Do you have a great business idea but don’t know how to turn it into reality? Want to become your own boss at your own business? If you want are interested in starting a business but don’t know how to do it, don’t worry! The Jefferson County Chamber of Commerce is here to help. We’ve put together a guide you can follow to help you start your own business. Here are the first 5 of 10 steps to get you on your way to owning a business startup.
Steps to Starting a Business
- Figure Out Your Idea
If you’re wanting to start a business, you probably already have a good idea in mind of what you want to sell or which market you want to enter. Before you begin the process of starting a business, research existing companies in the industry you’ve chosen. Find out what the current brand leaders are doing and how you can do it better. Do you think your business can do something others don’t, or can you do the same thing but cheaper or faster? If so, you likely have a great business idea in mind.
The next thing you need to do is start asking “why?” Make sure you define why you are starting your business. It’s best if your why is focused on meeting a need in the marketplace instead of meeting a personal need, as that means the scope of your business will be much larger.
Another option when starting a business is opening a franchise of an established company instead of a brand-new startup. With a franchise, the concept, brand following, and business model are all already set for you, which means all you need is a location and funds.
Regardless of which option you choose, you will also need to clarify your target customers. Who will your customers be, and why would they want to buy your products or services? These answers will help you define your mission and provide insight into the value you will provide for your customers.
Make sure you have all these details figured out before you start writing a business plan or brainstorming a business name. You need to first determine if your idea has value and will be worth becoming a business venture.
- Put Together a Business Plan
Now that you have your idea figured out, you need to answer a few more questions. What is the purpose of your business? Who will you be selling to? What are your end goals? How will you finance the startup? All these answers should be compiled into a well-written business plan. Answering these questions ahead of time will help you avoid rushing into a startup without considering all the important details.
To define your target customer base, you need to conduct market research on your industry and the demographics of potential customers. You can do this through surveys, focus groups, SEO research, and public data. This will help you understand your target customer’s needs, preferences, and behavior, as well as the industry and who your competitors are. The best small businesses sell products and services that are differentiated from the competition because this allows them to convey unique value to customers.
Your business plan should also include an exit strategy. Coming up with an idea of how you will eventually exit the business forces you to have a future-focused perspective. New business owners should have three or four predetermined exit routes so they can leave the business in the future if they decide to.
Once you have all of these details ironed out, put pen to paper and write a business plan. This business plan will help you figure out where your company is going, how it will overcome potential challenges, and what you will need to keep it going.
- Assess Your Finances
You’ve likely heard the saying, “You have to spend money to make money.” Any business startup has a price, so you need to figure out how you will cover those costs. Do you already have a means of funding your startup? Will you need to borrow money? Many startups fail because they run out of money before they can turn a profit. That’s why it’s important to figure out how much your startup costs will be.
One way you can do this is by performing a break-even analysis. This analysis helps you determine when your business, product, or service will become profitable. The formula is:
Fixed Costs ÷ (Average Price – Variable Costs) = Break-Even Point
You should use this formula to find out the minimum performance your business must achieve to not lose money. It also lets you know exactly where your profits come from so that you can set reasonable production goals. This formula helps you: determine profitability, price a product or service, and analyze the data.
When starting a business, it’s always important to watch your expenses so you don’t overspend. A lot of new business owners tend to spend money on things they don’t need, so make sure you spend only on things that are essential for your business to grow and succeed. Luxuries will come once you’re established.
As you consider your startup finances, you’ll need to decide on a bank and how you will raise startup capital. When choosing a bank, we recommend a smaller community bank that is in tune with your local market conditions and will build a personal relationship with you. To raise funds to add to your bank account, you can use:
- Business loans
- Business grants
- Choose a Legal Business Structure
Before you can register your business, you need to decide on the type of entity you want it to be. The business structure will affect everything from filing your taxes to personal liability. Business structure options are:
- Sole proprietorship – If you want to own the business entirely by yourself and be responsible for all debts and obligations, you can register your business as a sole proprietorship. Be aware, though, that this can directly affect your personal credit.
- Partnership – A partnership means two or more owners are held personally liable for the business. If you can find a business partner with complementary skills, it can be a good idea to add them to the mix to help your business succeed.
- Corporation – Forming a corporation separates your company’s liability from your personal liability. There are a several types of corporations, and each is subject to different guidelines. A corporation is a separate entity from its owners and is able to own property, assume liability, enter contracts, pay taxes, and take legal action.
- Limited liability company – A limited liability company, or LLC, is one of the most common business structures for small businesses. This is a hybrid structure that provides the legal protections of a corporation with the tax benefits of a partnership.
- Register the Business
Before you can legally start operating, you must register your business with federal, state, and local governments and acquire the necessary business licenses. You’ll need the following:
- Articles of Incorporation & Operating Agreements – A corporation needs an articles of incorporation document that includes the business name, purpose, structure, stock details, and other information about the business. LLCs often need to create an operating agreement.
- Doing Business As (DBA) – Most states require a DBA to register your business name. This can be your legal name, a fictitious DBA name (if you’re a sole proprietor), or the name you’ve given your company. You may decide to trademark your business name for additional legal protection.
- Employer Identification Number (EIN) – You may need to get an EIN from the IRS after you register your business. This isn’t required for sole proprietorships with no employees, but you may decide to apply for one anyways so you can keep your personal and business taxes separate. You can use this checklist from the IRS to determine if you need an EIN.
- Income Tax Forms – You’ll need to file certain forms to meet your state and federal income tax obligations. Your business structure determines the forms you will need. Check state and local tax obligations for more information.
- Federal, State, and Local Licenses & Permits – Some business must have federal, state, and/or local licenses and permits to operate. You can obtain a business license at your local city hall and/or the county courthouse. For businesses formed in the state of Tennessee, you can find state registration information here.
Join the Jefferson County Chamber of Commerce for More Small Business Resources
Use this guide to help you navigate the uncertainties of starting a business, and stay tuned for steps 6-10 coming soon! If you need some more help with your new startup, join the Jefferson County Chamber of Commerce to receive additional small business resources. We will provide you with information, networking opportunities, advertising options, and other chances to learn and grow your small business. Become a member of the Jefferson County Chamber of Commerce today to start building connections in the community and to gain access to helpful small business resources. You can fill out the membership application, or give us a call at 865-397-9642 if you have any questions about what it means to be a chamber member.