How to Start Your Company from Scratch
Do you have a great business idea? Now is a fantastic time to become an entrepreneur and join millions of others who are taking advantage of opportunities. But an idea will only get you so far – first you have to learn how to launch a company. In this article, you’ll learn the nuts and bolts of starting a company from scratch.
Research the Market
First, you need to make sure your business idea is a real opportunity. Look at other companies that offer something similar and see how successful they are. You need to find a way to make your business unique so it will stand out form the competition. You also need to determine who your target market will be. Who is most likely to buy what you’re offering and where will you be able to reach them? You should also research your industry forecast to see if it’s growing or in decline.
Determine Your Startup Costs
You need to determine exactly what you need to spend money on before you can start selling. You’ll have the cost of making your product or preparing to offer your service, and costs for things like business registration, insurance, and business licenses. You may also have equipment costs or supply costs, and software costs. Then you’ll have to spend some money on marketing. Create a spreadsheet listing all potential costs and estimate the cost for each item. Then you’ll know if you have enough funds, or if you need to apply for a business loan or seek other financing.
Project Your Sales
First, you’ll need to determine your prices. Research the market to see what competitor prices are. You also need to look at what your product costs to make and price your items high enough to make a reasonable profit. Then, examine how much you can reasonably expect to sell and how much revenue you can bring in on a monthly basis. Also, look at what your monthly costs will be. From this, you can determine how much you need to sell to break even and how much profit you will make at various sales levels. At this point, you’re trying to figure out if you can realistically have a sustainable company.
Come Up with a Business Name
Your business name is your identity, and the first impression people will have of your company so choose wisely. Once you have a name in mind, you’ll need to make sure it’s not already taken. You can do a business name search on your state’s website, and also search on the United States Patent and Trademark Office website. You should also see if the domain name that you want is available.
Write a Business Plan
Creating a business plan will help you to think through every aspect of running your business. The plan will include your startup costs and your sales projections as well as an operating plan and a sales and marketing plan. If you are going to apply for financing, your business plan will be a critical part of the application process, so it needs to be thorough and well written.
Choose Your Business Structure
You’ll need to determine whether you want to run your business as a sole proprietorship or partnership, or if you want to form a limited liability company (LLC) or corporation. An LLC is a popular business structure for startup companies because it offers personal liability protection, flexibility in terms of management, and pass-through taxation. This means that the company is not taxed – income passes through to the LLC owners who pay taxes on their share of the income on their personal tax returns. Once you’ve made a decision, go ahead and form your company with the state. Sole proprietorships do not require registration, and in most states, neither do partnerships.
Obtain an EIN
You’ll need to obtain an employer identification number (EIN) for your business if you are going to have employees or if your business has more than one owner. You can apply on the IRS website, and the process is simple and free.
Apply for Financing
At this stage, if you need financing to start your business, you’re ready to apply. Bank loans and SBA loans are often your best bet. You can also fund the business yourself or talk to family and friends about investing in the business or loaning you the funds. You also might try crowdfunding platforms. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Obtain Business Licenses and Permits
Depending on your type of business, you may need various business licenses and permits at the federal, state, or local levels. Check with your local governments for requirements.
Open a Business Bank Account
To open a business bank account, you’ll generally need your EIN to do so. You may also need a copy of your business formation documents. Having a business bank account is important so that you can keep your business and personal finances separate.
Obtain Business Insurance
There are various types of insurance that are important for you to have to protect you and your business. The most common types are:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
You may also need to insure your business property or equipment.
You can start with free marketing options such as social media posting. If you are selling to businesses, be sure to have a LinkedIn account and connect with as many people as possible. There are a host of paid marketing techniques you can use including social media ads, pay-per-click marketing on Google, and search engine optimization strategies.
Now you’re in business. You’ve gone through all the steps and laid the foundation, so hit the ground running and start selling your product or service. You’ve begun your entrepreneurial journey, so hopefully, the money will start rolling in. Good luck!