Starting a new business can be an exciting experience, but it can also quickly become stressful as you step out into the unknown. Luckily, there are many great resources available to first-time small business owners to help start them on the road to success. Here are some helpful steps for starting a business.
Sadly, a large number of businesses fail each year in the U.S. According to the Small Business Administration, approximately 20 percent of businesses fail within their first year. Only about half of small businesses manage to survive their five-year anniversary. However, if you complete your due diligence and go in armed with as much information as possible, your business will have a much better chance at success.
To start, research the market of interest to you. Is there truly a need for your business? Do you have the appropriate amount of capital available to you to be successful? Do you have the right team in place to help you succeed? If you need help answering these questions, the Small Business Administration offers data on a variety of different topics, including free business counseling.
A business plan is a document that summarizes the objectives of a business. It contains detailed operational and financial plans that will show how you plan to reach your business goals. Consider it your roadmap to business success.
Your business plan should include the information you discovered when you conducted your initial research:
Finally, and most importantly, your financial plan will help determine your initial investment needs as well as long-term funding requirements. It will help when approaching potential investors or meeting with banks for financing, if needed.
You will also need to set up your business structure, which means deciding on your type of business. Your business structure will directly affect how much you will pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability. At this point, you should take your business plan to an accountant or attorney to discuss the pros and cons of each different business type:
Once you have decided on the type of business structure you will use, it’s time to get a tax ID number. Also known as your employer identification number (EIN), this number helps the IRS keep track of your business for tax purposes. You are legally required to get an EIN if your business is established as a corporation or partnership. Sole proprietors are also required to have an EIN if you plan on hiring employees. You can obtain an employer identification number easily and for free by applying online at the IRS website.
You will also need to register your business in your specific state, as most states will require you to pay income and employment taxes for your business. Some states have additional requirements, such as unemployment insurance. Again, your attorney or accountant can help you better understand your state’s specific requirements.
Once you have all your ID numbers and have discussed your plans with your accountant, you are ready to set up your financial documents and bank accounts. Based on your previous decisions, your financial documents can be as simple as a few spreadsheets or as in-depth as hiring an in-house accountant or bookkeeper. At the very minimum, you should keep:
Once you have your tax numbers and business finances set up, make sure to stay up-to-date with your tax obligations and changing tax laws. It’s a good idea to have standing appointments with your accountant or bookkeeper to make sure nothing is missed.
No matter what type of business you own, you will almost certainly need to accept credit and debit card payments. According to a 2018 report, millennials who are currently between the ages of 26 and 34 have driven the recent growth in credit card use. Accepting credit cards will play a key role in the success of your business.
Your business will be able to accept credit cards by following a few simple steps:
Your location will also be an important factor in your business’ success or failure. Will foot traffic be important for business? Make sure to look for a storefront in a busy town center. Is there an area in town that offers tax incentives if you establish your business there, such as an enterprise zone? Consider enlisting the assistance of an experienced commercial real estate professional. They will be familiar with the areas you are considering and will know if locations will be coming to the market soon. You should also keep in touch with your tax professional, as there could be tax implications for the location you select.
Different types of businesses may require special licenses or permits. For example, if you open a restaurant, you will require a business license, a liquor license if you plan to serve alcohol, a food service license from your local health department, and a food handler’s permit to guarantee your restaurant meets food sanitation, storage, and preparation regulations. Permits and licenses will vary based on your state and local area, so be sure to make sure you look into what you need. Consider joining your local Commerce Organization, which can be a great source of information.
It is time to set up shop! You have everything you need to succeed. It may feel like a daunting list of “to dos,” but what is most important to remember is to stay organized and seek the assistance of other professionals as the need develops. Don’t be afraid to ask for help!
If you’d like to learn more about getting started with credit card processing, schedule a free consultation with our merchant services team today.
Disclaimer: The information provided above is for educational purposes only and does not constitute business, legal, or financial advice.