You’ve always wanted your own business and now is the time to make it happen. The rewards can be great, but so can the challenges. The following nine important steps will help you plan accordingly to avoid many of the pitfalls of starting a business and give you a much greater chance of success.
1. Conduct Market Research
Market research is the critical first step to understanding the unmet needs of your target market and gives you incredible insight into the direction your company should take. It will help to define the needs and desires of your customers so your company can fill that niche. Even once your business is a success, continuous market research will be necessary.
Critical Role of Market Research
By conducting market research, you’ll find out where you fit into the marketplace. Market research should answer the following core questions for your business:
- What is my unique offering to the market?
- What else can I offer the target market?
- How can I meet the needs of the market?
- Who is my competition and what are they offering?
- Is my product going to meet customer needs?
Types of Market Research
Market Segmentation - will capture needs, values, attitudes, behaviors and demographics to best determine who is your customer.
Product Testing - is a process of measuring the properties or performance of products. It will determine product improvements and opportunities as your customer changes their purchasing behavior.
Advertising Testing - is the procedure of vetting your ad concepts with a sample of your target market. This is important to find out exactly what resonates with your customer. Test some ads on your audience and ask for feedback so you can appeal to your customers with improved advertising.
Customer Satisfaction and Loyalty Analysis - is a type of research aimed at identifying the key drivers of satisfaction. It also measures whether customers are likely to continue using a company’s products and services.
Brand Awareness - is used to help measure the effectiveness of marketing campaigns in regards to brand recognition, brand recall, brand image, brand identity, brand loyalty, and brand trust.
Major Sources of Market Research
The quality of market research data is important because it will have an impact on the quality of the research outcomes. The two main categories of market research methods are primary and secondary sources and using them both will give you the most reliable information.
Primary research should focus on the particular needs of your new company. You could either conduct it yourself or outsource it to a specialized company. Primary market research methods include:
- Focus Groups
- Experiments and Field Trials
Secondary research is effectively investigating the research conducted by others. Useful research sources are trade associations, government, chambers of commerce or other reputable sources, including:
- Public Sources
- Educational Institutions
- Commercial Sources
There are two categories of data collection: qualitative and quantitative.
Qualitative methods are useful for digging deeper into your findings. They are the outcome of things like interviews and focus groups. They categorize most things that you can not assign a number to, such as a written answer in a survey.
Quantitative methods include anything that provides numerical data and functions only with a large sample size. It then allows statistical analysis to find any significant information and trends.
2. Write Your Business Plan
Your business plan is vital to outline everything you will do and how you will do it.
The format for your business plan is important to consider. There tend to be four categories of business plans: strategic, traditional, lean startup, or feasibility. Choose your format according to what best suits your type of company.
Business Plan Formats
Strategic business plan format - The strategic business plan format focuses more on higher-level goals rather than the detailed methods. It plans how to achieve your goals and is a great asset for communicating the big picture to others.
Traditional business plan format - A comprehensive business plan, covering all the steps, is good for detail-oriented people. This plan is very useful if you are thinking of asking for funding.
Lean startup format - This format provides a visual picture of facts about your business, in the form of charts that cover the main information about your company, including finances, customers and structure.
Feasibility business plan format - This business plan seeks to answer can the company make a profit and who is going to buy what the company has to offer.
Business Plan Structure
No matter what type of company all business plans should cover the following elements::
- Executive summary - a quick outline of your company.
- Company description - details what your company does.
- Market analysis - This is where you will use your market research including some graphs from your quantitative research.
- Organization and management - the structure of your business.
- Service or product - what exactly you offer.
- Marketing and sales - your market and sales strategy.
- Funding request - how much money you require to conduct your business.
- Financial projections - detail the current state of finances and add financial projections.
- Appendix - this is optional to add anything referenced earlier in the plan such as permits, data or research.
For an in-depth guide to begin your business plan you can learn more on how to write a business plan.
3. Fund Your Business
It is important to calculate exactly how much money you will need to start. Assess your current financial position then decide how much money you may need for the next 3-5 years.
5 Ways to fund Your Business
There are many ways to accomplish self-funding from savings accounts, zero interest credit cards, or leveraging other personal assets.
Venture capital funding comes from investors whose money is managed by an investment fund. They look to invest in startups or small businesses that they believe will make them money in the long run.
