The First 5 Things to Do When You Want to Start a Business
If you try and start a company because you want a lot of money or because you are upset about getting laid off, you are setting yourself for a long, painful and expensive failure.
You have decided to start a business. Excited and terrified, right? On the one hand, you are embracing a dream, the sky is the limit. But on the other hand, you are taking a risk by joining the one tenth of one percent (Economist) and putting your own butt on the line. You’re going to sink in more money and time than you can even imagine and earn squat for who knows how long. Wouldn’t a cubicle job with a steady paycheck be easier?
But you aren’t searching for easy. You are searching for something else. You are looking to satisfy the itch down in your soul, that you won’t be happy until you have your name on the door, per se. So when you make the decision to start a business, here are the first 5-ish things you must do.
1) Answer for yourself why you are starting a business
Your purpose in life is not to make money. Your source of happiness is not to make money. Therefore, your inspiration for starting a business cannot be to make money. Gaining control of your life and schedule? Perhaps. Unlocking an income potential? Sure. If you try and start a company because you want a lot of money or because you are upset about getting laid off, you are setting yourself for a long, painful and expensive failure. I started a few companies like this. They crashed hard. In one case, I spent more time crunching numbers about the income potential than helping people. After 3 years of pushing and getting upset at everyone else for my own failures, I finally closed the doors after spending thousands of dollars and ended up with nothing to show for it.
Spend some time journalling and talking with friends and family about what they see are your passions. My recommendation is to pick up The Art of Work by Jeff Goins. It’s a great read and really helped me understand that my passions are writing and making small businesses successful. Also, you can read my article on how to be happy at work.
2) Figure out your passion and choose a business
Do you see a pattern here? Play to your passions! You will find that it makes work feel less forced. When I redesigned my vocation, and started this blog, I kept asking my wife, “Is this okay? It sounds great to me, but that’s because it’s significant to me. Will other people like it?” And guess what? A few months later, I’m writing all of the time and helping small business owners with this blog and my marketing company, Box 5 Promotions. It’s still surreal that this is my career. It doesn’t feel forced. It’s actually enjoyable.
Once you have done any or all of the things from “why” you are starting your business, you have your passions on paper. Now find correlations between them. Spend some time on Google, asking questions where the keywords are your passions. It may be amazing what you find. Once you have a few ideas for new careers, imagine yourself being a “blank”. Do you love baking enough to do it all day, most every day? Could you imagine yourself baking cakes and making families smile all the time? Great!
NOTE: This process might reveal to you that you don’t need to start a new business, but simply get a new job. Don’t reinvent the wheel if you don’t have the entrepreneurial passion. You will be miserable.
3) Research the industry, get to know your market well
You’re going to get familiar with Google (added bonus, the Bing Rewards has been pretty helpful when I have a lot of research to do.) Research what it takes to be your new chosen vocation. What does a normal day look like? How much “other stuff” is there, like accounting, paperwork, cleaning the store, etc. Figure out what your competition will be. Reach out to them and offer to get them a cup of coffee. They will most likely be excited that a new player is entering the field and will teach you a lot of things they learned when they were where you are now. If they are hostile toward you, forget about them and move on to the next person. Try and get a handle on the saturation in your market. If you are opening a pizza joint in a town of 30,000 people and there are already 15 places, that may not be the best plan. Consider your second choice career or even consider moving to a city with a better setup for you.
4) Develop a business plan, and don’t try to make it perfect
The second part of that instruction is hard, especially if you are particular about details like I am (my first business plan took nearly a month). This process should be exciting. Get a book on, or find templates for business plan development. Don’t worry, none of them will be spot on for you, but that’s okay. You can also try going to your local Small Business Development Center, but my experience with them has never been very good. I find their mentality not one that is designed around successful start-ups. The next thing about this is write down your business plan. Do not think that having a business plan in your head counts. It doesn’t. Do you want to see a failed business? It starts in your head and never makes it to paper. The real purpose of a business plan is to ask questions that you haven’t thought of yet and to expand your mental image of what the business will need. It is a massive shift from concept to game plan. It is also helpful if you are planning to bring other people in to your vision to get them on your page. There is nothing worse for a partnership than for a simple misunderstanding to destroy the entire joy of ownership.
4b) Set working hours
When you have finished your business plan and your industry research, set the hours which are going to be the most accommodating to your customers. Sometimes, this will be a crucial step (storefront businesses for example) and sometimes, it will only depend on your work schedule (like an online blog about small business success). This is important to do for two reasons. First, you want consistency for your customers to know when they will be able to get to you. If they are unsure, they will most likely choose someone else. The other big reason is illustrated in point five below.
4c) Incorporate if needed
Your business plan should show you if you need to incorporate. Sometimes you do in order to to protect yourself and your family. There are so many factors to determine whether or not you need to incorporate, but the first question I ask people who seek my council for a start-up is this: “How much liability do you have on the line?” The more liability you have, the greater the risk and the greater the need to offset the liability with an LLC or Corporation. Incorporating can easily be done with forms found on the IRS website. If you have questions about this, you can send me a message by the Contact Form on my website (www.smallbusinessliving.net) and I’ll try to help you.
5) Set a budget and income source
This is crucial. Do not take your savings account and assume that $10,000 will last you “long enough” to start making enough money to live. It will never work that way because as soon as you approach your new business with that mindset, you invite Murphy’s Law into your storefront. If you have a draining fund, there is a timer counting down. When the account hits zero, the business dies. The whole time you watch it drain, you treat your customers like subjects are keeping the fund floating. You don’t want that.
Set a budget, making educated guesses where you don’t have solid data (not knowing rent before you sign a lease, you can ask around to the average rent in the areas where you are looking to sign a lease). Once you have set a budget, create that income to come in to the business. If you can’t free up the income through your current job or severance package, then find out how to get that income. The easiest way is to get a part-time job or to projects on the side. Yes, it will slow down the time you want to put in to your new business. In doing this, though, you remove the fight or flight deadline for your business’s survival. You can keep doing it as long as you are enjoying yourself and working for your passion, not your paycheck. Spending one day a week mowing your neighbors lawns in order to spend the rest of the time growing your dream is a small sacrifice to make!
6) Open a bank account
Keep your business expenditures separated from your personal expenditures. The easiest way to do this is through a checking account at a different bank or credit union which is not connected to your personal accounts in any way. You don’t want to be late on your electric bill because you have to keep the lights on at your store. Also, pay yourself through your business checking account. It makes taxable income and business expenses (deductions and write-offs) easier to handle when April starts creeping around. When you go into the bank, you will need your EIN (Employee Identification Number) if you incorporated. If you are operating as a sole proprietorship, which is anyone who didn’t incorporate, then you will be opening a business checking account with your social security number and setting it up as a DBA (Doing Business As) account. It will have both your name and your business name printed on the checks.
If you are discouraged by this list, try to come back to the article in a few days and try again. Your dream can be real. You can do what you love doing and make a great income doing it. With these steps implemented, you will greatly reduce the risk of waking up in a year and wondering how the heck you ended up stuck in a pile of responsibilities that is breaking the bank and ruining your relationships. You are a success story, waiting to happen. I’ve been through many of those failures and you don’t have to repeat those mistakes.
Originally published at smallbusinessliving.net on April 20, 2015.