1. The Law
The most important thing to think about before you start your own business is your entity type. This will create protection for yourself and family, while giving you direction for essential company functions and roles. A corporation or limited liability company (LLC) will ensure that your personal assets are protected as you launch and grow your business. Additionally, these structures will give you a foundation for your daily and long-term operations by providing selected individuals with responsibilities and powers. Entity formation can also provide privacy in certain states and tax savings, depending on your structure.
Remember, forming an entity is just the beginning. You need to consider additional aspects of the law, such as business licensing, specialty licenses (e.g. food or liquor licenses), equipment licensing, or any other additional state or city licenses. Knowing the legal requirements of your business ahead of time can save you hours of frustration later. Not to mention, this can also ensure that your start-up fees are accurate and are being projected into any annual renewal costs.
- Your Expenses
One of the biggest mistakes new businesses make is underestimating operating expenses and start-up costs. It’s often the small costs that add up to hundreds and then to thousands of dollars in expenditures. Over time these charges can cut into profits, making your business more difficult to manage.
Another oversight by new entrepreneurs is not allowing an adequate contingency budget for the unexpected. As a start-up business, you will continually have unexpected expenses. If you don’t have the proper money set aside for these items, you can quickly find yourself deep in debt.
Take the time to set up your financial reports, accounting for operating expenses, loans, marketing dollars, incidentals, contingencies, payroll, etc. Develop an accurate forecasting model where you can detail your costs and place controls as needed. If you do this in advance, you’ll be able to successfully launch your business and have the funds to watch it grow!
- You Need a Business Plan
Developing a proper business plan can be a daunting task. While it might seem overwhelming, creating a business plan is one of the best things you can do before launching your business. Business plans make you spell out exactly what your company is and its purpose. While writing it, you’ll have to ruminate on every aspect of developing your products and services, including marketing, human resources, finances, operations, place of business, strategic growth opportunities, and much more. This will give you the opportunity to ensure that you are making educated decisions and properly aligning your expectations with the market for your products/services.
Over time, you can continually update your business plan as your endeavors change or new opportunities present themselves. It will be a worthwhile tool to have during the start-up phase, while also providing useful insight as you manage expansion initiatives.
- Understand Your Strengths and Weaknesses
Before launching your big idea, it’s important to take time to focus on understanding your strengths and weaknesses. Entrepreneurs are notorious for wanting to do it all. However, you need to start thinking about the best way to utilize your time and where to focus your energy. There will inevitably be things you can’t accomplish in the timeframe you want, so you have to learn how to prioritize and spend time working toward the million-dollar ideas, not the ten-dollar tasks.
Take note of how you currently spend your time, reviewing your peak hours of production juxtaposed by the hours that you need to fulfill your personal obligations. Creating a balance will be crucial to your success. Once you have this in place, you can start to plan your day in a fashion that allows you to take advantage of every hour.
- Be Prepared for Failures
Unfortunately, yes, you will have failures along the way to becoming a successful entrepreneur with a thriving business. If you prepare yourself ahead of time, you’ll be able to start mentally overcoming these obstacles. The biggest challenge will lie in your ability to continue your pursuit, while suffering hardships along the way. Persistence is essential to building a business that will stand the test of time.
As you write your business plan, try to determine weaknesses or flaws in your systems, products, marketing tactics, etc. If you see the potential failures now, you’ll already start to overcome them with other plans or ideas. Keep yourself educated about changes that could negatively impact your business.
When you hit the point that you stumble and something fails, all you have to do is focus on finding solutions and generating new ideas for success!