By Janinne Brunyee and Lara Lavi ESQ.
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As we all sit in our homes wondering what the impact of the coronavirus will be on the economy, you may be asking yourself whether now is the time to start a business. For many people, economic uncertainty or the loss of a job is just the bump they need to take the leap and do something they have longed to do for many years – start a business. But, many don't full understand the steps for starting a business.
But, before we get to that, it is a good idea to take a step back and ask some important questions.
Do I have what it takes to start a small business?
Before you read the rest of this article, this is a critical question to ask yourself. The truth is, starting a new business is one of the most challenging adventures you could go on. We have all seen the statistics about the failure rate of new startups.
A few things to consider before you pull the trigger:
Do you have a strong business idea?
Does your business idea fill an ongoing need– does it offer something new or different and, crucially, will your business idea allow you to make a profit and grow a business in a scalable way?
Do you have a passion for this business?
Is this business idea something you truly want to invest your heart, soul, time and resources in?
Do you have staying power?
Even an ordinary small business can easily take three years or more to turn a profit. If you are the kind of person who tends to lose interest in projects or has trouble sticking with one thing, you may not have the staying power to make your startup work. A true Entrepreneur is a marathon runner ready to go the distance to make the business they have always been passionate about a success.
Can you be decisive?
As the decider-in-chief you are the final authority on everything that happens in your startup. Do you have the courage to make all decisions?
Are you risk-averse?
There will be times when you are lying awake at night worrying about cash flow and whether you can make payroll. Owning a small business can bring you freedom and flexibility, but you also have to be comfortable living with unpredictability and uncertainty.
Can you roll with the punches?
Unfortunately, you don’t know what you don’t know. A flexible attitude and a willingness to adjust and adapt can be critical to your long-term success.
Do you know what your definition of success is?
It’s important to understand the scale your business needs to be in order to be successful. Part of the beauty of starting a small business is the threshold for success does not necessarily need to be in, for example, millions of units sold. Sometimes less is more while still giving you financial success and personal freedom running your own small business. You may also be looking to start a side business while you maintain your full-time job.
WANT TO START A SMALL BUSINESS? KNOW THE STATS
62% of US billionaires are self-made.
26% of entrepreneurs say their biggest motivation for starting their own business was the idea of being their own boss.
In 2016, there were 25 million Americans who were starting or already running their own business.
#1 reason why businesses fail is there’s no market need.
33% of entrepreneurs have only a high-school diploma.
60% of people who start small businesses are between the ages of 40 and 60.
There are 582 million entrepreneurs in the world.
22.5% of small businesses fail within the first year.
Steps to start a small business
Starting a small business online or in the real world can seem like a daunting task. In reality, there are a number of steps for starting a new business and setting it up for success. Following a check list can be a great way to break the steps needed to start a small business into logical “chunks” or steps you can follow sequentially. By following the steps and checking off actions once complete, you will quickly find that the whole process to be much more manageable and exciting – which it should be!
What is your business idea?
Before you do anything else, it is critical to clearly define you business idea. What are you selling? This is equally important whether your new startup is an Etsy store, a yoga studio or a recruiting agency. Are you offering goods and/or services? Will there be a need for inventory and a risk of aging inventory? Might you need partners – i.e. human capital – to help you execute your plan or provide necessary financial capital? Will your business grow in stages or simply be a supply/demand chain running steady and simple?
A few questions to ask to determine whether your startup idea is viable:
Does it solve a real problem or is it merely a better mousetrap?
Does your business idea come from personal experience? Is this something you have in-depth knowledge and experience of?
How unique is your business idea? How easy is it to copy? Can this idea be protected?
How big is the market for this business idea? How many people experience this problem. How fast is this target market growing?
How much can you charge for this product vs how much it costs to produce?
Once you are confident that you have a unique and viable business idea, it's time to implement the steps for starting your small business.
Step 1: Write a business plan.
First, write a business plan for your new business. According the to SBA, a good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
While it is tempting to overlook this step, don't. Many businesses fail due to a lack short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results.
Step 2: Decide on a legal entity for your business.
It is critical that you set your business up correctly from a legal perspective from the get-go. This means choosing the correct legal business entity and working with an attorney to complete the file the paperwork correctly. There are a wide range of options to choose from and it is important to take a long-term view when considering which is best for your new business.
Step 3: Create a marketing infrastructure for your business