Starting a business is an exciting time. It could be your way to quit your 9-5 job or start a side hustle. Whatever your motivation is, however, it's important to do your research before you jump into any new venture. There is a lot of work to do behind the scenes.
Before a business idea can be realized, entrepreneurs spend countless hours on the details. You must consider everything from stakeholders to risks, and financing.
This article will discuss nine important things to remember when starting a business.
1. Choose a Business Structure
A legal business structure is what allows you to plan how your company will run. This is the foundation of a successful business.
If you are the only founder of your venture, you can start it as a sole proprietorship or, if you have a co-founder, as a partnership. Other structures include not-for-profit cooperatives and limited partnerships. However, sole proprietorships and partnerships are the most popular.
Sole proprietorships
This structure is the most straightforward and convenient. It does not require any formal filings or registrations, except for the registration of a business name or tax account.
Partnerships
This structure involves more people, which makes it more complex. To set out the roles of each person, how income is divided, and other details, you will likely need to create a partnership agreement.
A Corporation
This structure is still more complex. Registering corporations with your provincial or the federal government is required. You will also need to fill out extensive paperwork and keep a record of all minutes. Because a corporation acts like a separate entity, taxes will be different.
The nature of your business will determine which option you choose. For example, start-ups and beauty salons are often ineligible for incorporation. Talking to an accountant or lawyer will help you decide whether to incorporate or continue your sole proprietorship, partnership, or corporation.
2. Create a Mission and Values
Your business' mission is the heart of your company. Although it sounds cliché, your future decisions will be influenced by your company's mission and value statements.
These ideas can be distilled into an elevator pitch, which can help you explain what sets you apart to potential clients. This can help increase your chances of growing your business from the start.
3. Put Together a Shareholder Agreement
It is essential to have a shareholder agreement in place before you start working with another person. The shareholder's agreement describes your business relationship with other members of the company. This can help reduce conflicts later.
Let's say your business is successful and grows. Your partner suddenly believes that they should have more company ownership, because they have put more effort into the business. You disagree with your partner and believe a 50-50 split would be fair.
This conflict could end up in court if there is no shareholder agreement. The lawsuit could cause you and your co-founder to be distracted. It could also lead to the end of your business and/or your professional relationship.
To understand how to approach a shareholder agreement, it is best to consult a lawyer.
4. Research Start-Up Costs
Entrepreneurs face many challenges because of their start-up costs. It is important to know how much funding you’ll need to begin your business.
Let's say you are starting an IT company. Financing will be required to purchase servers, software, and computers. This could cost you a few thousand dollars.
A beauty salon has a much lower start-up price, however, you will likely need a storefront. This alone could cost a few thousand per month. You might also need to renovate the store, purchase equipment and decor, or even buy new furniture.
Each venture is unique, so it's important to know what your specific business costs will be. This can also help you be ready for unexpected expenses in the future.
5. Find Financing
Once you have figured out the costs of your venture, it is time to plan how to finance it.
Many entrepreneurs begin with their own personal savings. However, you can also take out a loan or look for investors.
With a loan, if your business fails, you may be personally responsible for the debt. This could lead to you losing your home, or even bankruptcy.
Equity financing won’t require you to repay anyone if your company fails. However, it does mean that you will lose some ownership and you may not have the same decision-making power as you did before.
It is important to work with a lawyer before you apply for a loan or partner with an investor.
6. Identify Your Business Risks
It is difficult to start a business because of all the risks involved. You are responsible for the financial obligations of your business, such as paying rent, suppliers and wages. Legal risks are also involved in the provision of your services or day-to-day operations.
For example, suppose you provide bookkeeping services. A single error could cause financial losses for your client, which could lead to them suing you for negligence.
If you own an office, warehouse or storefront, you could also be liable if a client injures themself on your property. Suppose you're a car detailer. Your garage is open to a client who wants to pick up their car. They slip and fall on a pool of water as they walk around the garage. The client could sue you for bodily injury.
These kinds of risks can be mitigated by the right business insurance. A business insurance plan will cover legal fees, damages, court costs and many other expenses. The right policy can also cover interruptions and assets.
7. Start a Digital Presence
You need to have a digital presence, regardless of whether you are an accountant or a tech start-up. For example, you should have a website, social media and a Google profile.
Potential customers can use your website and profiles to find reviews about your business and learn more about your services, which can help them decide whether or not they’d like to use your company.
Consider which digital platforms you would like to be a part of your new business before you start. A professional accounting firm is more likely to be successful on LinkedIn than Tiktok. An e-commerce company selling organic bath bombs may find the reverse. You can also try everything to increase your chances of success.
8. Invest in Technology
Technology is essential for running a business. Many problems that entrepreneurs face can be solved by the right software and hardware. Automating repetitive tasks, such as billing, can allow you to get back to what you care about – building your business.
Although technology purchases can be costly, they offer a great return on your investment. They can help save you time and increase the quality of your service.
9. Acquire Permits and Regulations
Not every venture needs business permits or regulations. For example, private tutors are not required to set these up. However, salons, restaurants, clinics and other businesses are subject to numerous regulations.
Some regulations are very specific. It is important to review them and make sure your business follows them. Otherwise, you risk being shut down by government regulators.
You might also require specific permits for your company. For example, salons will often require a license. Restaurants require permits to sell alcohol or serve food. There are many industries that have their own permit requirements. It is important to know what your business requires.
Although it's exciting to start a business, it's certainly not an easy task. There are many things to consider and tasks you need to complete before you begin.