What to Know Before Building a Business
Starting your own business is a dream for many people. The promise of being your own boss and building profits for yourself are what drive us to give up a secure job and start out on our own. However, there are many things people wish they knew before starting their business.. The list of what to know before starting a business is not that long but every item is important. What to know before building a business is critical because twenty percent of small businesses fail within the first year, thirty percent within two years, and fifty percent within five years. Here are some other things to consider when starting a business.
How to Decide What Business to Start
What to know before building a business is of course deciding what business you should start in the first place. This is a critical decision to make. This decision is easier if you have worked in a business for years and want to start out on your own. Then you typically have the knowledge and skills needed. However, you still need to consider how services, merchandising, and manufacturing will fit into the picture. Another major part of doing business is gaining confidence. If you are really starting from scratch, this info may be helpful:
Service Businesses
In this case, you do things for people instead of making things. Food kiosks and restaurants fit into this picture as do transportation, spas, beauty salons, and computer programing services. There are also digital businesses, like media businesses, but these are facing difficult times.
Merchandising Businesses
This is the retail trade. You buy goods and then you sell them. Grocery stores and department stores fit into this niche but so do those who sell computer software online or sell technical products along with providing services or a beauty salon that sells hair products as well as doing perms.
Manufacturing Businesses
This is the business of making anything from cars and trucks to clothing and electronics. These businesses need a lot of money to start up and typically involve buying a commercial property for your business.
No matter which route you take, what to know when starting a business will depend in part on the specifics of the business you want to start and part of general principles.
Pick and Target Your Customer
A successful business needs paying customers. You need to sell enough goods or services at the right prices to people who you can convince to buy what you are selling. First, you need to know what people you are targeting and then you need to let them know that you are selling at a price that they will appreciate. Your advertising can be local or national, depending on what you are selling. But, you need to have a message that gets their attention and brings them to you. Your advertising and sales need to be focused on your ideal customer. Training your brain can help you to build a profitable business too.
Where Will You Set Up Your Business?
What to know before starting a business starts with where your customers will be and how you will interact with them. If you are selling groceries out of a store or making deliveries, you need to be in the community where your customers are. If you are selling things online, you can be anywhere in the country. Will you need to move a large amount of items into the new business? If so, you may want to consider looking into how much renting a moving truck will cost you beforehand.
What Sort of Business Entity Do You Need?
You can set up as a single proprietorship, a partnership, or a corporation. To know which one is best for you, you may wish to talk to a tax attorney. Each type of business entity has its advantages and its drawbacks.
How Much Money Do You Need and Where Will It Come From?
The capital requirements of a new business depend on the type of business. In this case, what to know before starting a business is how much money you need to borrow, how much you have, what kind of reserve you need to have and for how long before sales start coming in. You will need to think of insurance for your future employees as well. Most companies do not think of this before building their business. This one of the biggest mistakes people make with insurance planning. It should be thought of in advance.
Leases, Improvements and Renovations
When you are setting up your business, make sure to consider how much you will be paying to rent or lease, what costs of improvements you may need to consider, and how much it will take to furnish your new office. Advance rent and deposits for security may be as much as six months of rent. Make sure to add these figures to your costs. You can’t forget about renting a dumpster for renovations. Make sure you look into what you can throw away in a dumpster before throwing anything in there.
Check Out Your Suppliers
Merchandisers and manufacturers need to have a secure source of supplies and contracts covering costs. Reliability of service, operating hours, and location of your suppliers are all important in order to avoid down time.
What Will Your Operating Expenses Be?
You will want to figure out all of your routine expenses for the first six months and year of operations. Because you cannot rely on enough income to cover these expenses right away, you need to make sure that they are covered.
Outsourcing Versus Employees in House
Depending on the skills needed for your workforce, you may choose to outsource or hire to work on the premises. Cost comes into play with this decision and your need to have a reliable team that grows with your business. Taking a look at potential employees should include their resume and any other work history they may have. Will they be the right fit for your company? A good resume should include a list of references to reach out to previous employers or others who have know this person for a significant amount of time. This will help you decide if you should hire in house or have outsourced employees.
Registration and Government Compliance
Depending on your business, you and your workers may need to be registered with various agencies. There will also be compliance with government agencies staring with the IRS and filing your taxes but also other requirements based on your business. Make sure these are taken care of up front.
Set Up a Bank Account before Your Open the Doors
Ideally, you will want a bank account for your business that is separate from your personal account. You will also want a line of credit which may be easier to set up with your bank at the start instead of trying when you are in a cash crunch.
Marketing Your Business
Your marketing will depend to a degree on whether your customers are local or national, your services, and your products. What will always be true is that you need to make sure your customers know why you are the best option for what they need.
Financial Analysis and Accounting
Although we are listing it last, the first of what to consider when starting a business is a good bookkeeper or accountant. Too many small businesses only get excited about accounting when there are problems. The truth is that a competent accountant can help you set up systems to make your business efficient and more profitable from the very start.
