Roadmap for Starting a New Business
One of the most thrilling and rewarding experiences you can have is starting a successful business. Starting a new business requires a lot of planning and preparation. But how do you get started?
There are many different approaches to starting a business, each with requirements to take into account. Follow our advice on how to launch a business to reduce uncertainty and increase your chances of success. We’ll lead you through the steps of the process.
1. Develop your idea
With so many business types to choose from, most people who want to start a new business already have some idea of what type of business it will be, including whether it will be an online or brick and mortar business. If you already have a business idea or know what market or industry you want to go into, start by doing a search online for other businesses in that space to see if you can improve on what they are already doing.
Discover what kind of business you want to start
If you haven’t yet nailed down the kind of business you want to start, here are some questions to think through.
- How much money do you have?
- How much time can you devote to your company?
- Would you rather work at home, in a retail shop, in an office environment?
- What are you interested in or passionate about?
- Do you want to sell a product or do you have information you could sell?
- What are you experienced in or skilled at doing?
- How quickly do you want to scale the business?
- Do you have any support to help you start the business?
- Will you be doing this alone or will you have a partner?
- Have you thought about starting a franchise?
2. Do research on the market and your competitors
Market analysis is crucial for any business. The majority of business owners devote more time to deciding what products they want to sell than they do in studying and analyzing their competition. If you ever need to apply for a loan or other funding, you will be asked what makes your business unique from your competitors.
Also, you may discover that the competition is very great or the industry is saturated, so you may need to pivot some either with a different approach or by niching down. Maybe there isn’t even a market for your idea, in which case you may need to come up with another idea.
3. Specify who your target market will be
After you’ve researched the market and potential competition, you need to focus on detailing who your target audience or customer will be. This is critical because everything you do from here on should be done with your customer in mind.
Clarify your potential customer’s gender, age range, what their interests are, where they live, and why they will want to buy from you. If you don’t nail this down in the beginning, your business will flounder without a specific customer target because you don’t know who you are marketing to.
Conduct market research
Detailing your potential customer demographics may take some market research through the use of focus groups, polls, surveys, and public data research. Understanding your customers will enable you to provide services or products that will help differentiate your business from the competition and provide a unique value.
4. Decide on a business name
Some things to consider when choosing a business name:
- Make it simple and catchy, not too long
- Be sure you can buy a domain that is the same
- Check to see if any other business has trademarked or registered the name. If so, you will not able to use it. The United States Patent and Trademark Office (USPTO) has a list of trademarked or registered businesses.
If you already own a legal business entity and want to start a new business that is using a slightly different name, you may want to consider filing for a DBA (Doing Business As) with your state. With a DBA you can open a new bank account, get a business license, and use it as your trade name.
After the business name has been decided, go to the IRS website to apply for an EIN (Employer Identification Number), which will be the business federal tax ID.
5. Create a business plan
Even if you don’t plan to apply for a loan, having a good business plan in place is important for you to have an understanding of what you want your business to look like and where you want it to go.
The Small Business Association (SBA) has a tutorial on how to create a business plan. You can get free business plan templates online to fill out, or if you are going to need funding, you should pay to have one written professionally. A good business plan will include answers to the following questions:
- What is the purpose or goal of the business?
- What are the details of the products / services that you will offer?
- Who are your prospective customers?
- Will you be hiring employees?
- How will you fund the business in the beginning?
- Will you need investors or a business loan?
- What type of marketing are you planning to do?
- What is your end goal?
6. Plan for taxes
Planning for taxes is crucial when opening a new business. New business owners are responsible for several types of taxes besides just income tax. There will be sales taxes and reports, and depending on whether you have employees, there could be payroll, social security, and unemployment taxes to pay.
Choose Your Business Structure
How you structure your business as a legal entity will have an impact in many ways, including how much tax you’ll pay on profits, and how at risk your own assets will be. It is highly recommended to schedule a time with your tax accountant for advice on the best legal entity for your business. It can always be changed when the business grows.
There are four main types of legal structures:
Sole proprietor – Profits from a sole proprietorship are claimed on your personal income tax return. It can impact your credit score, your personal liability, and you will be responsible for all debts the business incurs.
Partners – Both partners are responsible for the business debts, and again, the profits are claimed on your personal income tax return. Partnerships can be good for having help with the business. However, a large percentage of partnerships do not end well. Be sure you are comfortable and know the person well you plan to go into business with if you choose this route.
Corporation – There are two types of corporations – S Corp and C Corp. Your accountant can go over the differences between the two and which one, if either, is best for you.
LLC – Limited Liability Company. These are the most common types of entity for a small business.
For more information on choosing the right structure for your business, check out the SBA’s website. You will need to decide which legal entity is best for you, depending on your goals for the future of the business.
7. Get a clear picture of your finances
There are always costs involved with a new business startup. Make a list of what costs will be needed to get the business started, and what will be needed to cover expenses until the business is turning a profit and can sustain itself.
Do you have enough to cover those costs or will you need outside funding? What if the business takes longer than you anticipate to become profitable? What if startup costs are higher than you budgeted for? Many new businesses fail because they underestimated the costs and they simply run out of money. It’s a good idea to budget for more than you think you will need, especially since it could take a long time to become profitable.
If you need outside money, the SBA has sources for funding your business. Having a clear financial plan for a new business is critical, and is best detailed with the help of an accountant.
Open a bank account for business
You will need a separate business bank account in the name of the business and a business credit card, in order to keep your personal and business finances separate. You will need the EIN you applied for to open the account. All income will go into this account, and all business expenses will be paid out of it.
8. Make a marketing plan
A marketing budget needs to be considered when listing the startup costs of the business. Most new business owners don’t think about marketing until the business is up and running and then they don’t have any extra money to add it to their budget. They have no plan for getting the new business in front of their potential customers. This in itself can spell doom for a new company, so be sure you have a plan for how you will market your new business right from the start.
Jeffrey Ressler owns a boutique, full-service accounting firm in Boca Raton, Florida that provides individualized financial services, expert tax preparation, tax planning for individuals and companies, and finding solutions to IRS problems.