As a freelance business consultant, many folks come to us with a business idea and want our assistance writing a formal business plan.
Despite what many aspiring entrepreneurs believe, putting together a business plan is not the first or most important step in starting a successful business. For most people, especially those with little to no experience running a business, this is actually one of the last things you want to do in start-up.
This article is designed for the brave individuals who have never started a business, have a strong desire to do so, but do not know where to begin. Here are 5 practices, learned from our vast experience, to help you avoid common pitfalls and get off to a great start. (Bear in mind, these are for companies that need little to no startup funds.
Take time to create your business “spiritually” before building it physically. See it in its best and perfect condition, as a super successful world-class operation. How does it feel, look, taste, sound, and smell?
Entrepreneurship is one of the most difficult things you will ever do, and your business needs to constantly invigorate and excite you. Otherwise, it will never last through tough times.
Write your dreams down. Not a business plan, but written dreams, plans, goals, and brainstorming. The official business plan will come later in the process.
Dreams cannot go far without knowledge. Read these four books in order: Cash Flow Quadrant by Robert Kiyosaki, The Art of the Start by Guy Kawasaki, Burn Your Business Plan by David Gumpert, and The E-Myth Revisited by Michael Gerber.
Before spending time and money on your dream, research to determine if your idea is viable and sustainable.
You will want to ask and answer a lot of questions, like these: Will the market support your idea? What evidence do you have to support this? What pain does your idea solve? Who else is doing it and what has been successful? What will you do differently? Do you have an easily identifiable market? Do market trends back the idea or will the idea become obsolete in a 2-3 years? Do you need financing? If so, how much and when? What technology can be used in the business? What skills are you lacking for the business?
Also remember that practical experience can be the most useful piece of research. You may want to start your business small and be guided by what the market is telling you.
4. Form an entity and ensure legal compliance
Assuming you are confident your idea will work, you are ready bring it to life and form a business entity. You need an entity for four reasons: to be legal, to maximize tax savings, to reduce liability, and to stay in control.
Your basic business entity choices include LLC, Sole Proprietorship, S-Corporation, and C-Corporation. Meet up with an attorney and CPA to discuss the differences between them and choose the appropriate entity for your uses. It will cost approximately $125 if you do the paperwork on your own, or between $200 and $500 if you hire a professional for help.
You must also make certain that you comply with the law in all other areas. For instance, if you have employees, you likely need workers’ compensation insurance. A good lawyer will help you navigate through any legal problems you may face.
5. Generate income
This step is obviously critical. Too many new business owners try to do too many things at once and are worried with things like image that they spend tons of money, time, and effort on logo and branding work, brochure marketing, advertising, and so forth. Make money first.
Do whatever necessary to generate income, even if it means selling from house. No dream, however inspiring, will come true unless you can pay to make it happen.