“Make a business plan first” and other advice on starting a business.
The top priority for any entrepreneur starting a new business should be to develop a solid business plan. New business owners often worry about details such as getting a business license or negotiating a lease before they have figured out whether their new business can be profitable. Developing a business plan first forces you to think through your business idea, including its financial feasibility. Once your plan is in place, you can think about other things, such as ownership structure (LLC or corporation?), permits, and insurance.
Develop a Business Plan
For starters, decide what products or services you’re going to offer. Be as specific as possible. For example, if you’re going to open a bath and body shop, figure out what type of products you’ll
offer, how much inventory you’ll need, and how you’ll price your goods. Also think about your target customer, possible locations for your business, what type of marketing you’ll need, and how you’ll gain an edge on the competition.
Then do some financial projections. Estimate how much you’ll have to spend on your business (your overhead plus inventory costs, if any) and compare that to how much you think your business can
bring in over the same time period.
Take Care of the Details
After you complete your business plan and are comfortable that your new venture can be financially successful, you can turn your attention to the more bureaucratic tasks of starting a business.
Choose a legal structure
For starters, you’ll have to choose a legal structure for your business — sole proprietorship, partnership, limited liability company, or corporation — and take any necessary steps to form your entity, including choosing your business name.
Obtain the necessary tax documents and permits
All businesses must obtain a tax registration certificate (sometimes called a “business license”)
by registering with their local city or county tax collector’s office.
You may need other permits, such as:
• federal and state employer identification numbers (unless you’re
a sole proprietorship with no employees)
• a seller’s permit (if you are going to sell products),
which allows you to collect sales tax and also obligates you to
periodically remit those taxes to the state, and
• a specialized permit or license (depending on what type of business
you’re in), such as zoning or environmental or vocational.
Evaluate liability and purchase insurance
Before opening your doors, evaluate your liability exposure and determine your insurance needs.
Establish a bookkeeping system
Set up a reliable and easy-to-use system for tracking your business’s money. Establishing good bookkeeping habits from the start will make running your business infinitely easier; don’t let receipts pile up.
Consider Consulting Professionals
You should be able to handle these tasks mostly on your own, with the help of business books and online resources as needed. But even the most avid do-it-yourselfers will be well-served by consulting an accountant or other financial or tax professional at least once a year. This will help you keep your books organized, make sure you file your taxes on time, and avoid the fines and penalties that can result from mismanaged finances.
© 2009 Nolo