How To Start
A Business

Business Project
~Student Duties~
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Business Website~

 

Starting a business can be a complex and difficult process. It takes persistence and diligence, and investments of time and capital. The prospect of increased wealth, freedom and job satisfaction have led many people to start in business for themselves. Many have failed, however, because they did not clearly identify their personal and business goals.  Write down your specific goals and aspirations on paper. This will help you to think about them clearly. Each method of start-up has it's pros and cons. It is essential for you to know your own aims, strengths and weaknesses in order to decide which is the most suitable start-up method for you.

Starting a business from scratch can be the most rewarding method of business start-up. Before you dive in at the deep end, there are plenty of things you can do to increase your chances of success e.g.. getting to know your market and competition, creating a realistic business plan, constantly motivating yourself and your staff.

There will be plenty of problems to deal with and many things to learn. Nothing is impossible, but things can get very difficult. When facing problems it is important to maintain a positive attitude, but be realistic. Imagine the scenario: two identical businesses face the same problem- one fails and the other succeeds. It goes to show that it isn't the problem but the way that the problem is dealt with that differentiates between success and failure. Deal with problems head-on, if you 'bury your head in the sand' the problem will get worse and the only person you can blame is yourself! Most successful entrepreneurs have found themselves in exceedingly hairy situations- taken the correct course of action- and survived.

There's a lot of money to be made in this big-wide-world, all you have to do is perfect a system that enables you to:

 The Pros:
 The Cons:

How Do I Start My Business?

STEP 1 Business Ideas
To start a business you will need to choose or create a business idea. While this is an obvious step many people who want their own business don't have an idea, just the desire to be an entrepreneur. For the budding entrepreneur, there are many options; buying a franchise or an existing business, or looking to others for ideas for a start-up business. Once you have decided on the business you wish to start, then the real work begins.

STEP 2 Business Plan
Writing a business plan is your next and most important step, this is how you and others will evaluate your business. When seeking financing the investors or lenders will want to read your plan before they supply you with funding. If you're financing the business yourself, you will still want to have a written plan to develop business strategies and financial projections. A key element within the business plan is the marketing plan, which explains marketing strategies that will be used to advertise and promote the products or services. The goal setting steps of the plan will help you to analyze the success of the business in future years and clearly illustrate the capital needed to operate the company to break-even.

Making a Business Plan

The first step in starting your own business is to have business plan. Specifically, you should make a written plan that does the following:

  • Explains the product that you will manufacture or sell, or the service that you will provide, and why you expect to be able to sell your product or service profitably.
  • Sets forth the qualifications and experience of you and any other key individuals who will be involved in the business.
  • Includes financial statements that project the income and expenses for your business for at least three years.
  • Provides an explanation of the funding (capital) that will be needed to operate the business and your expected sources of such funding.
  • Identifies any professional advisors that you will be using including an accountant, lawyer, tax advisor, banker, and insurance agent.

Your business plan will help make sure that you are taking into consideration all of the issues. A business plan is also essential in convincing a lender to provide a loan or an investor to provide capital funds.

STEP 3 Financing
With your business plan in hand, you are ready to go find yourself some capital. Most small businesses have three options for financing: friends & family, investors or bank loans. Each of these options has different considerations for the business. Investors and even friends & family usually want ownership and control of their portion of the business. Bank loans burden the business with an additional expense of the loan payment, which can erode the business profits.

Funding Your Business

Obviously, one source of funds is your own savings. Other sources include loans from banks or other lenders, and investments from other individuals.

~Your Savings: It is a good idea for you to invest some of your own savings. If you are not risking any of your own capital, it will be more difficult to obtain loans or capital from others.

~Loans: You can obtain loans from banks, other lending institutions, and individuals. You will need to provide them with a business plan and financial statements that show your ability to repay any borrowed funds.

~Capital Investments: A capital investment is different than a loan. Instead of obtaining funds that will need to be repaid with interest, you are obtaining capital funds from investors who will be co-owners with you.

STEP 4 Getting started
You've got the plan, the money and the enthusiasm; you're ready, right? Not yet, as with everything you need to take the legal issues into consideration. First you should choose a legal structure: Sole Proprietorship, Partnership, or Corporation. Your financing decisions will have an effect on what legal structure you choose. Now you can file with the state to incorporate and obtain a federal Identification number.

