In the United States alone, there are over 10 million small businesses contributing to 99.7 percent of the total businesses. As we can see small businesses are everywhere and they play a crucial role in the country’s economy. It’s clear this could be a major motivating factor for you to start a small business right away.
There are many reasons why small business are started such as having an innovative business idea, flexibility to work as per own hours, better growth opportunities, financial independence, and passion for being an entrepreneur. However, not every small business is ranked for success. It’s reported that only two-thirds of businesses survive for not more than five years. So this could be a challenging task to become a business owner.
Hence, it is important to follow the necessary steps when starting your own small business and before ditching the day job. Taking one step at a time is the best way to go ahead with your business venture.
Here are the 4 primary steps one needs to follow when starting a small business.
- Conducting market research
You might have a solid business idea that you believe would rock the world. However, it reality it could be the opposite. Hence, it’s a good idea to do a reality check. Asking certain questions to yourself such as does the product or service has the potential to succeed, does it solve a problem, fulfill a need, or something that’s demanding the market. Doing some market research would be beneficial such as knowing the prospective customers, their needs, their existing preferences if any, competitors and revenue shares.
Planning is the second best step in starting a small business. Once you have done your research and have come to a positive conclusion out of your preliminary market research, the second step is formulating a business plan. In short, a blueprint of your business progress path. This should cover start-up phase, establishment, business growth and a stipulated deadline to measure the success and outcome.
- Financial Planning
Though starting a small business doesn’t need a huge amount of money, some initial investment on your part is always expected to cover the on-going expenses before actually making profits. Keeping a track in the spreadsheet of all the expenses incurred for one-time setup costs, licensing fees, branding, advertising, market research services, supplies and salaries should help in evaluating profits over a period of time. One can raise funds through small loans, angel investors or crowdfunding.
- Selecting the business structure
A small business could either be registered as a sole proprietorship, private limited or partnership, or as a limited liability company depending on the nature and size of the business. The business entity chosen affects many factors such as the business name, tax liability, filing income tax, etc. Picking the right business name would be important at this point. Taking help of a consultant would be a good idea, to begin with. You may begin small and then reevaluate the business structure as per the growth and needs.
Once the above preliminary steps are conducted, a small business can then further move forward with getting licenses and permits, deploying accounting systems, staff, and human resources, setting up office premises, getting the team hired, and promoting your small business to your customers.