Written by James Papajesk, EVP & Chief Credit Officer of 1st State Bank
Starting a small business can be stressful, but at the same time a rewarding venture. It requires careful planning, and, in this article, I will discuss some of the steps to help you navigate the process.
Step 1 – Define Your Business: Begin by cultivating business ideas. Brainstorm potential concepts starting with your passions, skills, and expertise. Consider market demand, competition, cost of entry, and the feasibility of turning your idea into a profitable endeavor.
Step 2 – Conduct Market Research: Before opening your business, research the market to validate its viability. Understand target customers, analyze competitors within the industry, and identify gaps in the market to find a niche that differentiates your business from others. This research will help further refine your idea and is a starting point for your business plan.
Step 3 – Create a Business Plan: A business plan will serve as your roadmap by outlining goals, strategies, target markets, and financial needs. Identify products and services, marketing strategies, and operational procedures. The business plan should include startup costs, operating expenses, and monthly cash flow projections. A well-developed business plan is essential to identify funding and guide the overall direction. It can also be presented to banks or investors to help obtain financing.
Step 4 – Set up Your Legal Structure: Consult with a lawyer to determine the legal structure that best fits your business. Examples include sole proprietorships, partnerships, corporations, or limited liability companies. Understand the legal obligations and future tax implications with each. Register your business name and obtain the necessary licenses and permits to ensure compliance with any local, state, or federal regulations.
Step 5 – Secure Funding: Evaluate your ability to fund start-up costs with your business, which will include personal savings. Sources of funds can involve friends and family, crowdfunding, investors, or bank loans. The more cash you can provide, the less partner equity or debt is required.
Step 6 – Set Up Your Business: Establish the infrastructure needed for your business. This includes procuring building space, equipment, or inventory. Determine which assets are leased or purchased. Engage an accountant to set up a system to ensure accurate financial reporting critical to the management of the business. For employees, establish control procedures on access to information and accounts.
Step 7 – Launch Your Business: Begin promoting your business and build brand awareness. Refine your operations based on market changes and demand. As your business grows, carefully consider expanding your product line, entering new markets, and optimizing processes to maximize efficiency and profitability. Keep in mind expansion requires additional working capital. Look to your accounting and banking partners to craft updated projections that support expansion, and any need for additional funding.
Starting a small business requires diligent planning and execution. Under 50% of new businesses survive more than five years. These steps will help with some of the initial challenges and set up your business for success. Continue to seek professional advice to help adapt to changes.