What Does a Small Business Need to Start?
“There is no finish line. There are only mile markers.”
-Michael Ventura
This is really true when you are beginning the path toward building a small business.
Also you’re not alone – according to the Small Business Administration, there are nearly 31 million small businesses in the United States alone – which means there are roughly 31 million people out there just like you, working on starting a business!
What’s the definition of a Small Business?
Before we dive into the essentials of starting a small business, it’s important to understand what we mean by “small business.” The definition varies depending on the industry and location, but the Small Business Administration defines a small business as one with fewer than 500 employees.
Here’s maybe the biggest nugget in this entire article – I say this often and for good reason:
What people must understand is that “the goal of any business is to provide a product or service that is so compelling – that when your target customers see it, they decide they must buy it from you, so they can solve their perceived problem.”
Understanding What a Small Business Needs to Start – and How To Proceed
Starting a business is an exciting and fulfilling experience, but it’s not for everyone. It requires a lot of hard work, dedication, and resources.
People aften ask me: “How many hours per week should I have to dedicate to building/starting my new small business?” and the answer is sort of harsh: The answer is “As many as possible really.”
If you can’t find a way to work on your new business a minimum of 20 hours per week, I’m not sure it’s even worth starting. Optimally, 30-40 hours per week would be much better.
Where does one find the extra hours needed to begin a small business?
Something called “nights and weekends” is your answer. Start getting up a couple hours earlier, or going to bed a couple hours later. Those weekends are packed with family, chores, and friends, but carve out a couple hours or so each day on weekends. Now you’ve picked up an extra 20 hours hopefully.
With a little luck, you’ll start to see your progress and you’ll magically find additional time to work on the business because you’re so stoked on it.
Understanding what a small business needs to start can help you assess whether entrepreneurship is right for you and increase your chances of success.
By understanding the essential components of starting a small business, you can create a solid plan and take the necessary steps to turn your idea into a reality.
The high level steps you’ll need to take are these we will dig into the additional details and sub-steps in other articles on StartABusiness.Center site:
- Identifying your business idea
- Developing a business plan
- Understanding legal requirements
- Securing funding
- Creating a marketing and branding strategy
- Setting up operations
- Managing your business effectively.
What’s Next?
- In the next section, we’ll explore the importance of having a solid business idea and factors to consider when choosing a business idea.
Your Business Idea!
One of the most critical components of starting a small business is having a solid business idea. Your business idea should be something you’re passionate about and that solves a problem or fulfills a need in the market.
When choosing a business idea, it’s essential to consider the following factors:
- Market demand: Is there a demand for the product or service you’re offering?
- Competition: Who are your competitors, and what makes your product or service unique?
- Profitability: Can you make a profit from your business idea?
- Skills and expertise: Do you have the necessary skills and expertise to bring your business idea to life?
- Can this business idea meet your personal needs, financially and otherwise? If you want to make money, and it won’t help you make enough, then do you really have the right idea?
Business Plan: What they are good for, and what NOT to do with your business plan
Once you have a solid business idea, the next step is to develop a business plan. A business plan is a roadmap for your small business and outlines your goals, strategies, and how you’ll achieve them.
A business plan typically includes the following elements:
- Executive summary: A brief overview of your business plan.
- Company description: A description of your company, including its mission, vision, and values.
- Market analysis: A detailed analysis of the market, including competitors, customers, and industry trends.
- Products and services: A description of the products or services you’ll offer.
- Marketing and sales: Your marketing and sales strategies, including how you’ll reach your target audience and generate revenue.
- Financial projections: Your financial projections, including revenue, expenses, and profit and loss statements.
A business plan is essential for securing funding, attracting investors, and guiding your business’s growth and success.
What is a business plan good for?
A business plan is an excellent way for the founder to get in touch with all of the components that the business will need – and how it stacks up against the competition, what kind of financing will be needed, what sort of personnel or help will be needed, and what the forecast for profitability looks like just to mention a few things.
The business plan is normally the first time the founder actually puts down in writing what their actual plan is, what the business will do, how it will do it, etc to see exactly how feasible it really looks. The business starts to become REAL once you write it all down in this format. Until you have done so, the business is just a concept in the ether.
I strongly encourage all founders to complete a mid-sized 10-12 page business plan, if not a longer form 20-30 page plan. Doing so is enormously beneficial to your understanding of where you are and what will be coming.
