Your Own Business: The First Steps

What an exciting feeling you must be having at this time. You have finally made the choice to “chuck it all” and go into business for yourself. You dream of the freedom from your unreasonable boss and the wonderful feeling of writing your own paycheck. It’s a lifelong journey that has to start at the first step – the very beginning.

It is my goal to take everything all those books say and boil it down to a real action plan that is a simple as it can be. Basically making it like a recipe. You really don’t need all that filler; you just need to know how to get started. A bunch of fluff isn’t going to help; in fact it slows you down. Instead of reading, you should be doing!

This section will be those most difficult first steps of just getting started. Effectively launching your business and then growing it for success are their own unique steps in the future. For now, I’ll have to assume you have an idea already and have researched it enough to know that it is a good idea and has a bunch of customers clamoring for your product or service. Please be sure you have a good quality product and/or superior service. You are not trying to make a quick buck; you want to have a business that lasts.

I also have to assume that you already have some sort of support network in place, trusted friends, professional advisors like accountants and/or lawyers, and a maybe a mentor with excellent opinions. If you don’t have them, you can pick them up along the way. But you’ll need them all at some point.

You probably want to know what qualifies me for writing about this. Academically, I have an MBA in Entrepreneurship and Marketing. Professionally, I have been a consultant for many entrepreneurs, I worked at a home business franchise company for several years, and I have a few successful entrepreneurial ventures of my own. I even helped my own family launch a very successful online business selling premium pashmina and cashmere products. I’m not a super rich entrepreneur, but I’m successful and happy. My key expertise is online ecommerce, but the following ideas are relevant to starting any type of business.

How to Establish Your Business

This first part is really what most people don’t know how to do. It’s the fundamental process of actually setting up the business. All the good ideas in the world have to start at the beginning. It’s not the fun part, but it has to be done.

It may seem elementary to you, but why haven’t you done it yet?

So, let’s start from the start.

1) Giving Your Business a Name

Your business’ name is important. It is your customers’ first impression and your public identity. You probably want to choose a name that is professional, but also may hold some meaning to you and your potential customers. My personal and professional opinion is to not get too elaborate with your name. Make it simple and direct so you don’t have to waste a lot of time branding or explaining to your customer just what it is you do or sell.

For example, for my family’s business selling pashmina products, we decided to go with The Pashmina Store. There is no question what the business is. Simple and direct…and the URL was available (which is very important).

Most people have a desire to name their business after themselves, using something like their family name, their first name, or their initials. This is a perfectly acceptable; as long as you get the idea across about what it is you are selling. For example, if you are selling raincoats and your name is Smith, you may call your business Smith’s Raincoats or even Raincoats by Smith.

Take the time you need to select on a business name that you’re happy with, says what you do, and has a good URL for a website. You should run your name choices by your friends and family to gauge their reaction and to get their thoughts.

2) Register Your URL

I know, you just decided on a name and have nothing close to a legal business yet. But I suggest snapping up the best available URL (or web addresses) as soon as you can. In this day and age, your website and the URL will be a large part of you business identity. It will also be the source of your email addresses, so getting a good URL matters. We were lucky enough to get http://www.thepashminastore.com for the pashmina and cashmere business, I hope you are as fortunate for your venture.

It is best to investigate available URLs even as you decide on a company name. Try to get the URL of your exact business name, or as close as possible. I suggest getting a “.com” rather than “.net” or other since that is what most people know.

You can research names and register at websites such as Register.com and GoDaddy.com. There is a small fee, but it is worth it if you are serious about your business. These two services even will help you inexpensively set up and host a website and email service.

3) Your Business’ Legal Organization

Next, you will have to determine what legal structure is best for your new business. Early in a business’ life, a sole proprietorship is most common. However, it is beneficial to know the different types of legal business structures before you decide for certain. You’ll need to know all about them as you grow, in any event.

You’ll most likely want to discuss the options with your accountant and/or attorney as well. To get you started, here are the three most common forms of business.

