Starting a small business is a dream of many middle-class citizens: those who grew up in poverty, those who immigrated from another country and those with an entrepreneurial spirit. While small business ownership involves finding the right idea at the right time, it also involves a lot of hard work and investment. Unfortunately, not all of these investments in time and energy pay off, and many small businesses fail each year.
So what do we know about the small business industry? In 2013, small businesses employed more than 56 million people in the United States. Representing almost half of the domestic workforce, the majority of these businesses had under 100 total employees.
While this represents millions of people, the small business money moves at a slightly different pace than many are used to seeing in larger corporations. Self-employed, incorporated small business owners reported a median income of around $49,000 in 2014. For an industry that often has limited liquid cash, banks reported 5.2 million small business loans of under $100,000 each.
It’s clear that there is a lot of competition out there and that cash flow is a serious concern. Most small businesses will not make you instantly rich, but they can provide a stable and fulfilling career for you and your family. In order to start your small business venture as wisely as possible, here are some things to keep in mind.
You wouldn’t go take a final test without studying the subject, so why would you start a small business (a test in itself) without gathering information? Research is an important aspect of any business–small or large.
Work to understand your market. Who are your competitors, and what are they doing? What are the prices of their items? Restaurants need to know food costs, product sourcing and supply, as well as health codes and regulations. Retailers need to review pricing and find the right storefront. Perhaps online sales will work better for you, so where should you sell and what will your website look like?
And don’t forget such concerns as: hiring and paying staff, local laws, marketing budgets and, of course, insurance. Ask yourself what is important for your new small business, and then create a plan to put things into action.
Creating Your Small Business Plan
Once you’ve moved past the information and idea process, it’s time to put it all down on paper. (But don’t stop learning here; keep constantly looking for ideas and process improvements.) You can start with a handwritten list; then you will want to make a more formal plan.
Think of this as a resume for your business. You can find many different templates online, as well as helpful information explaining the ideas behind a traditional business plan. And just as with a resume, you’ll want to explain your story, describe your process and provide information on your background. Use a simple business plan for an initial startup, or go into more detail if you are looking for financing.
Financing Your Small Business
The easiest way to start a small business is to have the money in hand. Unfortunately, most people don’t have the funds to buy things outright. Bank loans are one option to help finance your business, and you can also sign leases instead of outright purchasing property and equipment.
Modern small business owners have additional options for financing help with online funding sites. Angel List specializes in funding startups, and there are multiple strategies to attract investors or market your idea to “angel investors.” Enlightenment Capital is a financing firm that provides investment capital with a payback solution based on sales.
Kickstarter is also a great solution for many, providing upfront product and service information to get your business idea funded by multiple small investments. Your specific business niche will dictate the best funding method for you.
Organize the Legal Aspects
You’ll also need to “dot the i’s and cross the t’s” on all your legal paperwork. Decide whether you wish to be the sole proprietor of your business or if you’d rather team up for a limited liability corporation (LLC). Decide on a legal name for your business, and register your brand and trademark.
Sign all your leases and contracts for your physical business presence. And don’t forget your licenses and permits–you can’t open without them. These details will vary slightly, depending on your location, so check with your city, county and state licensing boards to be sure you don’t miss anything important.
You’ll also need to organize the business management tasks. Develop a tax and payroll accounting system. Hiring employees also requires certain legal human resource steps and information. Your marketing budget may also require some legal knowledge, such as understanding liquor or tobacco regulations or privacy laws.
Opening the Doors and Operations
Once you have all the legwork done, you’ll be ready to get down to the basics of your business. It’s then time to set up shop and train your staff. Plan a grand opening, and showcase yourself to the community. This is where you can really shine–sharing your business idea with the world.
Small businesses must find a niche to serve and then produce the best and most unique service in that area. With a constantly changing market spurred by globalized technology, getting started is only the first step, so don’t stop learning, researching and adapting now.