You need to assess how much time (and money) you're willing to devote to your new venture. Will it be full-time, part-time, or seasonal? Additionally, consider if your business will require a brick-and-mortar location, or if it can all be done online.
Once you have these basic questions answered, you're ready to get started. You want to get it up and running quickly, but don't rush the process or you might skip a few critical steps.
2. Ask the experts.
The best way to understand what you're getting yourself into — and hopefully avoid common mistakes — is to do your own research and ask around. Read as much as you can about starting a business, but don't hesitate to ask your bank, the Federal Small Business Administration, and other small business owners for advice. You may also want to use an accountant for help with tax compliance and expenses, as well as basic business information.
3. Know your market.
Your business may not appeal to everyone. In fact, it might be very niche (e.g. an online store for new parents). It's not enough to know who your customers are; you should also familiarize yourself with their needs and shopping habits. This could involve contacting potential customers and asking for feedback on your products and prices.
On the other side of the spectrum, you should know who you're up against. Identify your competitors and learn what they offer, how they sell it, and how much they charge. Focus on their strengths and weaknesses so you can find ways to outperform them. (Just don't assume lower prices will be the best way to do that.)
4. Work out the costs.
Your business' location could be your biggest overhead cost, especially if you're eyeing prime real estate. There is one way to reduce the cost: Start it from home. If and when you need a physical space, be diligent about searching for one that is the right size and type — and always negotiate on price.
Work out the other costs, which could include equipment, furniture, and eventually wages. Keep in mind that it might be hard to get a loan or grant, so you may have to use your own money upfront.
Branding is, essentially, how your business looks and feels — from your logo and web presence to your signage and marketing collateral. It affects how customers view your business, so it's essential to make your branding clear, consistent, and engaging. In many cases, you may need to enlist a professional designer.
Your website is especially important since it is often where customers judge your business before buying anything. There are many DIY solutions available, but regardless of which one you choose, make sure your site is well-designed and easy-to-use.
6. Make a business plan.
Now you're ready to write your business plan, which should consist of the following: an executive summary, company overview, market description, competitive analysis, marketing strategy, operations plan, and your financials. In a nutshell, it's a roadmap for your business.
Fortunately, it doesn't have to be complicated or long. Sage Advice is a great resource that helps you make the plan and forecast your cash flow, and the Small Business Association offers a step-by-step tool.
7. Make it official.
It's time to register your business. You'll need an Employer Identification Number (EIN) — a federal tax number which identifies your business — if you have employees or plan to form a partnership, LLC, or corporation.
Then you'll need to register your business under a trade name (or your personal name), apply for a business license with your county or city, and complete a business personal property tax form if necessary. You should also check if other permits are required for your county or city.
8. Track your finances.
It's incredibly important that you stay on top of your finances from the get-go. First open a company bank account, preferably one that is separate from your personal account. By law, you're required to keep bookkeeping records for six years — so automated, built-in software is an ideal solution. Consider using Sage One's free online accounting software, which helps business owners quickly and easily manage their invoices and expenses.
9. Explore crowdfunding.
If you're looking beyond traditional funding (e.g. bank loans), you may want to look into crowdfunding. It's increasingly popular among new businesses; it's raised $5.1 billion over the past five years, according to Sage One.
There are two models of crowdfunding: peer-oriented donations (when someone makes a donation in hopes of receiving an incentive) and investment funding (where funders become owners or stakeholders in the company). Note that various crowdfunding sources will take a percentage based on the amount collected, and there are tax considerations as well.
Offer a menu of options at different price points, create a compelling story behind your idea (ideally incorporating a video), and use data to support your cause. Start with your own network and then branch out via social media. Just be sure to have a plan in place if your crowdfunding campaign succeeds.