Starting a Business Checklist: 15 Steps to Take When Starting Your Company
Each entrepreneur faces unique challenges when starting a business. But before embarking on the journey, it helps to know the stages that lie ahead. What follows is a road map of 15 steps taken by most small business owners who are launching a business.
Let’s get started with this Starting a Business Checklist:
1. Take the time you need for an exploratory phase.
Take the time you need for an exploratory phase, when you determine who your customers are, and specify your unique value proposition. That is, what makes your product or service unique, and how it benefits your customers. John Bartelme, a certified mentor at the Chapel Hill-Durham chapter of the business mentoring organization SCORE, says this preliminary work is as “at the 30,000-foot level,” working on your business as opposed to working in your business. And it’s critical.
Bartelme recommends taking a workshop aimed at startups, since getting all the details on paper helps entrepreneurs to solidify if they are going in the right direction. “Sometimes this gets some folks to pivot before they even start,” he says.
A business planning worksheet can also provide a helpful self-evaluation before you decide to take additional steps. Questions cover topics you might not have considered, such as inventory tracking systems and how much credit will you be able to get from suppliers.
Other considerations at this time: you’ve narrowed down your list of business names to a few favorites, but which one says what you want about your business, and has a domain name available? You also need to do market research to determine how much demand there is for your product or service and the competition.
2. Write a business plan.
Once you’ve honed your idea and gathered more details and data, it’s time to make a plan. This is a statement of what you hope to accomplish with your business, backed up with the reasons why your goals are attainable. It also states exactly how you plan to do it.
While a business plan can be an informal statement just a few lines long for low-stakes businesses, it’s a formal affair when you need to secure funding from investors, or a loan. Templates for business plans can be found online, including this one, which has sections for marketing, management and organization, and expenses.
3. Choose a business structure.
Deciding on a business structure is one of the early steps in launching a business, because it has to happen before you can register the business, get a tax ID, or apply for any necessary licenses and permits.
The types are:
- Sole proprietorship: this is a straightforward, single-owner business, where the owner has total control. It also means your personal liabilities and assets are not separate from the business’. You default to this if you do business without taking steps to establish as any of the other business structures.
- Partnership: partnerships are a simple way for two or more owners or professionals (like attorneys) to own a business.
- LLC: Limited Liability Company: owners’ personal assets are free from liability and profits and losses are not taxed at the corporate rate.
- Corporations: Corporations are costly to form, and the owners have the strongest protection from personal liability.
- Cooperative: runs on an alternative model where the customers are also the owners and operators.
4. Once that’s decided, you can get a tax ID, also called an EIN.
You can apply for free using a form on the IRS website. You’ll need it for future steps like opening a business bank account and if you plan to incorporate.
To learn more, check out this article on the Employer Identification Number (EIN).
5. Take care of the banking business.
Set up a business bank account, business checking, and credit card. If you’re going to take credit card and debit card payments, it requires choosing a provider of merchant services, which may be through your bank or via an independent provider. Merchant services contract lengths, charges, and fees vary widely, so be sure to shop around, read reviews, and read the fine print.
6. Now it’s time to answer the $100,000 question: how will you fund this business?
Potential funding sources:
- Your own money, whether personal savings or from another business.
- Many entrepreneurs use funds from family and friends.
- A common source is loans from financial institutions: they will want to see pro forma financials (more on that below), your business plan, and want to know your business model.
- Investors are one option, about which Bartelme notes, “they’re always looking for a good business proposition but they’re also looking to own as much of it as they possibly can.”
- Crowdfunding is a popular contemporary method, using a fundraising website like Kickstarter or GoFundMe.
- Grants are offered through local economic development groups, or are offered for certain applicants like women or minority business owners.
Getting feedback from lenders while you secure funding also is potentially useful for modifying your plan as you go forward.
If you’re applying for loans, you may need to work up pro forma financials for the business. That means a forecast for the next 12 months. Most new businesses are going to show a loss before they become profitable. But accounting for losses is actually a good way to prepare to have funding in place to allow that to happen and still become profitable. Templates for financial projections are available online, such as this one.
7. Register your company name.
If you’re not sure yet of your company name, you might delay this step. “Don’t wait,” Bartelme said. “Use your name if you want to. You can always change it to DBA [“doing business as”] later.”
The reason it’s important to register and get your processes in place is because from very early on, owners pay for things that should be classified as business costs. They are commingling personal and business finances, and they’re not taking advantage of tax write-offs.
If you have a name you want to be uniquely yours, it’s important to get a trademark search and registration. Typically you can trademark your name in a state, nationally, or internationally.
Consider hiring an Intellectual property attorney not just for help with the name, but for any other business-related trademarking.
8. Stake out the virtual space.
This means registering your company’s web presence, particularly the domain name, and setting up its social media profiles. You don’t have to put up a site or post anything on the social accounts yet, but if you don’t act fast, the names might not be available when you’re ready to start posting. You should get the website up by the time you are doing business, if not sooner.
9. Find your physical space.
Will your business require a bricks-and-mortar location? When choosing a location, take into account not just the physical attributes required to conduct your business, but other aspects determined by your address like taxes, zoning, and laws.
Coworking spaces open up office options for small businesses that only need a desk or several desks.
Even if you run your small business from home, you may need somewhere to hold meetings. Coworking workspaces also offer the option to rent meeting rooms for various periods like hourly, daily, and weekly.
10. Get licenses and permits.
After establishing where you are doing business, you can find out what business licenses and permits are required. This won’t apply to all businesses, but is more common in industries like agriculture, broadcasting, and businesses serving or selling alcohol. They may be issued by federal or state agencies, and naturally, there will be fees.
11. Buy your equipment and supplies.
Small companies can write off up to $500,000 of qualifying equipment purchases per year, which includes computers, machinery, and vehicles.
12. Decide on an accounting system.
“The devil’s in the details,” said Bartelme. It’s crucial to set up professional procedures for the finances.
“A lot of startups are cash poor, so they have a tendency to do it themselves,” he said, “And sometimes [when you do it yourself] you’re being penny wise but pound foolish. Get the professional help you need to make sure you get it done right the first time.”
That doesn’t mean your small business needs to hire a full-time CPA. A part-time bookkeeper can help you get set up with Quickbooks or another accounting system. It allows your startup to run as a true business, and lets you to keep track of your business– and not to mention, you’ll be well-prepared at tax time.
13. Take out insurance.
Workers’ compensation may be required, and general liability insurance, also known as commercial liability insurance, can protect business assets. Your business might be an LLC, but as a business mentor, Bartelme recommends this precaution nonetheless.
14. Begin marketing the business.
You’ll need some branding, like commissioning an original logo. Plan your businesses’ advertising, promotions, and social media strategy. You might be inclined to do social media yourself, but with everything else on your plate, it could be an afterthought. This task is easily outsourced–someone with SEO know-how and content strategy skills can do it much more effectively.
15. Brace for a long slog.
If you had visions of a triumphant departure from a soul-crushing office job, followed by a phoenix-like rise as a successful business mogul, it should be clear by now that running a business is no easy task.
“It’s not for the faint of heart,” Bartelme said. “You work long and very hard hours. You have to have a lot of self-direction.”
One rule of thumb: “Whatever you believe it will cost and however long you think it will take to become profitable, double it,” Bartelme said. “That’s the way the world usually works.”