9 Essential Steps for Starting a Business

Grand Lake Host January 31, 2020 0 Comments
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With so many factors to consider, the leap to starting your own business can feel huge, and the commitment of time and money especially daunting. Moving from ideation to operation takes mental and logistical fortitude, and the journey is often laced with uncertainty.

For this reason, understanding exactly what’s expected before you begin can help prepare you for any surprises or challenges along the way. This guide to starting a business in the U.S. is a comprehensive playbook for launching your business and moving toward profitability.

 

How to start a business

According to recent research, around 10 percent of the U.S. working population is self-employed, and the workers they hire account for another 20 percent of the national workforce. This shows not only the importance of entrepreneurship in the American economy, but also the potential for success in starting something of your own.

With this in mind, here are nine steps you must take to start your small business. We will also cover everything from sorting your finances to registering a name, giving you the best possible chance of success.

Market research helps you determine if your business idea is feasible, and it can be either primary research (information gathered firsthand) or secondary research (research from data, public records, trend reports, or industry information).

 

1. Research the market

The first step in market research is identifying your target demographic. To do this, it’s beneficial to create fictional buyer personas of the customers your product or service will benefit. These personas should be rough estimations of age, gender, income, location, and the challenges your product or service will address. In many cases, there will be multiple personas that fit your product or service, and identifying these “people” will help you tailor your product and marketing strategy to the right audience.

Starting a Business - Drafting Initial Ideas

The aim is to complete these personas using a combination of both primary and secondary research. It’s a good idea to interview or survey people who fit your rough personas, asking questions about their careers, incomes, family life, everyday experiences, obstacles, buying behaviors, and more. Most importantly, make sure you understand their decision-making process when it comes to your product or service, and their perception of your main competitors.

Secondary research should also help with this, with government sites providing data on population, income, age, and social trends according to location. In full, this research should show you the markets in which your business will be successful, and the people to whom you should tailor your marketing and roll-out plan.

Regardless of what resources you tap for your research, make sure you’re honest about how the data informs your product. It can be easy to fall into the trap of ignoring inconvenient data that doesn’t align with your original goals, but you can alternatively use this as an opportunity to strengthen your business strategy.

 

2. Write a business plan

There are two common reasons for writing a business plan. The first is to provide a road map for your internal team: creating a document that describes the nature of your business, your finances, initial strategy, and future planning. The other is targeting investors: writing a polished description of your vision that includes exact numbers and realistic projections with the aim of securing investment.

No matter its purpose, a business plan should include the following information.

 

Summary

An executive summary explaining the “why”—why are you starting this business? What problems are you looking to solve? Why are you passionate about this project?

 

Profile

A company profile including the history of your business, your product or service, target market, and future vision.

 

Finances

Documentation of expenses, cash flow, and industry financials.

 

Marketing

A strategic marketing plan, outlining who you’re speaking to and the ways you’ll reach that audience.

 

Organization

The organization of your company, including the legal structure and team hierarchy. This should be specific—include the CVs of employees, if needed—and show how your business is built to scale.

 

Funding request

If you are requesting finances, you should include a funding request specifying what funding you need and where that funding will go.

Starting a Business - Figuring Out Finances

3. Figure out finances

One of the most pertinent obstacles to starting a new business is securing financing and enough capital to get your vision off the ground. There are several ways to do this, including using your own savings, applying for a small business loan, asking family for help, or dipping into credit lines. Pitching investors can be a surprising and invaluable confidence booster.

Here’s a brief rundown of your options as an entrepreneur looking for financing.

 

Use your savings

Probably the safest way to start a business, using your savings comes without risk to your credit rating or the accrual of interest fees. The time it takes to save enough money, however, might restrict your momentum and slow your strategy.

 

Apply for a business loan

Several big banks have funds solely dedicated to small business lending, and these loans can help you address the initial overhead costs and pave the way to profitability. In applying for a business loan, be prepared to share meticulous detail around your finances (both personal and business-related), your business plan, and any business partners. Typically, applying for a loan takes around three months. Defaulting on a loan might affect your ability to borrow in the future, so it’s best to borrow within your means.

 

Use a credit card

Using a credit card carries relatively high risk compared to other modes of lending, because if you fall behind on credit card payments, you’re creating a hole that’s difficult to escape. Additionally, failing to make payments each month will negatively affect your credit score and potentially restrict future access to other lines of credit. There are positives, however, in using a credit card, including racking up points that can be used for travel and expenses, and being able to react quickly to unexpected expenses. If you are successful in paying off your credit card loans, whether they are personal or business credit cards, this also improves your credit history and score for either respectively. This can lead to increased lines of credit or applying for new cards with lower interest rates and also larger lines of credit.

