Starting a New Business? Here’s What You Need to Know
Starting a new business can be a huge undertaking. When faced with all of the necessary components, the idea of creating your own organization from scratch can quickly become overwhelming. Between becoming familiar with all the rules and regulations, financial planning, staffing, real estate investigation, and marketing concerns, many people begin to second guess if starting a new business is really the right move for them.
In this article, we will walk you through many of the core aspects and primary responsibilities you will be tasked with, as well as some of the biggest obstacles and challenges you will face when starting a new business.
Financial
The first step of starting a new business is to create a business plan. To do that, you must first answer several questions:
- What type of business is this going to be?
- How large of a business is this going to be?
- Will this be an internet-based, or a brick and mortar business?
- How many employees will you require?
- What type of management structure will you implement?
What is your advertising or marketing strategy?
Once you have answered these questions, the next step is to evaluate your finances. How much money do you have to invest in your business? How much additional money will you need to launch your business? How much money will you need to sustain your business? It is the answer to these three questions that will determine if your business is viable or doomed to fail before you even get it off the ground.
The financial portion of your business plan is comprised of three different parts: the income statement, the cash flow projection, and the balance sheet. An explanation of each section, as well as an analysis, will most likely be required by any investor who may be interested in providing financial backing for your business.
The income statement is essentially the company’s checkbook. It details revenue that has come in, expenses that have gone out, and overall profit for a specific period of time. This report is typically created either monthly, quarterly, or yearly. For new businesses, it is recommended that they generate this report monthly for the first year of operation.
The cash flow projection utilizes the income statement, as well as industry trends, to make an educated assumption about future business through a specific period of time. Much like the income statement, these projections are typically made monthly, quarterly, or yearly. How much cash is projected to flow in, and how much is projected to flow out? Do you anticipate your business’s cash flow will be sufficient to sustain itself during the projection period? An accurate cash flow projection is vital in knowing when adjustments need to be made, or when a short term investment should be sought after.
The balance sheet is the final word regarding the exact worth and value of your business. It reflects every cost, expense, liability, revenue stream, and asset associated with your business. The balance sheet should be updated no less than monthly.
Legal
1. Permits: Every business is required to obtain all necessary permits and licenses. Although this may sometimes feel like a necessary evil, failure to legally obtain permits and licenses can result in significant fines and possible forced shut down of your business.
2. Insurance: This is another mandatory requirement of running a business. However, this is an expense which could potentially save your business in the long run. There are several types of business insurance. Here are some examples:
3. Worker’s comp: Worker’s compensation benefits are paid monthly by the employer. This type of insurance allows for an injured on-the-job worker to continue receiving a paycheck while unable to work.
4. Liability insurance: This type of insurance can protect your business against negligence, or failure to deliver as agreed for a client or customer.
5. Vehicle insurance: If your business makes use of company vehicles for any reason, they will need to be insured, as well.
Physical
If you are opening a brick and mortar business, you will have a whole other set of concerns to work through. Where will your business be located? Will you buy or lease the property? How much construction and renovation is required? All of these things must be taken into consideration when creating your business plan. Even minor details such as landscaping and furniture can have an economic effect on your business.
Branding and Marketing
Once you have determined the niche of your business, you must begin to build value within your brand. This starts with the creation of a mission statement and knowing the story behind your business. The design of a memorable logo is also important. Your logo should reflect what your business is, but lend itself well to placement on signage, websites, social media, and various ad campaigns.
Make Your Business Something You Can be Proud of
The decision to start a new business should not be made without serious consideration. You are committing not just your financial resources, but also your time, energy, heart, and soul into making your business a success. It can be exhausting, but also very rewarding.
