Do you have a great idea for starting your own business, but don’t know where to start?

If you talk to other Entrepreneurs’, they will tell you they started out the same way.  What’s important is knowing the steps in the right direction for a successful business.  Ideas are great and all, but if you don’t know what that idea will entail, well your idea might fade into the wind.

Starting your own business takes commitment and drive. You will be expected to wear many hats in order to get the business up and running, plus you will need some financial understanding of what it might cost to get started. If you’re willing to put in the effort, you’re going to need to know the steps to reach your goals. 

Steps Towards Your Goal 

  1. Shape your idea
  2. Write a business Plan
  3. Create a budget
  4. Determine your legal structure for your business & Register with State & IRS
  5. Determine how to keep your books and records
  6. Purchase an Insurance Policy
  7. Research your market
  8. Create an advertising campaign
  9. Choose your vendors
  10. Are you going Solo or Hiring?
  11. Grow your business
  1. Shape your idea.

So, you have an idea to start your own business. Now what? You should start by asking yourself “Is there a need for your idea?” Has it already been done? What will make people buy from you over your competition?  Take a lot of time to research online, or locally to see if anyone else has your idea. If so, what are their prices, what do they offer, what can you offer them over your competitors to drive in the clients? If you think your idea will hold up to the competition, then you probably have a solid idea and are ready for the next stage.

You must also make a note of why you want to create your own business. Is it money, to be your own boss, because your passionate about it or something else?

Understanding your own motivation is key to making sure you will follow through with your idea once you get started.  You don’t want to waste time and money unless you are willing to commit to going all the way. Ideas can be expensive as you will see later.

Please choose your company name wisely.  Your name tells the story of your business, it goes with you everywhere you go. Online, social media, search engines, letterhead, business cards, website domain names etc. Give it a lot of thought because changing it later could be very difficult.

  1. Writing a business plan.

Some may say “You don’t need a business plan, that is too much work and I started my own business without it” Here is the thing, you may not need a business plan if you are flush with cash and can do whatever you want. However, if you need a loan later, or help with your business, you will need a business plan.  But this is not the only reason for needing one… you can’t understand your business unless you really think about everything. Writing a business plan will help you understand the undertaking of your idea.  You will need to make some projections for the next couple years such as:

  • Income
  • Expenses
  • Marketing Plan
  • Pricing structure
  • Staff
  • Conducting market research
  • Services/Products offered
  • How you will get funding
  • Projected cash flow
  • Start-up costs
  • Goals

Some of your questions will be answered once you have it all out on paper.  There are many sources online to download a Business Plan example. A good place to start is the SBA (Small Business Administration) which has a lot of good advice and examples for starting a small business. – Here is the link https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan.

  1. Create a Budget

I’ll tell you from experience you will never think of all the expenses you will incur starting your own business. I am not trying to discourage you! Far from it, I absolutely love having my own business, even when I worked 50 hours and didn’t receive a paycheck, I still loved it.  I really do enjoy what I do for a living, it can be challenging at times, but I wouldn’t change it for the world.  But what I would have changed, was planning better from the beginning. I was so excited about starting my own business, I didn’t take the time to do my homework.

You must create a budget! This will help you understand what expenses you are going to have, how much money you will need to make it for at least one year before your business starts to be profitable.  Unless you come up with some genius plan on an idea that everyone will just have to buy, you are going to struggle in the beginning. That is why most people start their business out of their homes.  Even then, you still have extra costs.

Depending on the business, if you can purchase used furniture, equipment etc. to save money for the business. Don’t get crazy and run up your credit cards on things you don’t need to get started. (Remember I am speaking from experience here) Use what you have if you can, be honest when creating the budget.

Here is an example of some expenses to get started:

  • Creating a business structure (LLC, S-Corp, Corp etc..)
  • Insurance
  • Website/internet
  • Branding (Logo, letterhead, envelopes, business cards)
  • Advertising (Some you can do free – such as Facebook, Twitter, Craigslist, Facebook Groups, etc)
  • Computer
  • Furniture
  • Printer
  • Software
  • Products/materials
  • Postage
  • Taxes
  • Cell Phone/Office Phone
  • Space to work
  • Wages
  • Training/licensing/permits
  • Accounting/Legal

Being realistic and creating your budget, will help you better manage your finances and keep track.  You can create a monthly report to make sure you’re on track.

Here is an example of a business budget:

Experts say that most businesses fail within the first year because they run out of funding. Keeping track will help you have a successful start. Remember luxuries come after your successful. Only spend what is necessary in the beginning.  Budget Example for Business

  1. Determining your business structure.

When creating a new business, you must decide the business structure that will be right for your business. Your business legal entity effects everything from how you file taxes to your personal liability if something goes wrong. Here are some types of structures you can select from.

  • Sole Proprietorship
  • LLC
  • S-Corp
  • Corporation
  • Partnership

Sole Proprietorship is when you are a one-person owner of a business. You will be solely responsible for the debts and liabilities created within the business.  Your personal assets are at risk in a lawsuit should something happen. This also affects your personal credit. The Business is not distinguishable from its owner.

