8 Things to Do Before Starting a Business

You’ve come up with a fantastic idea for a new business. You’ve thought about it extensively, talked it over with some friends, and now you’re ready to turn your dream into a reality. The only problem is…where do you begin?

Starting a new business can be an overwhelming process whether you’re a first-time business owner or an experienced entrepreneur. There are many steps involved and hundreds of decisions to be made. It can be hard to keep track of everything that needs to get done. To help you on your way, here’s a list of things to get done before you start your business.

1. TAKE CARE OF THE BASICS

Business Plan

Perhaps one of the best things you can do to help yourself when you first go about setting up a new business is to develop a business plan. You want to have a clear idea of where you are going and how you are going to get there, and going through the process of creating a business plan will force you to think through all the little details you may otherwise overlook.

Breakeven Analysis

You’ll also want to know from the get-go whether your idea is going to be able to make you any money. A breakeven analysis will help you determine how long it will take before you’ll be able to turn a profit. Make sure that you understand the realities of running your business “in the red”: can you really wait 2-3 years for a profit?

Funding Sources

Chances are that you aren’t going to be able to completely fund your business venture alone. So, where is the capital you need going to be coming from? A bank? An investor? Family? Make sure that you know how much you are going to need and where you are going to be getting it from.

Marketing Plan

How are you going to attract customers to your new business and make them aware of your presence? What’s special and unique about what you will be offering, and to whom will you be offering it? Know your audience and how you’re going to turn them into customers.

Exit Strategy

It may seem strange to think about how you are going to leave your business when you’re only just beginning to think about starting it, but your exit strategy may influence how you build your business. Is this business going to be a short-term venture, or are you planning on passing it down to your children? You’ll want to make this transition as smooth as possible when it comes, so make sure that you are setting up your business in a way that will legally allow for this.

2. COME UP WITH A NAME

Figuring out your business’ name is a more involved process than just drawing up a list and choosing your favorite; you’ll want a name that is easy to remember but unique enough to find online. If potential customers run a web search for your name, are they going to find a dozen other businesses, or are they going to find your new business? Check with your county clerk or secretary of state to see if someone in your area already has a business with your name. Also, run a trademark search online to see if your name is untaken, and check whether your domain’s name will be available for your website.

3. DO YOUR DUE DILIGENCE

How is your business going to be taxed? How many owners will there be? What will the ownership structure be? Are you going to need professional liability insurance, workman’s comp, product liability insurance, or commercial property insurance? Are you going to need a federal employment identification number or a seller’s permit for retail goods? What about local permits and business licenses? Healthcare for your employees? How much do you need to charge in sales tax? These are the types of questions you’ll want to have the answers to before you open your front doors. After all, neglecting taxes, regulations, or mandatory licenses can land your brand new business in a lot of trouble. Remember that you don’t need to do this all alone (and probably shouldn’t!): consult a lawyer, accountant, insurance agent, or fellow entrepreneur.

4. OPEN A BUSINESS BANK ACCOUNT

You may be surprised at the kinds of deals you can get when setting up a business bank account. Be sure to shop around and look at more than just your local bank. Think carefully about what you’ll potentially need from your new bank. Maybe having mobile check deposit is going to be crucial for your business, or maybe you need to have an unlimited number of monthly transactions. Also, remember that you’ll likely need some type of credit/debit card processing equipment or a system like Square.

5. FIGURE OUT THE COST

There’s no way around it; opening up a new business is going to be expensive. Now is the time to sit down and really think about your budget. How much will you be spending per month on your own rent/mortgages, health insurance, and bills? Be realistic about what you will and won’t be able to sacrifice, and leave room for some flexibility. You don’t want to fall behind on your personal expenses while also trying to keep your new business afloat.

Your new business is likely going to take a toll on your personal life as well. Most new business owners work 60-80 hours a week for the first two years of owning their own business. If you have big events coming up in your life (the birth of a baby or a wedding to plan, for example), you may want to wait for things to settle down before starting in on your business as well.

6. DETERMINE YOUR ROLE

As we mentioned before, it’s generally not recommended to attempt to open a new business completely on your own. You may be passionate about baking cakes or selling t-shirts, but how passionate are you about accounting, dealing with legal issues, and handling the daily hassles? Whether it’s hiring employees, bringing on a consultant, or getting an accountant, you’ll probably need the help of other people. It may be tempting to believe that you’ll be able to do this alone and save yourself some money, but errors in your bookkeeping, a failure to obtain proper licenses, or even just being grumpy and impatient with customers because you are so stressed can potentially end up costing you a lot more!

7. SET UP YOUR ROUTE TO MARKET

How are you going to be getting your goods or services to your customers? Will you have a storefront, or will you sell primarily through Etsy or eBay? If you’re looking to have a physical location, make sure that you understand the neighborhood that you’re moving into and your potential competition. Are the customers that you want to attract in that area? Also consider how much rent you’ll realistically be able to afford and whether the property you’re interested in is properly zoned for your type of business and hours.

8. STAY INSPIRED

Feeling overwhelmed by all that needs to get done? Wondering whether it’s really worth it? Sometimes all that it takes to get re-inspired is to talk to your support group—your family, friends, etc. Taking a step back from the little details and reminding yourself of the big picture and the end game is important to do throughout the process. Remember that all these little annoyances you’re dealing with now are going to help build your business to be even better.

Still feeling down? Read about Michael Dell (started Dell Inc. out of his condo), Sam Walton (opened his first store with $5,000 of his savings and a $20,000 loan from his father; went on to found Walmart), Sara Blakely (began developing Spanx with $5,000 of her own savings, testing her prototypes on her mother and friends), or any of the other scores of individuals who started small and went on to be the owners of enormously successful companies. It is possible. Who’s to say that you aren’t next?

Opening a small business isn’t going to be easy, and it isn’t going to be simple, but it’s important to remember that hundreds of thousands of people do it every year. Stay organized, and break the process down into small steps. Realize that this is not something that is going to happen overnight, and tackle one thing at a time. It may be a challenge, but that will just make the reward even sweeter.