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How to start a company

11 February, 2021 · 9 min read·Small business basics
How to start a company
This post discusses ten aspects of how to start a company from scratch. Follow this step-by-step guide for building a business. These principles work for both physical and virtual companies.

Building a new business is challenging. Whether you're launching a tech startup or a brick-and-mortar retail establishment, it's an exciting and thrilling process.

Starting your own business means you're accountable and responsible for the business outcomes. Therefore, it makes sense to do everything you can to build the right foundation for launching your new company.

This post discusses ten aspects of how to start a company from scratch. Follow this step-by-step guide for building a business. These principles work for both physical and virtual companies.

#1 Brainstorm business ideas

Start with brainstorming your business ideas and business name. What kind of business model do you want to develop? Are you a brick-and-mortar retail establishment or an e-commerce store?

Do you want to sell products or provide services? Understanding what you want to do in business, let's help you identify business models that excite you.

Every successful business emphasizes creating a business name that brandable. Your business name should reflect your business idea somehow, connecting your product and your company to the market.

#2 Draft a business plan

Your business plan forms the crux of how you intend to launch your company, turn it profitable, and sell it for a large amount of cash.

The business plan breaks down every aspect of your business model. It's a vital document for steering your operations and business directives as your company grows.

Some of the important elements of your business plan include the following.

  • Executive summary – This section is a brief introduction to your business and what you want to achieve with it.
  • Marketing Plan – How do you intend to market your product and services?
  • Financial plan – How much money you think you're going to make with your company. This section is critical for finding investment. Prospective investors will want to see your executive summary and financial plan first.
  • Product and or service descriptions – What is your business selling? What is your competitive advantage?
  • Management and Operations – Details on the team responsible for managing and operating the business.

#3 Find Funding

Speak to any entrepreneur, and they'll probably cite finding funding for their business as their number-one challenge.

While monetary conditions are loose and interest rates are low – don't expect the banks to offer you any help with financing your business.

Funding your business with a bank loan is the riskiest financing option. Chances are, you'll have to pledge your assets as collateral on any amount you loan.

If something goes wrong and you can't repay your loan, the bank seizes the collateral to cover the outstanding amount.

Instead of taking this huge risk, we recommend looking for alternative funding methods for your startup costs.

Here are some of our preferred methods for funding your small business venture.

  • SBA (Small Business Administration) Loan – This government agency can facilitate a low-interest loan for your business, with an excellent approval rate.
  • Refinance – Refinance your home or other business assets to get access to funding.
  • Side Hustle – If your startup costs are low, and a second job can help you save for the financing you need.
  • Downsizing – cutting your expenses helps you save for small business ventures.
  • Life Insurance – Cash out your life insurance policy and use the funds to finance your business.
  • Credit Card – If you need cash fast to fund a small business, consider credit cards. If you can create cash flow in 55-days or less, you'll get your financing interest-free.
  • Partner – Find another investor with the same passion for your business idea. Sell shares in your company in return for funding the venture.
  • Crowdfunding – The internet age can bring you funding for any corner of the globe. Crowdfunding models like Kickstarter offer you an excellent method for raising the funds you need for your business.
  • Venture capital – For larger businesses needing more capital, and tech companies looking for a large valuation, we recommend negotiating with VC partners for funding.
  • Product Presales – Sell a product before producing it and fund your business idea with your presales income. Tesla is an excellent example of this model.

#4 Register your company

Many entrepreneurs and small business owners find registering their company and forming a legal identity exciting. We get it.

If you come from an employment background, forming your business identity and formalizing it with a legal structure seems like you're doing something, making your arrival into the business world official.

The reality is many companies incorporate way too early, and that can cost them in taxes. If you're a small operation with yourself and one or two people, do you really need to incorporate it?

A corporate attorney can give you the advice you need on sorting out your structure and business license.

The only reason you need to worry about incorporating is for tax purposes, and an advisor can point you to the right legal entity for your business structure.

Eventually, you'll need to register with the IRS and get a tax ID number, and an advisor can walk you through the process. When it's time to formalize your business structure, you have the following options.

  • Sole Proprietor – A sole proprietorship means you're running the business by yourself.
  • Limited Liability Company – An LLC provides you with the flexibility and tax efficiency of a partnership, combined with the limited liability features of a corporation.
  • Corporation – If you're setting up a large company, you'll register as a corporation.
  • S-Corp – An S-corporation taxes you on a personal level.
  • Partnership – The best benefits of an LLC and sole proprietorship for co-founders.

#5 Hire an accountant and labor expert

When your company starts making money, you'll need the assistance of an accountant for managing your bank account and bookkeeping, as well as a CPA for auditing your financials.

Understanding the nuances of sales tax and personal income tax can seem somewhat overwhelming. A qualified accountant or CPA can assist you with navigating the landscape of your business finances.