1. Proprietorship. As mentioned earlier, this is the most popular structure when starting a new small business. It is also the easiest to start. In most states and cities, all it typically requires is a D.B.A. (“doing business as”) and a tax ID number, which would likely be your Social Security number.

A proprietorship provides you the maximum amount of control over your business…but it also leaves you the most potential liability. In short, you are personally accountable for your business and all of its debts and legal issues.

2. Partnership. This form of business is common if your business requires you to take on a business partner for expert knowledge or financial needs. A partnership is a legal definition of your business relationship and defines which party is responsible for what aspect of the business venture.

For example, you may be the engineering type who can make the product. Another person may be the talkative type who can sell sand in the desert. Yet another person may be the main financial backer. Whatever your circumstances, a partnership allows you to define each person’s part in the business and put it down on paper in a legal manner.

3. Corporation. This is the most official and potentially complicated legal form of business. This is also the most expensive type of business entity, but it does provide everyone involved the least amount of liability.

It is very common to start as a proprietorship or partnership and then change to a corporation after the business is established and growing.

4) Business Registration

Again, most likely you will start as a sole proprietorship. The process is very simple and inexpensive. But the process can vary a bit between states and even cities and counties.

The goal here is to get your business name registered as a D.B.A, or “doing business as”. You will need this in most areas to open a business checking account. The fees are typically minimal, but vary on your location. Your County Registrar is most likely to be the office you will need to contact to ask about what the process is to get your D.B.A. The methods will vary by location and in some rare instances you may not even have to register. Just be sure to ask about all of the steps to make sure you’re covered.

After you have made some calls or used the Internet to find out the steps in your area, you will most likely need to go fill out paperwork at the government office that handles the registration. The good news is that the paperwork is generally light and the wait is not too long. They or you will be responsible for checking to make sure the DBA name is not already taken, and in many cases you will be able to check on the Internet before you even go.

After the paperwork and name check, you will have to pay a fee, which is generally small. Once it is all done, be sure they give you a notarized copy of your registration as you will need it at the bank to open a business bank account and possibly for other things.

I wish to remind you that what I offer are general guidelines and information to help get you started. It is always a good idea to discuss your options with an accountant or lawyer to determine what is best for you and your individual circumstances.

5) Obtaining a Business Address

This is a step that you can skip if you simply plan to use your home address or an existing business location as your address. But in most cases, you’ll start working out of your home and probably wish to protect your privacy and create an aura of having a larger business by getting a new business address.

This process is as simple as going to the post office or a private mail box center (PMB) such as The UPS Store. I suggest a PMB over the post office because you can usually use a street address and list your box number as a “suite” to help create a more positive image versus having your address be a P.O. Box number.

6) Your Business Phone Numbers

Like the business address, you can skip this step if you plan on using an existing phone number. But you should consider adding a second phone number to your home or office to be used just for your new business. You can even get what is called an “overlay” and put a new phone number on top of your existing phone. It will go to the same phone as you have now, and in most cases you can assign a different ring tone so you know it is for the business.

A toll-free number is also an important item to have, but you don’t have to have it right out of the gate. But studies show that customers are more likely to contact you if you have a toll-free number. They are not that expensive to set up and the charges are based on usage, so if you use it a lot you should be getting more than enough business to cover the expense.

Remember that you phone voice is important. Talk with a smile – the customer can hear that smile. Be sure you have a pleasant and professional sounding message for your voice mail as well. And call back your customers who leave messages as fast as you can. Your competition probably isn’t taking care of them fast, so you should.

7) Business Banking Account Formation

Having a separate business banking account is advised since it will help you keep your financial records straight. It will save you a lot of time during tax season to keep your business and personal spending separate. I suggest using a larger bank, such as Bank of America or Wells Fargo, which serves the business community. They will offer a wider range of services and possibly be a good source of business loans to help fund your growth.