Sole Proprietorship Overview

This form of business is the easiest to start because you need obtain only whatever licenses that are required in order to begin business operation. The sole proprietorship gives you absolute control over your business, more so than other business structures such as partnerships or corporations. Very often, a small business owner will choose to start with a proprietorship. As the business grows, he or she might explore the possibility of forming a partnership or a corporation.

 

Partnership Overview

The Uniform Partnership Act defines a partnership as “an association of two or more persons to carry on as co-owners of a business for profit.” Although not required by law, you may have to submit written Articles of Partnership. This would apply, for instance, if you wanted to open a company bank account. These article would define the contributions made by the partners to the business—financial, managerial, material, or other. They would also define the roles of each partner in the business relationship. All articles should be filed with your secretary of state.

A partnership differs from a corporation in terms of the limited life of the partnership, the unlimited liability of at least one of the partners, the co-ownership of the assets, mutual agency, share of management, and share in partnership profits.

 

Corporations Overview

Since the corporation is considered a distinct legal entity with no ties to the individuals who own it as a legal structure, it is a very attractive option for small business owners. Incorporating is, however, a complicated undertaking. It gives you the opportunity to present your firm to the public as a bigger company than it actually is. It also gives you a better shot at obtaining long-term financing. Since you are not held personally responsible for the corporation, your personal assets, including your personal bank accounts, may remain untouched if the business fails. There are, however, more regulations and government filings to deal with than there are in sole proprietorships and partnerships.

Before you decide to incorporate, ask yourself-

  • How much risk are you willing to absorb?
  • If something happened to the principal(s), how long would the company be able to function?
  • What legal structure would offer the greatest flexibility in terms of administration?
  • How will the laws of the incorporating state influence your decision on method of incorporation?
  • What are your prospects for attracting capital?
  • What is the goal of your enterprise?
  • Are you willing to share control of the business with outsiders?
  • Is there a tax advantage or incentive for you to incorporate?

Then you can distinguish which business climate is for you.

STEP 5 Opening the Doors
Okay, it's time to get on the road to making some money; this of course means spending money. Where are you going to run your business? Will a home office do or is commercial space needed to service your customers? Do you need to hire employees to help you run the business? What are your bookkeeping needs, do you need an accountant? Finally, who could forget taxes, what taxes do you have to pay and collect? Now that your business is through the start-up phase, you can now look forward to the issues of managing a small business.

Choosing a Name

When choosing a name, make sure that it's not identical or confusingly similar to the name that is already owned or used by another company.

Most states have laws that regulate names for corporations, limited liability companies, limited partnerships, and business entities for professionals. Usually these statutes require that a word be included that clearly identifies the type of entity. For example, a corporate statute might require a corporation to include "corporation", "corp.", or "inc." as part of the corporate name.

If you choose a name for a sole proprietorship or general partnership that doesn't include your own personal name, you may be required by law to register the name of your business.

 

Ownership Changes

As a small business owner, you may wish to protect yourself against the possibility that one of the other owners will transfer his or her ownership interest to an undesirable third party. Obviously, this is not a problem for the sole proprietor or the sole stockholder of a corporation. However, it is a potential problem with any business that has more than one owner.

Business owners can (and should) address these issues in the partnership agreement (all partnerships), the operating agreement (LLCs), and buy-sell agreements (corporations). These agreements should include at least the following:

  • Appropriate restrictions on the transfer of an ownership interest, except in accordance with the agreement;
  • A method for determining the value of an ownership interest;
  • Provisions for handling a voluntary withdrawal from the business by one of the owners;
  • Provisions for handling the ownership interest of an owner who dies;
  • Provisions for handling the disability of an owner who was involved significantly in the business before becoming disabled; and
  • A means of funding any required purchase of an ownership interest (for example by using life insurance to buy the ownership interest of an owner who dies).

These make also make for great decision strategies in management hierarchy.

 

Payroll Issues

Employers are required to withhold federal and state income taxes, as well as FICA taxes, from employee wages. These withholdings must then be properly deposited with the federal and state governments. If you plan to have employees, you will need to comply with these requirements, as well as any requirements regarding withholding of other taxes.