 

Seek investment

As a startup seeking investment, it’s best to pitch angel investors—individuals with funds and an interest in your project—as opposed to larger venture capital investment firms. Angel investors provide capital in exchange for equity or future returns, and there are lists of individuals or ‘angel groups’ in most U.S. cities. Family can also become angel investors and sometimes they won’t even require anything in return, as they are investing in their own family to see them succeed and this is reward enough for a variety of reasons, both practical and emotional. When it comes time to pitch, read up on publicly available information around each investor’s background and interests, keep things concise and numbers-driven, and let your passion for the business shine through.

 

Apply for a microloan

If you don’t want to go through the stringent application process associated with bank loans, consider microloans by nonprofit groups or individuals. There are hundreds of these lenders across the U.S., and they provide access to smaller loans that come with fewer restrictions and greater flexibility. The catch? They often come with higher interest rates than traditional bank loans.

Starting a Business - Deciding on a Structure

4. Decide on a business structure

Choosing the correct legal structure for your company is key to starting a business, and will ultimately determine how much you pay in taxes and the personal liability you face as an owner.

 

Sole proprietorship

A sole proprietorship gives the owner complete control of the company. This is the easiest type of business to start, however it also brings with it maximum risk and liability for the owner— the buck stops with you. This business structure can also be a turn-off for banks and investors, as sole proprietorships can’t trade publicly and you can’t sell stock to drive investment. It’s typically used as a stepping stone for entrepreneurs looking to test their business idea, before launching a formal organization.

For more details on the advantages and disadvantages of a sole proprietorship, we will be adding a new article soon and update here with a link.

 

Partnership

A partnership, alternatively, involves two or more people who are in agreement to share the profits or losses of a business. This agreement is advantageous for tax reasons, yet each partner is personally liable for the success or failure of the business. A more advanced partnership is formed as a LLP or Limited Liability Partnerships (see LLC / LLP below).

While partnerships bring certain benefits to the table from each partner, they are also prone for some struggle along the way.  Each partner innately operates at different levels of intensity in both their natural abilities, their skills, their work ethic, their consistency, their enthusiasm, their capital investment, if any, and so on. So, the proportion of ownership should be agreed to separately based on how these factors may already be apparent up front; it doesn’t necessarily have to be an equal split.

Partnerships are especially great for romantic partners or married couples, as their personal partnership already indicates they work well together.  Some couples love spending every waking minute together, so forming a business together is a natural extension of that.  This is especially in contrast to splitting their time between two different places of employment away from each other. Going into business for themselves together can create a better quality of life for both of them.

Further, a marriage is arguably already a joint business institution between two partners, with the deepest levels of trust and commitment to each other already established.  Layering into that a commercial business can be very natural, effectively starting a family business— a popular type of business in the Grand Lake area. It is one that can be both personally and professionally more enriching and rewarding, and it can be passed down through progeny as an heirloom.

Alternatively, some couples may want to start a business together, but only one of them wants to be an Owner with all the responsibility that entails. If this is the case, a sole-proprietorship or a single-member LLC, where only one person in the couple owns the business, is likely the better choice.  This is especially the way to go if one person in the couple is extremely into doing the business, so much so that it’s really more his or her baby, and the other is simply glad to help wherever he or she can together.  These can still be family businesses and can still be passed down over generations.

 

Corporation

Unlike a sole proprietorship or a partnership, a corporation is a legal entity separate from the person created for the purpose of business. The primary benefit of this structure is avoiding personal liability, however corporations must pay income tax on their profits. Plus, the expenses, criterion, and reporting involved in owning a corporation are more stringent than other business structures. There are different types of corporations, and the difference between them involves “double taxing” (if the company is taxed as well as its shareholders) and the number of and type of shareholders permitted.

 

LLC / LLP

The key benefit of a Limited Liability Company (LLC) or a Limited Liability Partnership (LLP) is that profits are passed through the company to its shareholders without being taxed, yet the personal liability of the owners is null. A “hybrid” of a partnership and a corporation, these structures have an expiry date in some states, and members of an LLC must pay self-employment tax contributions toward Medicare and Social Security.

Ohio is amazing for starting up an LLC. You only have to file once, you can do it electronically online at the Ohio Secretary of State Business Services website now, and it usually completes within a few business days, less than a week now. The LLC doesn’t expire, although any additional Trade Name or Fictitious Names do require renewal in intervals– this is annoying and odd considering the core LLC doesn’t. You don’t need a lawyer to file for your LLC. However you do need a lawyer to draft your Member’s Declaration / Operating Agreement, completing the LLC formation process.

Grand Lake Host is an LLC as well as all of its sibling companies within the House Davis LLC family office small-business conglomerate. These companies may evolve into S-Corps at a later date as individual companies or the conglomerate as a whole grows into the future, depending on needs.

