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Write your business plan

The first step in any successful business is a plan. Believe me, I'm not talking about planning out every step you make to the infinite detail. I am the type that recommends more action than planning. It could be a one page brief summary of what the company is about and what products or services you'll offer. It should be about not only what you'll do, but also what you won't do. The common mistake is getting caught up in trying to please everyone.

A successful business must be focused, as you cannot be a jack-of-all-trades. Ultimately, write enough detail so it makes you feel comfortable. Writing it down will help organize your thoughts into one congruent process. If you were looking for partnering with others or getting outside investments, would it be enough information? In most cases no. You will need to do much more research and planning than say starting a part-time business that is self-funded.

Once you create your plan, be flexible. I've personally had countless business ideas that have turned into major duds. Don't be afraid to change course. Realize that selling ice cream to penguins wasn't such a hot idea after all. Understand successful businesses (and individuals for that matter), give a new idea enough time to let the idea blossom. If it doesn't work out, they move on to the next idea. Don't get caught up that your business idea is a “failure”. You can't succeed until you fail.

Incorporate your business

Okay, you know what you are going to do, but how do you create a business? This is commonly where people get tripped upon. Too many entrepreneurs incorporate after they start generating income. In my opinion, that's a bad idea. Creating a DBA (Doing Business As) is too risky in today's litigious society. There are many reasons to incorporate into a business. The major reasons are:

  • Legal entity – A business is a separate entity than the owner(s). A business can be sued, while not affecting the shareholders. A business in legal terms is like a person and has an unlimited life.
  • Taxes – There are many breaks that cannot be taken advantage of with your personal taxes, and can be taxed at a lower rate.
  • Business bank account – It's a good idea to keep your personal and business checking accounts separate from one another. Novo is a fintech company that focuses on checking accounts for small business owners and is worth exploring.

One service I can recommend is from The Company Corporation. Incorporating can be a complex process. Their process makes it easy and gives you incorporation recommendations based upon your business needs.

In my case, my primary business is an S corporation, but for your situation, it may make sense to be an LLC. The Company Corporation gives some great advice on which to pick, but you may also want to ask the advice of your accountant (see my other recommendation below).

Create a logo

Okay, you've got step one and two down. Now let's talk about the identity of the company. A logo, in my opinion, is a crucial part of your business. It's your welcome mat to your customers. How your logo looks reflect how your company looks. An unprofessional logo can immediately turn off a potential new customer.

I personally recommend 99designs. They offer a pool of talented graphic designers that can bid on your logo. You pick the one you like best. All of this is available for a reasonable fee. Going to a traditional advertising agency and getting a logo done can cost thousands of dollars.

Purchase a domain name and website

In this day and age, you need to be on the interwebs. With how cheap web hosting is, there is absolutely NO excuse not to have your own domain name and at least your own e-mail. In many cases for less than two Starbucks Mocha Frappuccinos a month, you can have your own website and domain name. I cringe anytime I get an e-mail from a small business owner who uses one of the free e-mail services like AOL. It looks completely unprofessional and unacceptable. So cut down on the coffee and get your self a website.

Accounting software

You need to be able to invoice and pay bills. Also, track your income and expenses. This especially becomes important when it's tax time. My recommendation is to use QuickBooks Online. It's the most popular account package for small business owners. They have many different versions of their product to suit the needs of many types of companies. They offer desktop based software, to completely hosting your accounting software within the cloud, options for the service industry, and point of sale (POS) software. (Read our Quicken review to find out more).

Find an accountant

I do not recommend a small business owner do their taxes themselves. I've personally seen too many fellow business owners not in legal compliance with our government. With things like the new 1099 requirement, it's crucial you aren't violating any tax laws. Do the right thing and find a reputable accountant. This means they should be CPA certified. Find one through your friends, and ask other fellow small business owners who they use. A good accountant should be the first advisor on your team.

Get funding

There are various means to get bootstrapped. Self-funding is usually what most small business owners do, but it depends upon your business idea. Possible funding sources are:

  • Self-funded through personal savings
  • Getting loans from friends and family
  • Personal credit cards and business credit cards
  • Bank loans
  • Angel investors
  • Venture capital
  • Peer-to-Peer Lending

Lack of capital and keeping cash flow going is the typical reason why small businesses fail. So while you may not need funding, at the minimum you should at least keep possible funding sources in mind.

The bottom line

Today it's easier and cheaper than ever to start your own business. For less than $1,000 you can have your business started and be on your way to possible financial freedom.

The process of starting a business can seem daunting at first. If you complete the seven steps I listed, you'll be further along the way than most others. My fellow entrepreneurs, best of luck with your new business.

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Larry Ludwig Freelance Contributor

Larry Ludwig is a freelance contributor for Moneywise.


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