LLC is a Limited Liability company. This is a type of Corporation. (Corporations require an Articles of Incorporation document, which includes your business name, business purpose, corporate structure, stock details and other information about your company.) This option is where your personal assets are not at risk. You can still be a single owner – sole proprietor called “Single Member” or Disregarded Entity for tax purposes. This is a very popular option. If you have more than one member in an LLC, this is automatically categorized as a partnership with IRS unless you choose to be a “C” Corporation or S-Corp. Subject to self-employment tax.

S-Corp is a form of a Corporation that has shareholders. The profit or loss flows through to the shareholders.  S-Corp’s can only have one class of stock. You must have a board of directors and have annual meetings. You can still have only one shareholder and be a single owner. This is taxed at the Shareholders income tax rate. No self-employment taxes.

C-Corporation is taxed separately from its owners. It is taxed at the Corporation rate. This option is fully protected from personal risks. All debt is paid by the Corporation. However, distributions to stockholders are taxed as well. Some companies are required to select “Corporation” such as Insurance Companies, Banks etc. This is not recommended for small businesses as the taxes can be much higher than other options.

Partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. All general partners are personally liable for business debts and taxes.

Consider your options carefully, then contact your state to register your new business. Next contact IRS for a new EIN number. Even if you go the Sole Proprietor route, I still recommend you getting an EIN and keeping everything separate from your personal finances. That includes a business checking account. If you select one of the Corporation options, this keeps your personal liability at less risk and offers more protection.

If you are still unsure or don’t understand, it might be a good idea to seek help from a professional.

  1. Determine how to keep your books and records

Keeping accurate records is key to saving money and helps during an audit.  You must keep all receipts on an expense you claim for taxes.  There are several ways to keep track of your books.  If you are a small business, you can just keep a detailed spreadsheet along with a file with your receipts and bank statements.

You can purchase an over the counter bookkeeping software, such as Quicken, Simple Accounting, Bookkeeper and QuickBooks Desktop. You can do cloud accounting such as QuickBooks Online, Zoho, Zero, Wave plus, FreshBooks and Sage.

The key to keeping good books is to be organized. I recommend a monthly folder with your receipts and bank statement.  Always reconcile your bank account to ensure all transactions are accurate. Keep good track of your invoices to your clients along with payment records. If you use a vehicle in your business, you will want to keep a good record of your mileage, the purpose of the trip, date etc.

You will need to know the percentage of usage for your vehicle is business or personal.  You can take a deduction for the business expenses if you choose the expense method over mileage.

If you just don’t have the skills to do your own bookkeeping, you can hire an independent bookkeeper to come on site, or work from their office. The fees vary from bookkeeper to bookkeeper. Some charge by the hour, and some charge a monthly fee based on the amount of work you need done.

CMW Tax Services has many packages to suit your needs should you need an outside bookkeeper. We offer a free consultation.

With all good record keeping your must follow IRS guidelines on how long to maintain your business records. You can find that information in this publication https://www.irs.gov/pub/irs-pdf/p583.pdf.

  1. Insurance

Insurance is a necessity when you have a business.  You must protect your self and your business with insurance. Contact a reputable insurance agent and discuss what type of insurance you may need for your business. Some people try to skip this because of the expense, but if someone were to fall on your property it will cost you a whole lot more in the long run.

  1. Market Research

Once you decide what type of business to create, it is a very good idea to research the market. You can see who your competition is, what their rates are, and how their business is run.  It is a good idea to visit your competition to check things out for yourself, don’t worry they won’t bite. Ask them questions on how they like their work, if they encountered any problems creating their business, etc.

  1. Create an Advertising Campaign/Website

You will need to start with a logo, something that you will have during the life of your business. Something that tells a story about your business or makes it stand out. Create a brand and use it for all platforms of your business.  Your letterhead, envelopes, your social media pages, etc. Then you will need to think of a mission statement, and slogan to pull people to your business.  Try Stargate Design for your business website and business forms etc.

Creating a good website is key to certain types of business. This tells all about you and what you are selling.  This can be difficult if not done right. You must use a good SEO plugin. Your website is going to be a great investment if done right.

Then you can decide how to advertise. There are a variety of ways to start with minimal costs.  Depending on what kind of business you have. Here are some ideas to start with:

  • Facebook
  • Twitter
  • Google My Business
  • Bing
  • Yellow Pages
  • Craigslist
  • Groups on Facebook

This will help you get started in the right direction. Decide what you are selling and how to advertise your business. I write everything in MS Word to reuse things I wrote and keep track of what I post.

  1. Choose your Vendors

You need to research your vendors that will help you achieve a profit and make sure they can supply you with your needs. Get quotes and evaluate their prices.

  1. Growing your business

A business is only as good as what you put into it. If you don’t make an effort, it won’t be successful. If you work hard and put your heart and soul in it, it will be more successful. The market has a lot to do with success as well. If you create a business that no one needs, no matter how hard you work, it will not make it successful. In order to stay in business, you must keep getting new business. You can’t have all expenses and no income.

It is recommended to start a business with enough money to hold you over or at least six months. This will enable you to last should you not have enough sales in the beginning.

No plan is ever perfect, you will also have to evaluate your plan to see if it is successful and adjust as needed.