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Think it’s finally time to get that idea off the ground or formalize your freelancing efforts? Starting your own business may be the right move for you, but there are a number of key factors to consider before diving into such a life-changing decision.
Small businesses drive a significant portion of the U.S. economy by generating over 65% of new jobs since 1995. A culture of entrepreneurship is trending as a more permanent part of the economic landscape. So, if you have an idea you think is worth monetizing, here are some steps to begin making your business a reality.
It is useful to begin with a business plan; even a quick one-pager that collapses all of your ideas into one place. This way you can collect your thoughts and prep your “elevator pitch” to potential customers, investors, and lenders. Business plans test the feasibility of your ideas and can help you secure funding when you need it.
As your business grows, a more thorough business plan (one that conveys insights like your business’ organizational structure and key performance indicators) could serve as a roadmap to keep you and your team on track to hit pre-determined milestones. Potential lenders and investors may request to view your business plan to help them measure the viability of your products and services, so it’s worth your time to create a solid document that has both short- and long-term implications.
It takes a great deal of passion to start a business, but it also takes money. Know your numbers – always. Create a business budget, examine your cash flow opportunities and challenges, and determine the minimum revenue amount your business needs to thrive. Set earnings goals up front and be realistic about potential, taking into account budget reserves if things do not go according to plan.
Keep your business’ cash flow separate from your personal checking and savings accounts. Not only will this make managing your finances easier at tax time, but it will also help streamline your expenses so you can have a clearer picture of your overall revenue streams.
A business’ legal entity or structure will vary based on factors including industry, location, and growth potential. Each has its own benefits, tax implications, fees, and shares of ownership, so be sure to carefully examine your options.
Here are some of the more common business legal entity options:
Once you’ve decided on the right legal entity, it’s time to officially register your business with the IRS. The level of detail needed by the government will depend on which state you are starting your business in and on the type of business legal entity you decide to use. Generally speaking, you’ll need the following:
As your business begins to grow, you may consider hiring employees to help scale that growth. Additional team members could help improve efficiencies and boost sales, but be sure you hire based on needs that are ongoing and not temporary. New and small business owners have unique challenges when working to attract and retain top talent, but they can also offer key incentives beyond base salary that are often out of reach of larger corporations. Perks like bringing pets to the office, working remotely, equity, volunteer opportunities, and greater access to creative strategy may differentiate small businesses from their corporate counterparts.
Easier said than done, growth and scale will likely take up the majority of your time as a business owner. Your business’ growth potential is directly tied to the goals you set at the onset of your company. Perhaps you simply want to maintain a business that delivers comparable profits year over year, or you have an exit strategy in mind that will guide you to sell your business for a pre-determined price at some pre-determined time. While unique for every company, growth is often a key factor of business activities and one that will naturally influence many of your day-to-day business challenges and opportunities.
Is running your own business a ton of work? You bet! But this is your opportunity to create something meaningful to you. While there are a few set rules of the entrepreneurial road, it’s mostly up to you to forge your own path forward.
Starting a small business is not a decision that should be taken lightly. There are countless steps that need to be taken in order to jumpstart your business, but being thoughtful upfront will help you succeed. Create a business plan, network, find mentors, and ask questions. The reality is most successful businesses continue to evolve over time. Business owners never really stop creating their business.
We are committed to helping your business reach its potential. Our dedicated business banking professionals can help you find the right product to meet your business’ needs. To learn more, please call 1-800-428-7463, visit us online, or visit your nearest Citizens Bank branch.
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