You may want to call several banks in your area to compare their small business service options and the associated fees. Once you decide on the right bank for your needs, make sure you know what paperwork to take when you open the account. In most cases they will require at least your notarized D.B.A certificate.

8) Logos, Business Cards, Letterhead and Such

Some people may tell you to invest lots of money upfront to develop a great logo and then put it on expensive letterhead. These people have never started a business on a budget. While you do want to appear professional, you can do just fine with your own computer and printer while you wait to grow big enough to afford such materials.

Most likely your word processing program or other such program already has a letterhead template. That is fine to use for now. Choose a nice font for your new “logo” and use some color for it, if you wish. Do purchase some nice paper to put it on. Then simply print out as needed.

On your letterhead, make sure you get all of your important information across in a professional way. In general, you’ll want to include your business name, mailing address, phone number, fax number and email address.

The same goes for business cards and envelopes. You can buy nice envelopes and business card stock and use your existing program templates to create professional materials as needed.

Having a designed logo or company motto on your letterhead is a personal choice. Make sure it looks good and reflects the business. Also make sure it looks good when it is made very big or very small since it will be used in various formats.

The Next Steps

Once you finish Step 8, you’re in basic business shape. It is difficult to tell you what to do next since there are so many types of business and different ways to go about it.

In general, you’ll need to start letting people know about your business and getting customers. This may mean developing a website that sells products or promotes your services. It can be as simple as handing out business cards to everyone you meet. Or maybe it is “pounding the pavement” and meeting people to tell them what you are doing.

But there are a few things to keep in mind that relate to any business. The Nike slogan has it right when they proclaim “Just Do It.” Nobody is coming to you, so you have to reach out to them. And it takes time and effort. Yes, you do have to “work” and “sell” no matter what those advertisements may promise for their wonderful business opportunity.

Here’s the “secret” to success: You will have to work harder than your competition, treat your customers better than your competition, offer a better product and or service than your competition, just plain be better than the rest. Yes, that is the secret!

My first job out of college was as an executive recruiter, a headhunter. I was successful at this job. In fact, I was one of the tops in the nation. It wasn’t because I was naturally better than anyone else, it was because I worked harder and I worked consistently. Have a plan for the day, the week, the month, the year…and do it consistently. Get into a routine and stick to it. You’ll get sidetracked along the way, of course, but keeping your efforts consistent will pay off. You’ll make you own “luck.”

Since you are your own boss, you do have a little luxury to make a schedule that fits your lifestyle. If you want to start at 10:00 AM, or play golf for lunch, or work late at night, that is fine. But stick to the schedule and make it your routine. This will help you get over the initial feelings of being scared and overwhelmed and start getting you comfortable with your new professional life and on your way to success.

Along the way, you’ll start to discover what your strengths and weaknesses are. You don’t have to be an expert at anything really; you just have to be average to above-average at a lot of things as an entrepreneur. If there are glaring weaknesses in you business skills, you simply have to work at them. You can read a book, take a class, whatever…but you’ll naturally get better each and every day just by doing your business.

Finally, do not get so frustrated in the beginning that you quit before you even get started. Depending on what you start with and what (or who) you already know it is going to take some time. Even minimal success is probably going to take several months and maybe a year or more. Make sure you are mentally and financially ready for at least a year.

If you’re not ready now, don’t worry. You now know the steps and what to expect to even get started. It is better to take you time and be well-prepared than to rush off and make a mistake that you will regret for years to come.

Launching and growing your business are the essential main steps 2 and 3. But those are whole other beasts that are best discussed at another time. Until then, I wish you the best of luck and hope that your new business is an incredible success.

Seven Biggest Mistakes Small Business Owners Make in Their Business – and What to Do About Them

Do you remember when you first started your small business? Remember the excitement? Do you recall how it felt when the phone rang or someone walked in the door? First, let me commend you on entering a profession that is true to your passion, and furthermore, one that serves others.