CPAs work with GAAP accounting practices across the United States, complying with regulations set out by the government.

Small business owners and e-commerce merchants must understand and comply with the SBAs sales tax guidelines, regardless of the country of origin of the sale.

Having an accountant and CPA on your team ensures you don't make any financial mistakes with your business taxes that cost your business huge fines with the IRS.

CPAs help with tax returns and sorting out your payroll. You'll also need a legal expert on your side for structuring your company entity and incorporating your business if you decide to go that route.

Labor attorneys can assist you with everything you need to manage your workforce, including compliance with issuing Employer Identification Numbers (EINs) and any other regulations.

#6 Design, optimize, and launch your website

In the digital age, every business needs an online presence. There are plenty of ways to use the internet to your advantage, but the best option is with a website.

Your website acts as a lead-generation tool for your company, drawing interest from prospective clients.

It acts as both an information resource and a marketing platform, and both are vital to your online reputation and bottom line.

You have three ways of designing and building your website. You can choose to do it yourself with a free web-builder program or use a professional design service.

With a web-builder, you get a user-friendly platform for creating your website. It comes with drag-and-drop web tools for easy construction for your site.

However, you can't expect the same functionality and customized design that you get with a WordPress site built by a development team.

While the professional design is the better option, it comes with a higher price tag. You'll also need maintenance on your site throughout the year. Unless you have the know-how to fix and optimize your site yourself, you'll need professional assistance.

Your third option is signing up with B12. This company is a team of design and SEO experts. They offer you a complete end-to-end solution for your company website.

You get all the advantages of professional design, without the steep upfront costs. B12 offers you're a subscription service where you pay a monthly fee for your website and its management.

B12 has affordable pricing, with packages to suit your budget. All B12 sites are fully functional, optimized for SEO, and integrate with tech solutions like CRMs and sales funnels to boost your referral marketing.

Visit B12 for a free AI-assisted template design. If you like what you see, check out the affordable packages, and launch your website in a few weeks!

#7 Create a Marketing Plan

Marketing is the lifeblood of your business. Building a successful marketing strategy is possibly the most important step in the process of founding your company.

Your business plan acts as the overall planning tool for your business. However, many entrepreneurs find that their marketing plan is the bulk of this document.

Your marketing plan identifies your potential customers through creating "buyer personas" you use to identify your target market.

In today's era of digital marketing, you'll be using your website as your primary marketing tool. It captures leads to your business, converting them into your customer base.

The depth of your market research defines your marketing strategy. Ensuring you conduct proper keyword research before outlining your content strategy keeps your marketing on the right trajectory.

Your plan should also include a social media marketing strategy for all platforms, from Facebook and LinkedIn to Reddit and other social forums in your niche.

Learn how to run ad campaigns on these platforms, tracking your results with internal insights tools and Google Analytics.

Download reports and understands the traffic data like sources and page time. You'll see what's working with your website and the areas where you must improve your strategy.

Remember to include a backlinking strategy in your marketing plan. Backlinking involves establishing "dofollow" links between your website and other domain authorities in your market or niche.

By creating a network of links between authorities and your webpages, you get the search engines' attention, boosting your ranking in search and SERP results.

#8 Hiring and firing employees

If you're hiring and firing employees and freelancers for your business, you need to comply with the labor act. Before you decide to onboard anyone in your company, spend some time consulting with a labor attorney.

They'll brief you on all the compliance needed to keep your business on the right side of the labor law. Statutes differ from state-to-state, and what's legal in New York might be different in California (such as minimum wage requirements).

If you employ people on a full-time or part-time basis, you need to ensure you're meeting labor legislation requirements in your state. Violating these laws could result in the risk of a potential lawsuit.

#9 Do you need insurance?

If you're running a brick-and-mortar business, you need insurance. A policy protects your property and livelihood against theft, vandalism, looting, and riots.

Remove your personal liability and risk from your business, especially if you carry expensive inventory, office space, or assets at your business location.

There are various policies tailored to every type of business, from retail to consulting. Speak to a broker or insurance agent about your needs.

#10 Create an exit plan

Setting up your business is hard work, and all your energy goes into getting it off the ground. Your business plan forms the foundation of your business, containing all the elements of your business model.

However, many entrepreneurs and small business owners neglect to define their exit strategy in their business plan. While getting into business might seem like the priority, what are you doing it for in your life?

What are your goals with your business, and when will you judge the venture a success? These are important questions because they help you formulate your exit strategy.

Whether they're in the physical or virtual world, every business owner gets into business to make money – with a specific goal of selling the company for a profit in the future.

Everyone's exit strategy will be different. Some people might want to build a business and keep it for as long as possible. Other entrepreneurs might want to sell it as soon as it starts turning a profit.

Ensure you understand your business goals and incorporate your exit strategy into the process.

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