A lot of people have an idea for a small business in their back pocket, but it takes a special kind of person to take that idea, mold it into a realistic plan, and take action. If you’re the type to take action, make sure you take the right steps to make it happen! Below is a step-by-step breakdown on how to start a small business.
1. Evaluate your Vision.
Why do you want to start this business? What do you want to achieve? What skills do you have? So many people jump into research without giving this step any serious thought, but it’s an important one! Making sure you know your motivations will help you know how to define success.
For example, a person who wants to open a small art supply store just to get by might feel that they’ve succeeded as soon as they are turning a profit, while someone whose goal is a retail chain might set the bar at five stores. Knowing your own skill set will also help you decide how to match your goals with your skills.
2. Do your Market Research.
A well-known step, but for good reason! You will want to know exactly who your clients are, so that you can market directly to them when you’re ready. Getting feedback is a crucial part of this step, so you know where you can improve or adjust your products or services to suit the needs of the people they cater to. You will also want to make sure that there’s a general market for your business – you don’t want to start a business in a place where the market for your services is saturated! Market research will help you avoid this mistake and fine-tune your plan to help you turn a profit.
3. Set your Service/Product Price
Based on your market research, decide on what prices you’ll charge for services or products – if you’re offering a service, this usually comes in the form of an hourly fee, although keep in mind it’s also possible to charge by project or by project milestone. If it’s a product you’re selling, you can either decide on having a set markup from its wholesale/production cost price, or a standard price for the product which you can increase at intervals.
4. Check your Finances and Funding Possibilities
You might have the finances to invest in starting a small business yourself, or you may need to search for a loan from a bank or investor. If you need a loan, look at what different banks have to offer for small businesses, and talk to an investor if you have one in mind. Most banks will have online tools to help you writing a business plan and check if your plan is feasible, as well as to determine how much money you’ll need.
5. Write a Business Plan and Set a Budget
If your financing is coming from a bank or investor, you’ll need a formal, detailed business plan that explains your market research and projects your expected profits over the first year. You’ll need to be able to explain exactly how much money you need and exactly what you’ll use it for. Even if you’re financing your way, it’s a good idea to draw up a plan, even if it’s less formal. That way, you can be sure you’re putting your money to good use.
6. Establish your Legal Entity
Will you be a sole proprietor, or a private limited company? While sole proprietors have less reporting and administrative obligations, they also have more liability. As a sole proprietor, your liability extends to your personal property, whereas as a limited company, your liability is limited to what you’ve invested in the business. Do your research on the types of legal entities and what you’ll need to do to maintain them before you decide on one.
7. Create a Business Bank Account
In order to accept cheques addressed to your business, you’ll need a separate bank account under your business name. Even if you don’t plan on accepting cheques, it’s better to separate your business finances from your personal finances so you can more easily track business expenses and profits or losses. If you have a limited company, this is especially important as it will be a legal requirement of your business type.
8. Gather your Team
If you need a sales team or an office, take some time to think about what roles you’ll need to fill and what skills you’re looking for from your candidates. New employers can sometimes overlook the importance of soft skills, but these are particularly essential when the team you’re working with is small. Even if you don’t need to employ people, think about whether you’ll need to hire contractors at certain points. If you’ll need marketing, accounting, and inventory help, for example, you may decide that it’s better to space out their contracts, so you’re not bombarded with bills all at once.
9. Create a Marketing Strategy
Preparing market research and doing a business plan beforehand will make this step a lot easier. Now that you know your target market and pricing, you will likely need to decide on the specifics of your brand identity. How do you want your product to “feel” to make it appeal to your target audience? Will you need to create packaging, a social media plan, or a website – and if it’s all three, how will they fit together? Will you offer special sales, limited time offers, or other promotions at certain times of year? Take some time to think about what fits with your schedule and budget.
10. Get Ready for Tax Time
An often overlooked but important step in running a small business is knowing tax law and making sure you’re ready for it, to avoid hassle and fines down the road. Using accounting software like Billomat will help you track your income and expenses, and keeping track of sales is particularly important if you expect to turn a profit quickly, as you may need to charge VAT. Take some time to research tax law and make sure you’re keeping the records you need to keep now so you know where to find them later!
If you have the drive and ambition, watching your small business blossom can be an incredibly rewarding experience. Following these 10 steps of how to start a small business will help you make sure it does just that!