The Nestle Company was formally launched after Henri Nestle discovered how to remove water from condensed milk, making it possible to create milk chocolate. Caterpillar was formed to meet the needs of farmers who struggled to plow the fertile grounds of Stockton. Every company’s origin lies in trying to do something better than the rest of the market. The reason they last is because the founders have a vision for the business.
Starting your own company is not an easy undertaking, but it’s the dream of almost everyone who works a desk job. How many times have you been sitting at your desk, doing the same task you’ve done many times before, and thinking that you could do it better and more efficiently? That drive is part of what keeps entrepreneurs focused, they see a need in the market and they try to fill that void. The trouble is that some of us don’t take the time we need to plan things properly.
By the time you’re finished checking off every point in this list, you’ll be five steps closer to starting a company that will last.
Prepare a Rock-Solid Plan
The Small Business Administration recommends you start with the simplest method: a business plan. A business plan might feel quaint in today’s age of startup-everything, especially in industries that move quickly. What a business plan offers you is stability.
Four years from now, after you’ve grown some of your client base and developed a moderate income, you’re going to consider how to scale. There will come a time when there is too much work for you and one other person to handle, so you’ll need to expand. That expansion time is where companies sometimes lose focus.
In the case of Groupon, the expansion nearly killed its business model. Sales worked hard to sell the product, but they sold to anyone without thought of who might benefit the most from it. This tarnished the brand, which still exists today, but it seems clear that they drifted somewhat from their initial ideas of sustainable bargains meant to grow businesses.
A business plan helps solve those problems. It gives you space to plot out what your company will look like, who will manage it, how you’ll sell your products. You must also do some market analysis, and make some predictions on the first few years of your company’s life. When you are ready to expand, make sure you return to this model and update it to match your current goals.
Keep Finances Seperate
It’s likely that many who are reading this will begin their business life as a sole proprietor. During this time, it’s tempting to keep your professional and personal accounts together. It’s easy to see why this looks simple, but it’s actually working against you. According to Lexington Law, you need to consider how your personal liabilities might get wrapped up in the expenses of a failing business.
Businesses don’t have credit accounts to begin with, so your personal credit is crucial for some of the initial financing you might need. Once you’ve become a legal entity (more on that in a moment), your business does get a credit account. As a sole proprietor, it may be best to either bootstrap or discuss your next move with a financial advisor.
Whichever route you choose, keep your business expenses separate by asking creditors to report charges under your business name. Of course you should still check every credit report related to you or your business to be sure there are no fraudulent charges on file.
Develop a Pitch
If you want to seek funding, you’re going to need a solid elevator pitch. When written out, your elevator pitch should not exceed more than two lines. Think about how you would tweet your business idea to someone.
Investors are busy people. A lunch meeting usually doesn’t mean lunch, you may be one in a string of people that investor needs to meet with or call that day. Before you even get to that meeting, you’ll need to come up with some way to hook the investor into hearing more about the project. That’s where the pitch comes in. It’s your chance to communicate exactly what you want to do, but it’s different from a mission statement. Statements of corporate goals or missions tend to be philosophical, and a bit abstract. You need concrete benefits and a summary of exactly what you aim to do.
One technique to help finalize is writing them all out, standing in front of a mirror and deciding which pitch feels the most confident.
Find Your First Customer
Before you quit your job, find a customer for yourself. It’s not just a way to get some cash on the side, it’s a big affirmation that you’re working on an idea people will care about.
You can even start this process before you get a business plan. Your first customer will teach you a lot about the skills you’ll need to manage a business. You’ll have to have the gumption to work on a project outside of work hours, you’ll need to budget for that project, report to your superior and learn how to manage client expectations. It’s a big sales process, and it can be fun and financially rewarding.
Register a Business Name and Tax Info
Another recommendation from the SBA is to register all of your applicable tax information. You’ll need an EIN, which takes just a few minutes to apply for, and then you will be able to register with your state and the federal government. Keep in mind that you’ll need to pay small business taxes each year, so it’s a good idea to secure a tax person who can help you out with your new financial burdens.
The business name is the final piece of the puzzle, and how you’ll successfully move into a legal entity. It’s up to you what kind of corporation you’ll run, but being a legal company has several benefits. It’s easier to claim expenses for the company, because all of your expenses are separate, and you can set up payroll accounts to expand and grow.