Oftentimes, entrepreneurs and self-employed workers are primarily considering a sole proprietorship vs. an LLC for their business structure. To learn more about the pros and cons of both options, we will add a guide soon and link it here.

 

Nonprofit

Specifically designed for charities, educational and health facilities, religious programs, research establishments, and political institutes, the nonprofit structure gives companies a tax-exempt status, and owners do not pay state or federal income on any profits they make. There are extensive processes and regulations in place for registered nonprofits, and there are heavy restrictions around what they can do with the money they earn.

 

S-Corps

S-Corps are full-blown corporations that have structural advantages, particularly in being able to issue stock and even go public on the stock market, but are taxed more heavily. These are for larger operations with substantial capital or partner interest. As mentioned, micro/small businesses usually prefer to start as sole-proprietorships or LLCs and then evolve into an S-Corp by refiling, almost always with the assistance of an attorney, a substantial angel investor, or venture capitalist firms. Check out more information about S-Corps here.

Starting a Business - Deciding on a Name

5. Register a name

Your business name is the embodiment of your brand mission and vision, and an important step in protecting this identity is registering the name officially. This registration makes you compliant with the laws around registration, and it means no one else can register a business of the same name.

Registering your business name happens automatically when creating an LLC or a corporation. If you’re operating under another business structure, there are two other ways to protect your name: You can either register the name as a trademark, or file a Doing Business As (DBA) with your state or county clerk’s office.

Note: If you’re operating a business under your legal personal name—perhaps as a consultant or other forms of self-employment—you won’t need to file for a DBA or trademark.

You can use the trademark designator without registering it. For example, Grand Lake Host™. To add further protection to your name, you should register the trademark, which would require it to appear as such: ‘Grand Lake Host®’.

For new businesses, it’s usually more important to first make sure the .com domain name is available than to check if the business name isn’t used already in Ohio at the Secretary of State’s (SoS) Business Services site under the Business Search tool. This is because it’s far more likely that, amongst everyone on the entire planet, the .com is already taken, versus only people in Ohio registering it with the SoS, and you definitely, absolutely want to try to get the .com for your potential business before you do anything else.

If the .com isn’t available for the name you want, you can try alternatives, such as the other two main top-level domains .net and .org. You can search for your domain here to see if it’s available on our homepage: www.grandlake.host

There are now tons of new special top-level domains, such as, you guessed it, .host for us (although we do also have the .com, .net, and .org domains too), as well as .shop, .me, .llc, .agency, .company, .institute, .io, .tv, .studio, .art, .games, .film, .movie, .ventures, .equipment, .solutions, .tech, etc… We will create a list on our site here with all of the domains, but in case you are wondering about any particular one, for these special ones, just ask and we can search for you.

If you already know you want your website hosted with Grand Lake Host, you can go ahead and register your domain by signing up for our Standard Secure / Standard Secure Shop / Pro Secure Shop tiers (we recommend Standard Secure Shop for all businesses owners to start; you can always upgrade later to Pro) and include your desired domain name in the Order Notes at Checkout. We will register and manage it for you, and there are no separate annual fees for your core domain (included with your plan rate).

You can also contact us at support@grandlake.host and we can help you get started.

It’s fairly common to register several domains before filing for your business entity if you aren’t yet sure which name you ultimately want to use. Better to grab them now before someone else does if there’s any chance you think you might want to use them. It’s way more affordable to do this than to try to pry a domain away from someone who is squatting on it or, even worse, actively using it for themselves. Buying owned domains easily gets up into the thousands if not tens of thousands of dollars or more, plus brokerage and escrow fees.

So if there’s something you like that’s available, just get it and decide later! All registrations last for a year, so that’s plenty of time to decide and, if you need more, our domains innately auto-renew.

To register individual domains separate from a plan, you can use our Domain Registration service product. Our fee includes service management and maintenance with the domain for you, so you don’t have to mess with any of the technical aspects of domain management.

 

6. Secure proper licenses

Not only is registering your business name essential in starting your own venture, it’s also necessary to secure licenses to operate your business legally. The number and types of licenses you need is dependent on your business structure and industry.

For companies in the goods and services industry, you will potentially need a sales tax permit, zoning permit, health permit, fire department permit, signage permit, and a building or construction permit. Restaurateurs will need special state licenses around the service of alcohol and the handling of food. And, if you work from home, you may need to register for a home occupation permit, although it seems Ohio doesn’t require this. You can however deduct your home office square footage from your taxes (ask your accountant, a CPA).

Most companies with an income stream in the U.S. will need a General Business License to operate in their state. This license is required to register for federal and state identification numbers, which are used for tax purposes.

 

7. Decide where to work

Depending on your business type and the licenses you hold, deciding on where to work is an important step in starting your business. Licensing is required for those opening a storefront or sometimes for working from home, and— while this is necessary in some instances— alternatives like shared workspaces and shared marketplaces allow you to bypass the extra paperwork.