In this article, I’m going to share with you some of the common mistakes that small business owners often make. If you’ve fallen prey to one or more of these, it simply means that no one told you about them yet. Once you know, then you can focus on solutions. And, perhaps you’ll find that you are already entirely on track, and this may re-affirm that you are headed the right way.

MISTAKE #1:

OBSESSION WITH THE SERVICES YOU PROVIDE OR THE PRODUCTS YOU SELL.

In business, we ideally view the products and services we sell as generic “black boxes” that either make money or don’t. Imagine you own a gas station – the old fashioned kind that just sells gas and maybe fixes cars (no mini-mart inside).

One day, a salesman comes to you and says “Hey, I want to put a soda machine in front of your gas station. You can buy cans of soda at $0.25 each and sell them for $1.25 each – you make $1.00 on every can of soda someone buys.” He offers to rent you the soda machine for $100 per month as long as you agree to have him be the one you buy soda from. You agree and find that you sell 20 cans of soda per day, or 600 per month. In other words, you make $600 per month selling soda, then pay the sales guy $100 of that for renting you the soda machine. In the end, you make $500 profit each month.

So, what does this have to do with running a small business?

You probably couldn’t care less about selling soda, may not drink it and may even emphasize how unhealthy it is for people. Exactly. And the gas station owner feels the same way. He couldn’t care less about soda or soda machines, but as a business owner, it’s a “black box” that earns him $500 per month in cash. He puts some stuff into the black box (rents the machine for $100 and fills it with soda) and money comes out of it ($500 in profits).

THE SOLUTION:

For any business to be truly successful, the owner needs to be able to step back and view it as a collection of “black boxes” that either generate money or support another black box in generating money. Evaluate each major method or strategy your company uses to make money. Let go of emotional attachment to things like favorite services or products – if they don’t make money for you, change them so they do, or eliminate them. If you can’t bring yourself to do this, acknowledge that this is an area of charity or contribution that your company participates in. But whatever you do, be honest with yourself.

Remember, if your business doesn’t make money, it won’t be around to help anyone in the future. Keep it profitable!

MISTAKE #2:

BEING IN A RUSH.

Business usually takes time. Our society is so wrought with instant gratification, we often overlook the fact that things take time. Just as the farmer can’t plant crops too late in the season, then try to “rush” them to grow, certain aspects of business take time. If you are trying a new type of advertising strategy, it might take three months before you can tell if it works or not.

THE SOLUTION:

Learn from someone else who has done it successfully before, and ask them how long they waited before seeing results. If we plan ahead and act early, we won’t be in such a rush at the end. For example, don’t think about holiday promotions in November, instead plan them in September in case some actions need to be taken early. We can often save money by starting early as well – after all, have you ever been to a workshop that cost more if you signed up last-minute than if you registered a month or two in advance? (Hopefully you use this strategy yourself with any programs you offer.) As you get better at a particular aspect of business, you’ll be able to do it faster, but in the beginning, it takes time. Be patient, evaluate your results and make changes as needed.

MISTAKE #3:

BELIEVING THAT TECHNICAL SKILL IS THE KEY TO SUCCESS.

So often, we believe that with lots of ability in our art we will succeed. We assume that if we enhance our skills and have perfect form that this will make our business more successful. Sadly, this has relatively little truth to it in business. Technical skill alone is not the key to success, and in fact, technical skill is only a small part of success. If business is slow, we often tend to consider getting more training, another certification or something like that. The real solution usually lies somewhere in business skills and management. Ask yourself about these areas of your business: Marketing, Sales, Accounting & budgeting, Customer service. I certainly don’t want to minimize the value of your mastery of your field – this is definitely important. Rather, I am emphasizing that in business, other things usually count more. I know it doesn’t seem right that someone who doesn’t have nearly the ability that you do should have all the clients, but that is generally the reality in business.

Consider the example of the most successful restaurant in history, McDonalds. Could you cook a better burger than they do? Of course – anyone could. It’s not their skill in making burgers that makes them such a success. They do the other stuff so well that people have learned to like their food.

