Are you finally ready to strike out on your own with your very own small business? Owning a small business is never a get rich quick scheme. If you want to be successful; it will cost you. It will cost you money, sleep, relationships, and you will be pushed in ways you never thought possible. But it will be awesome too. Being an entrepreneur is an evolutionary process; you must grow yourself to grow your business. If you’re planning on starting a business, take the time to figure out the business of running a business. I’ve learned lots of expensive lessons over the last 20 years in business, many of which I share in my bestselling book, Become Your Own Boss in 12 Months, 2nd edition, but here are my top 12 things to do before starting a business.
12 Things to Do Before Starting a Business
1. Get Clear About Your WHY?
Why are you starting this business? How do you envision your life now as a business owner? Have you looked into starting a business just because you hate your job or because you want to be the next tech star to cash out for big bucks? You can always get a new job. And more wannabe tech stars flame out than get a big payday. But if you are starting a business because you have a purpose you want to serve, want to leave a legacy, or fill an unmet need in the marketplace, then these are the reasons that will help you survive the hard days in business. Develop a vision board for your new dream life as a business owner. It will keep you focused on why you are working so hard.
2. Look at Your Finances
The money to start your business is going to come from your personal resources. So before you start your business, calculate your net worth, pay off credit card debt, get your credit score as high as possible, and look at all of your available cash reserves such as savings, your 401K or home equity. You need to have an emergency saving account for your household, money to live on, and at least the first year of working capital for your business.
3. Research the Business Opportunity
You might be excited about a new restaurant concept, but have you ever worked in a restaurant? Perhaps you should go work part-time in a business like the one you want to start so that you can learn the real deal about running one. It will also help you determine what skills you need to have to run your business. You’ll need to know the industry you want to join. Don’t make the mistake of thinking that buying a franchise will save you. They are not businesses in a box. It’s best to have business experience before starting a business.
4. Research the Market
You want to make sure there is a real business opportunity for you, so that requires research. Here are a few key questions that you need to answer. Who are the dominant players in your market? Who is going to be your target customer? Who is your competition? What are the current price points? What are the industry trends? What web marketing strategies are your competitors using? What are the typical sales cycles? These answers will help you make important decisions before starting a business.
5. Develop a Customer Profile
Once you identify what’s going on in the market, you’ll need to determine your target customer. Once you do that, you need to go and talk to them. Ask for opinions on how they currently get their needs met. Ask about their budget cycles. Call competitors and ask for a quote. Go online and order a competitor’s product and return it to see what their customer service is like. Use Spyfu.com to search competitor websites to see what keywords they use and if they use paid ads. Once you have this information, you can finalize your niche and your customer profile.
6. Find an Available URL and Name Your Business
Your website is your #1 sales tool. Your business will feel very real once you name it. You want to be cleaver, but it’s not a good idea to use a word that is hard to say or spell. Trust me on this; my business is named Quintessence Group, lol. You need a name that is memorable and no more than three words. Use alliteration if you can. Try to avoid unusual spellings on common words or using numbers in place of words. You will be seen immediately as a small entity. You want to build a brand, not just establish a business. So it’s best to invest in a professional logo for your business too. If you are tight on cash, try 99designs.com or fivrr.com as low-cost graphic design resources.
7. Establish Your Legal Entity
You need to incorporate your business as an LLC or S-Corp. Do not start your business as a sole proprietor using your personal social security number. You’ll open yourself up to personal legal liability, and you won’t look professional. Try CorpNet.com to help you get your legal entity filed.
8. Secure an EIN Number and Business Bank Account
Once you establish your legal identity, go to IRS.gov, and apply for an Employer Identification Number (EIN). You need to keep your business banking separate from your personal banking, so once you have an EIN number, go to a bank and establish a business bank account. I suggest using a different bank than your personal bank to resist the urge to comingle funds and also to protect your personal assets.
9. Develop Your Signature Product or Service
You need to test the market. So now it’s time to develop your test product and drill down your list of core services. If you are making jewelry or a food product, you’ll need samples. Find a maker space or commercial kitchen and make a prototype or a batch of your product. If you are a starting a service business, develop your one-pager that tells people who you are and what you do. Be sure to highlight the benefits of working with you. You might want to develop products at cost for your first few customers to get high-quality samples and great testimonials as well.
10. Set Your Price
You need to set a price, but you can’t do that until you understand all your costs. Looking at labor, materials, and shipping costs are easy, but you need to include a percentage of your overhead and admin cost and your profit margin. If you don’t know how to calculate this, get an accountant to help you. You can also find a SCORE chapter and get a mentor to help you establish your business.
11. Write a Business Plan
Now that you have tested the market, built a basic customer profile and competitive data, made a few sales, and developed pricing, it’s time to develop a business plan to turn your idea into a real business. Go to bplans.com to research sample business plans or use software to complete your business plan. It might even be helpful to sign up for an online business plan course.
12. Launch While Working
Don’t quit your job to run this business, yet. It takes 12-18 months, typically, to breakeven, so you won’t be able to cover even a portion of your salary for a while. You need to learn the ropes of running your business while you are still getting a paycheck from someone else. Unless you are directly competing with your employer, run your business on your nights and weekends. Request telecommuting or flex hours so that you can make business calls during the day. Be a smart side-hustler. Never use company resources for your business; that’s a fast way to lose your job. You can sell to your co-workers, though. They might be a great source of feedback or referrals.
There are a lot of things that go into running a successful business. If you start with these 12 elements before starting a business, you will have a good foundation to build upon. Hopefully, before long, you’ll be able to wave goodbye to corporate America. If you write a business plan and actually use it to run your business, your finances will grow, and that will allow you to build your dream life and create wealth for your family. It can happen, but it’s going to take a lot of work. You can do it! You must plan for success; it will not just happen to you.
Wow, I have your book already–need to read it! I love your website already–will return often! Thanks!