There are lean ways of getting around this. Grand Lake Host utilizes publicly-available places to meet up with our potential and active Members, such as coffee shops. We call these ‘Meet-Up Spaces’, and they’re great for many reasons. Firstly, it gets us out into the community and visible amongst our fellow neighbors, fellow businesspeople, and fellow entrepreneurs, and secondly, and most obviously, it’s currently saving us tons of money from having to lease a corporate office, which, being a mostly cloud-based company working out of laptops and smartphones connected to infinite cyberspace, we don’t really need at all right now.

The rising popularity of coworking spaces is due to the flexibility, convenience, and community they offer. Professionals of every stripe—from entrepreneurs and creatives to established businesses and enterprise companies—coalesce in these shared workspaces, enjoying beautifully designed spaces and a range of private offices and bookable conference rooms. Apart from coffee shops, there don’t seem to be very many, if any at all, coworking spaces in the Grand Lake Area yet. This is something Grand Lake Host itself is considering doing down the road once our hosting revenues are built up enough or we secure investors, so stay tuned!

Networking is a key advantage of any of these workspace solutions, and the opportunities that arise in talking with others in public Meet-Up Spaces or coworking spaces or attending monthly community events can help grow your reach both locally and in global markets.

For more tips on how to network, we will be adding an article soon for 13 strategies to forge strong business connections.

 

8. Build a team

Finding quality talent is integral to the success of your business, yet the hiring process can be fraught with uncertainty. There are negotiations around salary and benefits, and no guarantee that the ultimate hire will integrate with your team. In some cases, the best talent isn’t local, and hiring remotely brings with it a wealth of different considerations—time zones, connectivity, productivity, and feeling part of the team.

Open public Meet-Up Spaces and shared workspaces solve for this, allowing companies to hire staff locally and remotely around the world without investing in real estate. These coworking solutions also give each team member a feeling of community and connection, no matter where they’re located.

Sourcing talent can happen through job posting sites, your network, graduate programs, industry events, and community events within coworking spaces. It’s important to comply with legalized employment practices when bringing new people onto the team, and it’s illegal to recruit in a way that discriminates against candidates for their race, color, religion, sex, national origins, age, or disability.

For the local Grand Lake area, we see a lot of the ascending Gen-X and Millenials forming micro/small businesses and consultancies now, sadly often out of necessity due to lack of career opportunities here. We often have to invent our own jobs. However, in a twist, the very low cost of living here compared to the insane cost of living of larger cities makes the Grand Lake area an excellent place for the next generation of businesses to start, grow, evolve, and become the new big employers for others. So if you’re an entrepreneur, Grand Lake is a fantastic place to start-up!

For many of these start-ups at this initial level, who cannot yet afford employees, contractors are the next best thing (especially as many of these businesses are consultancies with one individual working for themselves as a contractor). Even further, we are finding it useful in some cases that instead of competing head-to-head at small scale and resources, we instead find ways to work together, exchanging our client resources in a mutual referral network, forming larger companies virtually, while each retaining our autonomy as individual business owners working for ourselves. These informal or formal partnerships can be thought of as ‘strategic alliances’ and ‘preferred vendors’. Grand Lake Host has found this useful already. If you think there’s a way for our companies to work together, Grand Lake entrepreneurs rising and up and joining forces to strengthen our community as a whole, do not hesitate to contact us at office@grandlake.host.

 

9. Promote and grow your business

Finally, after all these steps are complete, it’s time for the real work. The reason you decided to launch your business in the first place: to grow your idea into something tangible.

Depending on your industry, you will choose to promote your company via digital or traditional methods, or both. Growth will happen as you begin gaining traction and your target audience starts purchasing, utilizing, and talking about your product or service the way you intended.

Starting a business is exciting— but it almost always is also a lot of work, requiring, above all, persistence. We do it, because we know once it has grown and matured, the potential rewards at that stage are are well worth it.

Certainly, there’s an extreme amount of work involved in building your own business, and the steps needed to register and launch your operation are only the beginning in a long journey of wins and challenges. Yet that initial leap to starting a venture is one of the most intimidating and uncertain times in a business’s life cycle—and this is just one of the stages where Grand Lake Host can help by getting one of the most essential assets for any business well into the 21st century up and running: your website. Further, we connect you with other Grand Lake Host platform Members, forming a local entrepreneurs club of sorts, where we further host networking events. As described above, at our events, business can happen, especially the formation of new alliances.

From the inception of your company through every stage in its future, you will be constantly evaluating and adjusting your strategy to give your business every chance of success. Yet taking these nine steps to ensure the appropriate structure, financing, and legal framework of your business is essential for future growth. These considerations will help turn your startup into a success, proving that moving from an idea to a registered business is just the beginning.

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