THE SOLUTION:

Just as you can watch someone’s form and point out specific errors that they are oblivious to, you also have the potential to see your business in the same way. With the right perspective and knowledge, a business owner can very specifically identify a problem area and what needs to change. But only in rare cases is the problem actually the technical skill of services being delivered to the customer.

MISTAKE #4:

BEING SO EXCITED THAT YOU ARE DRIVEN BY EMOTIONS, NOT LOGIC.

Sometimes we get so attached to an idea – maybe one we created ourselves – that we forget to do a logical analysis. I remember a small store that sold specialty food products. The owner loved spicy food, so decided to offer hot sauces from all over the world. He expanded the concept such that a great deal of his inventory was essentially hot sauce. For months, he didn’t acknowledge that his sales had significantly decreased, because he was so excited about the idea that people love hot food – he loved hot food. Less than a year later, he was sadly forced to face the reality when he could no longer pay his bills and had to close the business.

It’s always easy to see it in other people, but very hard to see in ourselves. Is there a product service that you created, which for whatever reason has few sales? Consider areas of business where you are being guided by emotions, not facts.

THE SOLUTION:

When we are emotionally driven in business, our strengths become weaknesses. Self-confidence becomes arrogance, ambition becomes ruthlessness, quick-thinking becomes impulsiveness, strategic risk-taking turns to gambling. And one clear sign that emotions are taking over is that in discussions of a given topic, there is a clear need to “be right” instead of a striving to do what is best for the company.

The solution is simply to back away and treat it like the “Black box” we discussed earlier–it’s just a soda machine that makes money or it doesn’t. Another technique is to ask someone else for their honest opinion with the understanding that you will not interrupt them, or offer any feedback other than asking informational questions. Remember, successful business is driven by facts, not emotions.

MISTAKE #5:

NOT HAVING A BACKUP PLAN.

This one is pretty straightforward. Any time you try something new, at least have a rough idea of what you will do if it doesn’t work. When an airplane flies toward it’s destination, before it even takes off, the pilot always selects an alternate airport in case he can’t land at the original destination. And, he makes sure he has enough fuel to get there. He doesn’t plan all the details, but just knows what the alternative is and that there’s enough gas in the tank to make it.

THE SOLUTION:

I encourage you to do the same thing with any new business tactic. If you take a lot of money to invest in new product inventory, expecting you can make a killing selling it, have a backup plan. What would you do if it didn’t sell? What if it was a total disaster? In a case like this, you might decide that you could sell it at half it’s value to a large retailer, but at least it wouldn’t be a total loss. You want to make sure that you’re not going to go out of business if an idea doesn’t work. Always have a rough idea of a backup plan.

MISTAKE #6:

RUNNING OUT OF CASH.

This one sounds obvious, so let me clarify. This mistake is about having a plan for what needs to be done to create a successful business, but running out of money before it gets there. For example, suppose a new yoga studio owner has estimated that it will cost $150,000 to open the yoga studio, buy all needed equipment, supplies and inventory, and pay operating expenses for one year. After this point, the owner expects to have enough students, clients and customers that she will be able to cover the cost of all her monthly expenses (including paying staff and herself) and begin paying back the $150,000.
However, imagine that getting things going ended up costing $200,000 and even at that, there isn’t much left for an advertising budget. After one year rolls around, she’s not even close to making enough money each month to pay expenses (in part because she didn’t have money for advertising), let alone repay the debt. She has run out of cash.

THE SOLUTION:

First, make your cost projections worst-case. A quick way of doing this is to figure out best-case, then double it. No kidding, you’ll be pretty close to the actual cost about 80% of the time. If you think it will cost $10,000, then make sure you have $20,000 available (but still try to do it in $10,000 and in fact, base your whole budget on $10,000). Next: Plan, Plan, Plan! So many people dive in without a plan, only to find out they spent lots of time and money on things that do not generate any return. Bottom line: Expect it will take twice as much cash as you think.

