entwined with your personal accounts, it makes it hard to say what is what and can complicate your ability to pay taxes. There are plenty of options for business owners. Try and get a checking account, many of which have no fees or very low fees. You want an account from a financial institution with easily-accessible ATMS. You want your deposits to earn interest. You want to be able to access your accounts online and from your mobile phone. In short, you want banking solutions that make your life easier.