Crowdfunding is a fast way of raising money online, usually from people who believe in what you’re doing, or those who want to buy your product. Here is a list of 9 popular crowdfunding platforms that you could choose from.
Small business loans are the best option to get enough money to fund your business without giving up equity.
A key benefit of angel investors is that they are often entrepreneurs who want to help other startup businesses. However, the investment may be smaller than the amount you could receive from a bank or other sources.
What to consider when choosing a type of business funding.
There are a number of avenues to consider when you’re seeking business financing. Think about these crucial factors when choosing how you’ll fund your company:
- Long-Term Goals
- Access to Equity Markets
- What the Interest Rates Are
- The Repayment Terms
- Maintaining Control
- Your Business Structure
- Borrowing Requirements
4. Pick Your Business Address Location
Picking your business address location is a strategic decision. Your state, city, and neighborhood you choose to set up your business will determine taxes, permits, licenses, zoning laws, and state and federal regulations.
Types of Business Addresses
Home address - Using your home address as your business address will work for some types of industries. For example if you are in a service industry, such as a hairdresser or personal trainer, it may not be feasible to conduct your business from home unless you have a separate space for the business. However, if you’re a freelancer or consultant it may work well for you to use your home address.
Another important aspect to consider about using your home address is it won’t be able to protect your privacy. If you care about protecting your personal information a home address is not the best business address option.
PO Box - You can rent a PO Box in 3 easy steps. Before signing up there are 5 reasons for renting a PO Box you might consider. It is an option if you’re concerned about your home address being made public. However, if you run an LLC, corporation, or partnership a PO Box is not accepted.
Commercial Business Address - you can use a commercial business address to register your LLC or corporation. The requirement is a real street address, not a PO Box.
You can use these for your commercial business address:
- Virtual Mailbox - This gives you a real business address to receive mail and packages. When you receive mail, it is scanned and sent to you digitally. You’ll get real-time notifications when it is processed in your mailbox. Then you login and decide whether to forward, recycle, or trash the mail.
- Coworking Spaces - These are a shared space in an office building used by individuals or a team. They provide access amenities such as meeting rooms, open collaboration spaces, work desks, and more space than your home, but without the corporate atmosphere of a traditional office.
- Private Mailbox - These are rented mailboxes from a Postal Annex, UPS Store, PostNet, or located somewhere in a retail center. Your mailbox will be linked to that address, so it still provides you with a physical address.
- Commercial Office - Commercial property can be land, property, or facilities that are either zoned for or used exclusively for business purposes.
- Virtual Office/Business Centers - A virtual office gives businesses a physical address and office-related services without the overhead of a long-term building lease and administrative staff.
5. Choose a Business Structure
This may affect your taxes, financing, liability and legal requirements so it’s best to choose your business structure wisely before registering your business.
There are three main factors that affect the type of business structure you select; taxation, record-keeping, and liability.
Sole Proprietorship - This is a popular and easy way of organizing your business, which gives the owner complete control. The disadvantage is that the owner is personally liable for the business and is thus at a greater personal risk.
Partnership - A partnership structure can be used when there is more than one person who shares the losses or profits of the company.
There are two main types of partnerships which are Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs).
LLPs give all owners limited liability which protects each partner against the risk of actions from other partners. Limited partnerships, on the other hand, give one partner unlimited liability while the others have limited liability.
Limited Liability Company (LLC) - This structure protects the owners from personal liability. This means that if the company accumulates debt, personal assets cannot be taken from the owners to pay the debt. It also gives profits and losses to owners with business taxation. This is a common choice amongst medium to high-risk companies. Owners who have a high amount of personal assets also tend to prefer this format.
C Corporation - A C Corporation is completely separate from the owners being a legal entity in its own right. It can be taxed, held liable and make profits. Sometimes, the profits will be taxed twice both on receipt of profit and when shareholders are paid out.
S Corporation - They are designed to remove double taxation of the C Corporation. S Corps can give losses and profits to owners without having corporate tax rates.
6. Register Your Business
Both the business structure and location will affect how you register your company. To register your business a registered agent is required. It is also important to understand if your business operates in another state in order to register under foreign qualification.
Why Do You Need a Registered Agent?
Registering your company requires a registered agent to be assigned, which is a person or business that can accept the service of process documents. It is their role to receive government and legal documents and communications from the Secretary of State on behalf of the LLC or corporation.
