Starting a small business can be the key to living the life you want— as long as you take the right steps during the planning process. While your excitement and passion might compel you to jump in head first, it’s well worth the extra time during the planning stage.
Here are some key things to know before starting a small business.
Business Structure and Taxation Requirements
One of the first things to figure out is the right business structure for your new enterprise. There are pros and cons to each type of business. Choosing the right one for you will ultimately depend on the nature of your business, the level of personal separation you require, and your future vision.
The main business structures include:
- Sole proprietorship
- Limited Liability Corporation (LLC)
The structure you choose will also impact your taxation requirements. Take some time to review the nuances of each structure and the associated tax rules before making a decision.
Just because something sounds like a great idea to you doesn’t mean that everyone else feels the same. Finding out that your business idea isn’t viable hurts, but it’s better to do so before you invest lots of time and money.
Dedicate yourself to market research to identify the need for your offering. Conduct a simple SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to get a better look at the competitive market and your unique value. Reach out to groups you think would use your product or service to ask them what they think of the idea and if it has merit.
Financial planning is an integral part of the business development process. Before you start your business, create a financial plan that outlines everything you’ll need to be operational. Consider the various processes from ideation to fulfillment to customer service.
Once you understand what tools and resources you’ll need, you can start “window shopping” for options and pricing estimates. One of the big mistakes new business owners make is buying things they don’t need yet. Look at free resources, like a free fax app, free project management apps, and other accessible options.
Approach your financial planning with a scaling mindset. Buy what you need to get started, and spend more to grow as you start making money.
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Ideal Customer Demographic
Don’t make the mistake of entering the market without identifying a target market. Your hope might be to capture everyone’s attention and improve your ratio of qualified leads. However, the problem with this approach is that if your marketing is too generalized, it won’t appeal to anyone.
Develop an ideal customer avatar, outlining the person who is most likely to use your product or service to solve a problem in their life. Then, cater your branding and messaging to them. Chances are, you’ll still attract other customers, but it will be easier to nourish lasting relationships with your demographic.
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Before you jump into business ownership, take some time to answer the five W’s: Why are you doing this, who will it appeal to, what makes you different, where will your offering thrive, and when makes the most sense to launch?
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