Most employers are subject to federal and state laws that require you to pay unemployment insurance. This insurance is used to pay unemployment benefits to employees who lose their jobs.

 

Types of Insurance Needed

There are several kinds of insurance that should be obtained:

  • Workers' Compensation. Most states have workers compensation laws that pay benefits to employees who suffer job related injuries. Employers are required to obtain this insurance from private insurance companies.
  • Liability Insurance. Although you may choose a business entity that will enjoy "limited liability", you will still need appropriate and adequate liability insurance.
  • Property Insurance. Your new business will need property insurance to protect the business assets. If you transfer any personal assets to your new entity, you should make sure that your insurance policies are issued for the person or entity that owns the assets.

Also know that some state mandate insurance coverage.

 

Permits and Licenses

For many types of businesses it is necessary to obtain certain permits and licenses. For example, if you are involved in retail sales, you may need a sales tax permit. A contractor may be required to obtain a contractor's license. A restaurant may be required to obtain a license in order to sell beer or liquor.

 

Franchises

A franchise is an agreement under which an owner of a business idea, trademark and business "know-how" sells you the franchise rights to use these items. For example, your local Chevrolet car dealer is probably operating his or her dealership under franchise arrangements with General Motors who owns Chevrolet. You might be interested in a franchise so that you can sell a well-known product, obtain management advice, and participate in joint advertising.

If you want to consider this type of arrangement, make sure that the details are stated in a written agreement that you understand. Obtain the advice of a lawyer if you have any questions.

 

Working from Home

You may wish to locate your business in your home to save the cost of buying a building or renting space for your business.

In some cases, you can obtain an income tax deduction for the cost of having the business in your home. However, the rules are very strict, and in many cases, your business must be located in a building that is separate from your residence (for example, in an unattached garage).

In some locations there may be zoning laws or other local regulations that limit or prohibit the operation of businesses in homes that are located in residential areas. In addition, there may be permits or licenses that you are required to obtain to operate a business in your home. Work out what you want from your business and ask yourself why you are starting it.

Some Top Tips-

Don't Give Up.

Selling your products or services is a tough job. Don't get dispirited by countless refusals and let downs by potential customers. Very often people are too polite to say 'no' when they are not interested in your business proposals. Being 'led up the garden path' is just another aspect of sales and, if you have researched your market properly, you will soon find buyers.

Vanity.

Becoming a 'household name' is a nice thought, but you are not going to achieve such heights, in the short term, unless you spend vast quantities of cash! Set your goals on shifting products or services first, becoming an 'industry name' second, then have a crack at sponsoring the Olympics after you've got yourself a few bob in the bank.

When you are deciding on the biggest words to have on your advert, web site, mail drop etc. try to avoid the urge to make them your name / company name. In a magazine ad, for example, the 'headline' should grab the reader's attention. A few words in a, slightly smaller, 'sub-headline' should convince the reader that it is worth reading on. Then, the smaller, 'main body of text' can be used to get your message across. Take a look at any magazine article for inspiration. You'll also notice that showing a graphic/photo 'draws the eye' too.

Deadlines.

What ever method of promotion that you are using, always aim to stimulate an immediate action. An advert is far more effective if it has some kind of deadline or 'incentive to act now' before the customer loses interest. e.g. 'Sale Ends Bank Holiday Monday' or 'Free Gift If You Book Now'.

Reputation.

Your customers are your most cost-effective advertisers. If they are pleased with your products / services they would be the first to recommend you to their peers. They are even more efficient messengers if they are displeased.

Be sure to present a good image at all times; i.e. your premises, personal appearance, vehicles, stationary etc.  

 

Copyright Information
Title:  How To Start A Business
Authors:  Walker & Gibson Publishing Ltd. , LectLaw & BusinessTown.com LLC
URL: http://www.startinbusiness.co.uk/ (Walker & Gibson), http://www.lectlaw.com/filesh/qfl10.htm (LectLaw) & http://www.businesstown.com/gettingstarted/index.asp (BusinessTown.com LLC)
Certain materials herein are included under the fair use exemption of the U.S. Copyright law and have been prepared according to the educational multimedia fair use guidelines and are restricted from further use. This work may be protected by further copyright, reproduction and distribution (in violation of United States Copyright Law).