MISTAKE #7:

RE-INVENTING THE WHEEL.

Lots of people (and companies) have opened and operated successful businesses for years. There are people who know the answers to questions that frustrate you and problems that cost you money. One reason franchises are so successful is that they give a business owner answers to nearly every question regarding running the business.

THE SOLUTION:

So, don’t re-invent the wheel. I can’t emphasize this enough. There are people who know how to run a small business very profitably. Find them. Observe them. Talk to them. Model them. They may even be willing to actively mentor you. If you find a successful business similar to yours in a non-local area (that is, they don’t compete with you), the owner may be more than happy to share. If you need to hire consultants for marketing, web site design, business planning, accounting, and so forth, then do it. It’s expensive up front, but once you learn the right way to do things, you can either take it over on your own or hire someone lower-priced and tell them what to do.

Bottom line: If someone else has done it before successfully, learn from them before trying to figure it out on your own.

IN CONCLUSION:

There you have it – the seven most common mistakes small business owners make in business. Few of us ever had a class or mentor to teach us how to run a business. Unfortunately, 8 out of 10 small businesses will fail because of this lack of experience. Do whatever you have to in order to do it right (remember, don’t re-invent the wheel!) Read books, get online courses, find a mentor, get a good business coach and model a successful business just like the one you’re trying to do. There are so many people who are really successful at running a small business.

Learn from the experience of others and be one of the one’s who has passed the stage of hard work, and now enjoys doing just what you want to in your business.

To your success!

Failing to Plan Your Business Properly Can Be the Death Sentence to Your Business

A great business plan can only get your business so far, but having the business capital to go along with that business plan can bring your business to new heights. It can also go the other way as a great plan is the first step to obtaining the capital you are seeking for your business.

Failing to plan your business properly can put your business in with the 90% of businesses that fail. Developing a business plan is hands down the most important step any business can take if they want realize true success. The business plan will be used by potential lenders or investors to determine where your business is going and how you are planning on getting there. A well written business plan will assist you greatly when you are seeking financing. Both lenders and investors look at your business plan differently. The lender is mostly concerned with whether you can repay the loan, and the investor wants to know how far you can take the business to maximize their potential earnings on the investment.

The first, and probably most important, part of your business plan will be the Executive Summary. This is where you grab the attention of the lender by providing an overview of your product or service, the market, your niche, the management, the mission, company structure, funding amount requested, use of funds, the proposed terms, and collateral offered. The lender or investor will not look at your business plan further if you don’t grab their attention with the Executive Summary.

The next item you will need to include will be a narrative, which is also known as an “elevator pitch.” A narrative simply defines what your company does in 20 seconds or less. Include the history of your business and your idea next. The reader needs to know a little bit about the history of this idea before they pour their money into your business. Try and answer the 5 W’s here; who, what, when, where, and why and it should assist you greatly when completing the history section.

A one sentence mission statement will follow. This is where you talk about what your business is about in one sentence. It’s important to not go quickly through this mission statement, as it gives your business a unique identity, so you need to make sure you do a great job with it. The stage is the next section of your business plan. This is where you discuss where you are at in the process of obtaining business funding.

The market niche section gives you the opportunity to show which niche your business is exploiting. You will want to disclose information on what sets you apart from the competition. This part will need to be very detailed to help the lenders and investors learn as much as possible about your business. Next to follow in your business plan will be a market research report. In this section you will do research to back up your claim that there is a need for your product or service. The financial overview is next. In this section you will include information including what your gross sales, net income, net worth, etc. should be in years one, two and three. This is just an overview and later in the business plan you will provide more accurate projections.

This will give you plenty of information to get you started on putting together a business funding request. In my next article I will cover some of the other aspects of your business plan. For a full version of an excellent business funding guide do a search on Google, Yahoo, or MSN for “Business Funding Workbook”.