In my last blog, I looked at the pros and cons of starting a business. While people often love the idea of opening a business, they also get bogged down in the actual nitty gritty of just how to do it.
It might help to know that no matter what type of business you decide to start, the essential steps are the same. Yes, different businesses will certainly have a slightly different path, but generally speaking, most businesses follow a formulaic path:
Step 1: Personal evaluation: You need to begin by taking stock of yourself and your situation in order to figure out which sort of business is best for you. Why do you want to start a business? Is it money, freedom, creativity, or some other reason? What do you bring to the table? What skills do you have? What industries do you know best? What do you like to do? How much capital do you have to risk? Will it be a full-time or a part-time venture? Will you have employees or not? The answer to these types of questions will help you narrow your focus and pick a business.
Step 2: Analyze the industry: Once you decide on a business that fits your goals and lifestyle, you will need to evaluate your idea. Who will buy your product or service? Who will be your competitors?
Step 3: Draft a business plan: If you will be seeking outside financing, a business plan is a necessity. But even if you are going to finance the venture yourself, a business plan will help you figure out how much money you will need to get started, what needs to get done when, and where you are headed.
Step 4: Make it legal. There are several ways to form your business – it could be a sole proprietorship, a partnership, or a corporation. Although incorporating can be expensive, it is usually well worth the money. A corporation becomes a separate legal entity that is legally responsible for the business. If something goes wrong, you cannot be held personally liable.
At this stage, you also need to get the proper business licenses and permits. Depending upon the business, there may be city, county or state regulations, permits and licenses to deal with. This would also be the time to check into any insurance you may need for the business and to find a good accountant.
Step 5: Get financed. Most small businesses begin with financing from bank loans, credit cards, personal loans, help from the family, and savings. As a rule of thumb, besides your start-up costs, you should also have at least six months worth of your family’s budget in the bank. (My new book, Get Your Business Funded, gives all sorts of ways to finance a business that you may not have thought of.)
Step 6: Set up shop: Find a location. Negotiate leases. Buy inventory. Get the phones installed. Hire staff. Set your prices. Throw a “Grand Opening” party.
Step 7: Trial and error: It will take awhile to figure out what works and what does not. Follow your business plan, but be open and creative. Advertise! Don’t be afraid to make a mistake.