The road to being your own boss starts with starting your own business. For many budding entrepreneurs, however, starting a small business from scratch seems easier said than done. The thrills of starting a new business are often balanced out by the challenges and worries that come with any new venture. And yet, the rewards are well worth the hardship. After all, a not-so-surprising 84 percent of small business owners say they would do it all over again despite the challenges, according to insight from Constant Contact.
When starting your own business, it can seem like you’re in way over your head at times. Fortunately, this article can help you navigate those uncertain waters and avoid some common pitfalls that often doom fledgling businesses. Below, we’ll break down a few key knowledge points about starting your own business, along with some helpful examples.
Do Your Homework
You might have a great idea for a small business, but only market research can tell you if it’s one that you’ll actually make money on. Many small businesses in the U.S. have fallen prey to starting out in the wrong market or overestimating demand for a particular product. Here are a few questions you should ask yourself before starting a new business:
- Does demand exist for your product?
- How many people are likely interested in your product?
- Where are your customers and can you reach them?
- How much are your customers willing to pay for your product?
- What are the economic factors among your customer base? These typically include income levels and local employment rates.
- Is the market already saturated?
Gathering demographic information is also key to genuinely understating your market. Age, family size and home ownership stats are useful for further honing your marketing.
How to Incorporate
The next step to consider is how you’ll incorporate or register your business. Choosing your business structure isn’t something anyone should take lightly, as the wrong decision could have immeasurable impacts on how the business operates and, more importantly, how long it lasts.
Many small businesses start out as sole proprietorships or general partnerships. But while both require little to no paperwork to form, they also lack the liability protections that are crucial for keeping a business afloat during troubling times. Registering a business as a limited liability corporation helps shield personal assets from litigation while allowing businesses to take the first “official” step towards being. However, LLC registration comes with a wide variety of fees, permits and tax issues to consider.
S and C corporations are also a popular option for some small businesses, especially those with an eye towards future growth. Registering as an S corporation can help your small business mitigate or even avoid certain taxation and filing requirements. C corporations are more complex, but offer bigger advantages when it comes to retaining profits for reinvestment.
Where to Incorporate
Knowing where to start your business is just as important as deciding how to form it. Each state has its own set of tax codes and regulations to consider on top of the federal government’s own rules and regs. But each state also has its own perks when it comes to starting a new business. Many states, especially those that tout themselves as “business-friendly,” offer a broad range of incentives to attract businesses and savvy investors alike. As a result, being choosy about where you plan on starting your business can help you reap these rewards.
Take Virginia, for example. The Old Dominion offers plenty of noteworthy advantages, in case you’re choosing to create a VA LLC for instance. For starters, new businesses are eligible for a variety of tax credits, including the Major Business Facility Job Tax Credit and Green Job Creation Tax Credit. These credits can help offset startup and investment costs for your small business. Virginia also offers a variety of small business grants. The Commonwealth’s Opportunity Fund (COF) and Virginia Economic Development Incentive Grant (VEDIG) are a couple aimed at job generation and investment, for example.
Delaware’s famously business-friendly environment also makes it an attractive place to start a small business. In addition to not imposing taxes on businesses registered in-state but operating outside of it like foreign LLCs, Delaware also allows for a more compact corporate structure. This means that a single person can comprise an entire corporation, taking up the roles of officer, director and shareholder. Delaware is also home to the Court of Chancery, a unique legal entity tasked with handling corporate cases with judges well-versed in corporate law. As a result, Court of Chancery rulings tend to be more predictable than those from other states.
Wyoming also boasts an ideal climate for starting a small business. Compared to other states, Wyoming is relatively tax free. There’s no corporate or personal state income tax, plus the state lacks franchise taxes, occupation taxes and value-added taxes. On top of that, the state also boasts lower state and local sales taxes compared to other states. Wyoming also offers a variety of tax rebates and incentives to new businesses incorporated in the state, including one exempting the sale or lease of manufacturing equipment from sales taxes. Business incorporation fees are also lower relative to other states in the U.S.
Marketing Matters
It doesn’t matter whether or not you have a good product or service if few people know about it. Poor marketing is one of the more common errors that budding businesses make when starting out. This is where a well-drafted business plan comes in handy. By laying out your marketing cards on the table with a clear, concise and detailed strategy, you can turn those plans into action and stay ahead of the competition.
Also, avoid making broad assumptions about your customer base, especially when reaching out to them via advertising. While social media is the current dominant force in marketing, you shouldn’t ignore traditional advertising mediums. A simple billboard or newspaper ad can surprise you when it comes to audience reach.
Marketing isn’t everyone’s strong suit, which makes hiring a marketing agency one of the best investments you can make. Leaving the marketing to the professionals gives you more time to focus on the core of your business while ensuring it’s not left behind in the marketing race.
Learn from Others
No one person knows everything, no matter how brilliant they are. That’s especially true when it comes to starting a new business. In fact, most of the knowledge comes from those who’ve tried – and failed – to get their businesses afloat.
This is where networking becomes the key to success. Organizations like your local Chamber of Commerce offer countless opportunities to mingle and interact with other, likeminded entrepreneurs and business leaders. By gaining valuable insight from business veterans, you’ll have a better chance of avoiding some of the more common missteps that often lead to business failure.
Another option involves finding and learning from a willing mentor. SCORE and similar organizations offer face-to-face mentoring for budding entrepreneurs, along with a multitude of workshops and online seminars aimed at small business owners.
When faced with uncertainty and a wide variety of unknowns, starting your own business can seem like a scary task. With the above advice, however, you’ll have the basics needed to drive your newfound venture towards success.
