What Do I Need to Start a Business?
Starting a business is not easy, especially when you’re a newbie. If you are reading this article, it can only mean that you’ve been asking yourself, “what do I need to start a business?”. Well, you are already on the right path. Understanding the essentials to start a business before you invest time and resources is a wise move. Read on to understand the intricacies involved, from arranging funds to choosing a location.
1. Question Your Idea
Every business starts as an idea. It may be as small as manufacturing covers for cell phones or as big as building anchors for giant ships. The size does not matter. But here are the questions you need to ask yourself. Who is going to buy your product? What is the market size? How well do you know your potential customers? Based on their income levels, will they be able to afford your product or service? Where are they going to buy it from? Are there other such products/services on the market? Why should clients choose your product?
See that you answer these questions, take notes of your answers, and keep updating them based on business factors. However, if you cannot answer even one of the questions above in specific terms, it is time to go back to the drawing board and fill these gaps.
2. Arrange for Funds
Setting the finance in order before jumping into the business’s day-to-day operations is essential. The monetary needs will vary depending on the product or service’s size and type. Therefore, you must nail down the amount needed to manufacture a single unit of your product. Suppose your business is in the service sector, it is essential to calculate the input costs required to render one instance of your service.
Once you decide on the input amount needed per unit or service, the next step is to fix the volume. How many units are you aiming to produce? Do you have enough funds to sustain for at least some months without making profits? It is also crucial to determine beforehand the labor costs, transport expenditure, administrative expenses, and rents to arrive at the overall cost of the business.
The sum of all the above expenses is the money you will require to start your company. Will you be able to invest them on your own? If not, you need to seek investors. Build a business plan and pitch it to interested folks. Most of the time, you will have to arrange your seed money from different investors, so keep pitching to many potential investors.
3. Pick a Location
Selecting a site may seem very trivial, but the location of your business carries much weight. First, the site decides the permits required to start a business. Then, depending on the type of business you do, various federal and state-level licenses will have to be procured. Here is a government guide that may help you.
You also need to register your business with federal and state organizations and pay the required fees. You must be aware of the laws of the land and the taxes collected by the region to be on the right side of the law. So getting a tax ID at the federal and state levels is a must. Being in the know will also help you as some states might offer incentives for those willing to start a business in their area.
4. Choose a Name
The name does make or break a business. You must be aware of copyright laws and avoid trouble by not naming it after known brands. Also, once you settle on a name, make sure you can register a website with the same name. In an increasingly digital world, having the same name for the website will help you grow your business.
Make sure you put much thought into the name, as it has the potential to develop into a brand tomorrow. So it should be something that consumers can relate to.
5. Open a Separate Bank Account
It is good practice to separate your personal account from the business account. Open a business account in your company’s name. Here is a detailed guide from Bank of America to apply for a business checking account. This act will help you protect your personal funds if the business runs into trouble. Also, this enables you to run a professional company as your customers can now write checks to your firm’s account. This move will also help you raise loans for the business.
In summary, know who your customers and competition are. You need to make your customers buy your product and undercut the competition. While arranging for funds, keep in mind even the most minor costs such as transport and rent. If your business takes off, lack of funds should not be a reason to exit it. Pick a location and make sure you know the state’s laws. Pay your taxes on time and seek permits to avoid trouble. Finally, maintain a separate bank account and name your company wisely. Best of luck!