If you’ve always wanted to open your own business, you’re in good company. According to the U.S. Small Business Administration (SBA), there were 30.2 million small businesses (which they define as fewer than 500 employees) in 2018, employing almost 59 million people in fields as diverse as health care, construction, entertainment and agriculture. The fastest-growing segment? Firms employing fewer than 20 people.
“It’s a good time to be starting a business,” says Steve Bulger, regional administrator for the SBA. “We’re seeing growth areas across the board, from online businesses to brick-and-mortar retail.”
Before you order those business cards, though, Bulger says to keep the following tips in mind.
1. Do Your Homework
- Research potential customers. Look into demographic information and consumer spending habits in your area with this tool from the U.S. Census Bureau.
- Find a mentor. Identify others in the same industry and ask for advice—someone who’s already been down the path could help you avoid mistakes. Or connect with a small business advisor on covid-sb.org who can provide guidance on which federal resources are best suited to your business and help you identify opportunities in your community.
- Get feedback. Conduct an informal survey of friends and family, as well as potential customers and people who might be familiar with your product or service. Is it something they would spend their money on?
- Check out the competition. Is someone else or another company doing what you’d like to do? If so, how is what you’re offering different?
2. Write A Business Plan
A business plan forces the entrepreneur to create a strategy and determine what will be necessary to get the business off the ground. It can include things like what makes your business unique and how your product or service may be manufactured, distributed and marketed. Get suggestions on what to include in your plan with free online tools, like this one from the SBA, and remember:
- Not all business plans are the same. A retail store business plan will look different from one that’s selling products online, for example. However, they’ll all have some of the same general categories, like a company description and market analysis.
- Let others read your business plan. As you develop and fine-tune the plan, bouncing questions off a mentor or others could increase your odds of success.
- The plan will change over time. Keep in mind that every business plan should be flexible in order to adapt to changing conditions.
3. Create A Financial Plan
The biggest reason small businesses fail is simple, says Bulger—they run out of money. The solution? Forecast how much capital is needed to launch the business and keep it going for the first six, 12 or 24 months. Creating a financial plan will require asking questions like what the cost of your goods or services will be; what kind of upfront money you’ll need; if you’ll hire employees; and how you can budget enough to pay yourself.
4. Decide How The Business Will Be Structured
What kind of business will it be—a limited liability corporation (LLC), an S corporation, a partnership, a sole proprietorship? There are pluses and minuses to each, and some make more sense than others, depending on the business. A mentor can offer advice about your options, and your state’s department of commerce may also have online resources.
5. Make It Official
Each state, county and city has different requirements for opening and running a business. Check with your local government’s chamber of commerce or economic development office, which may have a checklist for new small businesses. Depending on your location and type of business, you may need to register it with local, state or federal authorities; obtain licenses and permits; and get a tax identification number.
6. Get The Right Insurance
Having the proper business insurance will depend on the business you’re in. If you’re opening a legal or tax service out of your home, say, you’ll need a different policy from someone opening a hair salon or dry cleaning business. In general, though, look into options like business owner’s insurance, which bundles property damage and liability coverage into a single policy. Also, if you use your vehicles for business purposes, you’ll need a commercial auto insurance policy, as a personal auto policy doesn’t cover vehicles for business use.
Starting your own small business is a big deal. Help protect your dreams with business insurance through the GEICO Insurance Agency. Get a quote now!
By Ellise Pierce
Illustrations by Mikey Burton