What not to do with a business plan
A business plan should not be considered an immutable concrete plan that you must stick to.
It should be considered a flexible document that will lead the way as you go down the path toward building your business – but you need to understand that it is likely some parts of your original plan will shift and change so be open to those changes should they present themselves.
What’s Next?
- In the next section, we’ll explore the legal requirements for starting a small business.
Legal Requirements
Starting a small business requires compliance with a variety of legal requirements. Some of the most common legal requirements for small businesses include:
- Business structure: Choosing the right business structure is essential for tax and liability purposes. Common business structures include sole proprietorships, partnerships, LLCs, and corporations.
- Business license: Most states require businesses to obtain a business license before operating. The specific requirements for a business license vary by state and industry.
- Tax ID: Most small businesses need to obtain a tax ID number from the IRS for tax purposes.
- Permits: Depending on the nature of your business, you may need to obtain permits from local or state governments.
- Insurance: Depending on the nature of your business, you may need to obtain insurance to protect your business and employees.
It’s important to research the legal requirements for starting a small business in your state and industry to ensure compliance and avoid legal issues down the road.
Funding
Starting a small business requires capital to cover expenses such as equipment, supplies, and marketing. There are several funding options available to small businesses, including:
- Savings: Many small business owners use their personal savings to fund their businesses.
- Loans: Small business loans are available from banks, credit unions, and other lending institutions.
- Investors: Angel investors and venture capitalists provide funding in exchange for a share of the company’s equity.
- Crowdfunding: Crowdfunding platforms such as Kickstarter and Indiegogo allow businesses to raise funds from a large number of people.
It’s essential to consider the pros and cons of each funding option and choose the one that’s best for your business.
Location
The location of your small business can have a significant impact on its success. When choosing a location, consider factors such as:
- Foot traffic: Will your business be located in a high-traffic area?
- Accessibility: Is your business easily accessible by car, foot, or public transportation?
- Competition: How many similar businesses are in the area?
- Cost: How much will it cost to rent or buy a location in the area?
It’s important to choose a location that’s convenient for your customers and cost-effective for your business.
Branding and Marketing
Branding and marketing are critical components of a successful small business. Your brand is the way your business is perceived by your customers, while marketing is how you promote your products or services to your target audience.
When developing your branding and marketing strategies, consider the following factors:
- Target audience: Who is your ideal customer, and how can you reach them?
- Brand identity: What values and qualities do you want your brand to embody?
- Marketing channels: Which marketing channels, such as social media, email, or print ads, will be most effective for reaching your target audience?
- Budget: How much money can you allocate to branding and marketing?
By developing a strong brand and effective marketing strategies, you can attract and retain customers and grow your business.
Hiring and Managing Employees
If your small business requires employees, hiring and managing them effectively is essential for success. Some tips for hiring and managing employees include:
- Define job roles and responsibilities clearly: Before hiring employees, define their job roles and responsibilities to ensure that they know what’s expected of them.
- Recruit strategically: Use multiple recruitment channels, such as job boards and social media, to attract a diverse pool of candidates.
- Train employees effectively: Provide your employees with the training and resources they need to perform their jobs effectively.
- Communicate regularly: Regular communication with your employees can help build a positive work culture and address any issues before they become major problems.
- Set clear expectations: Set clear expectations for your employees regarding performance, behavior, and other job-related issues.
Effective hiring and employee management can help your business operate smoothly and achieve its goals.
Technology
Technology is an essential tool for small businesses, enabling them to automate tasks, manage data, and communicate with customers and employees. Some important technologies for small businesses include:
- Computers and software: Computers and software are essential for managing data, creating documents, and running software applications.
- Website and online presence: A website and online presence are critical for marketing and sales and can help you reach a wider audience.
- Communication tools: Email, messaging, and video conferencing tools can help you communicate with customers and employees more effectively.
- Productivity tools: Project management tools, time tracking software, and other productivity tools can help you manage your business more efficiently.
It’s important to invest in the right technology for your small business to increase productivity, reduce costs, and improve customer satisfaction.
Conclusion
Starting a small business requires careful planning, research, and execution. By considering the key factors outlined in this article, including legal requirements, funding, location, branding and marketing, employee management, and technology, you can increase your chances of success and achieve your business goals.
Remember that starting a business is a journey, and it’s essential to be flexible and adaptable as your business grows and evolves.