More than 620,000 businesses are launched every year. That’s despite the odds of survival being against each and every new business owner.
Only a quarter of those businesses will make it to 15 years. No one dreams of starting a business that’s doomed to fail. Yet, that’s what happens when small business owners don’t lay the groundwork for a business to thrive
Becoming a small business owner isn’t easy. You need to have the right skills, experience, and temperament to make it to the 15-year mark.
Are you ready to learn what it takes to build a successful small business?
Let’s get started!
What’s Your Vision for the Business?
You have to start with your business idea. At this stage, you’re probably full of excitement, inspiration, and creativity because you think you have an amazing idea.
This is your chance to get your vision onto paper. Don’t waste time. Instead, harness that inspiration now and use it as leverage.
You’ll want to write down your idea, potential ways to make money from your idea, and ideas as to how you’ll manage the business. Be sure to include your long-term vision for the business.
Do you see yourself selling the business down the road or will you run it for years to come? What will your life look like when the business is successful? What will your day look like?
These are all things that you want to do because the initial idea and your vision for the business are powerful reminders. These are the things that you want to carry with you when the business gets hard (and it will at some point).
Write Your Business Plan
The business plan is the formal document that you’ll use as a guidebook as you start your business up. You’ll have to research your idea and validate that it can become a profitable business.
You’ll do research on who your target market is, the market and industry conditions, risks of opening the business, and the competition.
The most important part of a business plan is the financial part. You need to create detailed spreadsheets that go over your startup costs, monthly operations costs, and your sales projections.
When you create these spreadsheets, you should have two versions, especially for your sales projections. Small business owners are incredibly optimistic, and your financial projections will reflect that.
You should have very conservative estimates along with your optimistic projections. This will help you navigate the worst-case scenario as you begin your business.
The Mindset of Becoming a Small Business Owner
One of the most important factors in successful business owners is the mindset. You’ll see that there are plenty of other people that don’t have your skills or talent, yet they’re hugely successful. That’s because they have an entrepreneurial mindset.
You need to assess your mindset before you move forward in your business. This is the time to assess your strengths, your weaknesses, and your own opportunities to improve.
For example, you may know that you are great at managing finances, but weak a following up with customers. You can either delegate follow-up to someone or put a system in place to make customer follow-up easier.
Another important part of your mindset is your attitude and emotions when things get rocky. Mistakes will happen, things will break down, and your attitude will largely determine your response.
Will you break down and see these things as a failure? Will you see them as an opportunity to learn? By seeing these challenges as an opportunity to learn, you set yourself up to correct the mistake, learn from it, and move on.
The Steps to Start Your Business
Once you’re certain that you have the right mindset and commitment to start your business, you can take the necessary steps to make it official.
You can start to do that by getting a team of advisors together. These can be professionals that you hire to take care of certain things, such as accounting and business law. The team can also include people that you trust to give you constructive feedback.
You can run ideas by them, show them your business plan, and get feedback as to how you can improve it. Having professionals on your side will help you have your business set up properly from a tax and legal perspective.
Decide Your Legal Structure
One of the biggest decisions you’ll make early on is starting your business is your legal structure. You’re likely to start your business as a sole-proprietorship or an LLC. You can also start off as a C-Corp, but that’s usually for businesses that will bring on shareholders and investors.
Starting off as an LLC is a little more expensive than as a sole proprietorship. However, you’ll have more legal protections as an LLC. It will also be much easier to open up a business bank account to keep your business and personal finances separate.
Before you make a decision, you should ask a business attorney and accountant to go over the pros and cons of each option.
As soon as you decide your legal structure, you’ll need to come up with a name for the business and get is registered with your secretary of state’s office or business division.
If you plan to open a physical location, you need to have a great location. It needs to be close to your target market, have plenty of parking, and be well within your budget.
For businesses that plan to be online only, you may need to think about storage needs for inventory and other items. You may decide that you want to rent a co-working space for your business.
Some businesses may require a lot of financing to get started. For example, a restaurant will need thousands of dollars worth of equipment. The location will need some remodeling as well.
You may have enough saved up to start the business on your own, or you may need to look at external sources of financing. There are plenty of resources available.
Your local bank may be able to lend money to you to start the business. Check with your local economic council, too. There may be grants available to entrepreneurs who start businesses in up and coming locations.
Today’s world in completely unpredictable. You don’t know when the next wildfire, natural disaster, or pandemic will strike. The only way to be prepared to meet a high level of uncertainty is to be insured.
Many businesses find themselves underinsured because they assume that all they need is general liability coverage. That only covers so much.
You need to find affordable insurance for businesses that offers plenty of options. Your business may need auto insurance, cyber liability insurance, and worker’s compensation insurance.
Manage Your Finances
Thousands of businesses have had to close permanently over the last few months due to COVID-19. Many simply didn’t have enough cash on hand in order to survive beyond a few weeks.
You can avoid such a fate for your business by managing your finances right from the start. You should make it a practice to set aside a certain percentage of income for an emergency fund. You want to have at least 6 months of expenses set aside, including salaries.
You should also practice setting aside money for taxes. You need to pay quarterly estimated taxes and payroll taxes if you have employees. Failure to pay taxes on time will result in tax penalties and fines.
Create a Culture of Balance
As you bring employees on board with your business, you have the opportunity to create a working culture.
There is a myth among entrepreneurs that you have to work 16-18 hours a day in order to be successful. They expect their employees to do the same. That will only create a culture of fear and chaos.
It will also create a high amount of turnover in your business. Instead, make sure that you and your employees have a culture that emphasizes a work-life balance.
You also want to create a culture that is professional and fun. That will help you retain your employees, even if you can’t afford the best benefits package.
Become an Amazing Small Business Owner
Becoming a small business owner is actually simple. You can start with an idea and run with it. That will increase your chances to create a business that fails because you didn’t plan the business out.
That’s a huge mistake that too many people take. It’s important to validate your idea, find the right partners and advisors, and have a roadmap to create a successful business.
This guide gives you the steps that you need to take to create a business that will be built with a solid foundation. Taking each step listed here will empower you and give you the confidence to take a few more risks in your business.
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