These documents may include:
- Tax-related documents from the IRS, the Franchise Tax Board, and other government tax entities.
- Normal corporate filing documents, such as reminders for filing the statement of information and other information sent by the secretary of state.
- Notice-of-litigation mail (mail that initiates lawsuits) and legal documents when others want to formally contact you or send you notice.
The registered agent must be in the same state as your business and needs to have a physical address in the state not a PO box, and be contactable during regular business hours
The foreign qualification process means you need to register as a foreign entity for any other states where you want to perform business operations outside of your state of formation. If you are unsure you can learn more about when to register a business out-of-state. You will often need a Certificate of Good Standing when you are registering in other states and require the following items as part of your application for Certificate of Authority or Certificate of Registration.
- File application of Certificate of Registration or Certificate of Authority to foreign qualify your company.
- Pay a fee application.
- Include a copy of your company’s Certificate of Formation or Incorporation.
- Provide a Certificate of Good Standing or Certified Copy from the state of formation.
Certificate of Good Standing
This state-issued certificate shows that your company is authorized to conduct its business in that state and that you’ve met all their requirements. The Certificate of Good Standing shows that your company has:
- Made all its franchise tax payments
- Filed its annual report
- Made all its state fee payments
7. Get Federal and State Tax IDs
When you register your LLC or corporation an EIN will need to be obtained. An EIN is a unique nine-digit number assigned by the IRS to business entities operating in the United States.
You are required to have an EIN for the following purposes:
- To open a business bank account
- Apply for business licenses, permits, or business loans
- Hire employees
- Filing taxes
- Forming an LLC, partnership, or corporation
Once an EIN is issued by the IRS, it is permanent and does not expire. It stays for the life of the business until ownership or structure changes, or other exceptional circumstances. Applying for an EIN is free and should never ask for payment. Learn how to apply for an EIN.
8. Apply for Licenses and Permits
Your state and county websites will list the types of permits or licenses you need for your industry specific requirements.
Federal licenses and permits - If your business operates in areas regulated by a federal agency, you’ll need a federal permit or license. Check with your federal agency if your business requires this and how to apply.
State licenses and permits - The required business licenses depend on where you are and what your business does and the fees vary. Usually, states regulate more activities than the federal government.
Local licenses and permits - The local licenses and permits depend on where you are based and your business type. Businesses that are run from home usually need permission to perform these activities in a residential zone.
9. Open A Business Bank Account
The main reason why it’s recommended to open a business bank account is that it alleviates problems that are caused by mixing your business and personal finances. It is important to separate your business and personal bank accounts to keep financial records clean.
Overall, you’ll have a better way of managing budgets with a clear overview of your spending and expenses as you keep track of business expenses, simplify tax reporting, and protect your business.
Steps to Opening a Business Bank Account
Begin by finding the right bank for your business, then choose the type of account that best suits your needs. Make sure you investigate all the attached fees and costs.
You will be required to provide personal and business documentation such as Articles of Organization and EIN so make sure you have everything you need by calling the bank of choice. You can learn the 3 steps to opening a business bank account.
Lastly, you will need a physical address to open your business bank account. Due to stricter financial regulation some banks will allow a home address, but a PO Box is not permitted. You can learn more about how to get a physical address to open U.S. business bank accounts.
It is critical to be thorough throughout the process outlined in this 9 step guide on how to start a business. By ensuring that you are correctly setting up your business it will build a stronger foundation of success.
Put in the work to conduct your market research, write a strong business plan, obtain necessary funding, and in the selection of your business location and structure.
To register the business make sure you have all business documents as well as all the necessary licenses and permits for operations.
Lastly, don’t forget to open a business bank account for your financial success.
Do You Need a Business Address?
All our locations are commercial business addresses and not PO Boxes. With your commercial business address you’ll maintain your privacy and get a professional image plus much more.
Learn More About Related Topics
How to Write a Business Plan
Creating a business plan is essential to mapping out your competitors, pricing, product details, and financial goals. In this blog post, you’ll learn what information to include in your business plan and how to order the information you present. Read more.
How to File Your Articles of Organization
Articles of Organization are necessary to legalize your business and prevent any potential disputes between members regarding their rights, duties, and protection of personal assets. We will walk you through how to file your Articles of Organization. Learn more.