Small Business Guide to Help You Succeed
If you’ve always dreamed of turning your favorite hobby or side hustle into a full-time job, then small business ownership might be for you. Startup businesses are on the rise as more individuals turn to entrepreneurship as a way to satisfy their personal passions while also earning a living.
Being your own boss has its benefits, but it takes more than an entrepreneurial spirit to achieve your goals. At Origin Bank, our trusted advisors know how to help turn your small business startup dreams into a reality. Check out our step-by-step new business guide to help you succeed.
1. Define your big idea
First and foremost, you need to define your budding business. Experts recommend you start by developing an elevator pitch.
This brief statement should take no more than 60 seconds to deliver and should concisely state what you plan to do, why you plan to do it and why it’s worth someone else’s time.
Start by asking yourself questions like:
- What’s my core concept?
- What’s my reason for starting this business?
- What products will I sell or services will I provide?
- What makes my business idea unique?
- Why will customers want to support my business?
For more tips on how to create a winning elevator pitch including examples and advice on what not to do, check out this article by BusinessNewsDaily.com.
2. Do your research
Now that you’ve clearly defined what you want your new business to be, it’s time to dig in and do market research for your chosen industry. This critical step will help you identify your target market, develop successful launch strategies and create long-term plans for your business model to grow and expand.
Start by learning about your customers and build your business with their needs in mind. Ask yourself:
- What is my target market?
- How do I reach them?
- What will my business model offer that will help solve their problems or fulfill their needs?
- What message will I use to earn their business?
You’ll also need to learn about your competitors. Conduct market research to learn what they do well and look for gaps that your startup can fill in the industry. You should consider:
- Who will my main competitors be?
- What do they do that works well?
- What do they not do well?
- What are they missing in the industry?
- What can my business do better or provide to fill in those gaps?
Not sure where to start? This article by Entrepreneur Magazine has some great information on how to do your research, including platforms to help you find what you’re looking for and tips on how to analyze your findings.
3. Plan for success
Congratulations! You’ve defined your small business idea and you’ve done your market research, now it’s time to take that information and start writing a business plan. Arguably your most important tool, a strong business plan provides a road map for the future and can make or break a small business.
The exercise of developing your plan will force you to think through and prepare for every aspect of your business and will give you a much greater understanding of what you’ll need in order to succeed as a small business owner. It should include what you’ll need to get started and should forecast the first three to five years of your business.
The first step is to create your executive summary. Here, you’ll provide a description of your professional background including specific skills you possess that will support your business venture. Be honest about your strengths and weaknesses, outlining what you bring to the table, as well as what gaps you’ll need to fill through outsourced services or in-house employees.
Next, you’ll create your company description. A good way to start is to use your elevator pitch as a foundation for building your company’s mission statement. From there, you should develop a robust company description including your business goals, detailed methods for achieving those goals and a timeline for reaching them.
With your goals in mind, it’s time to determine which business structure will best support your needs both now and in the future. The type of business structure you choose will determine many components of your business, including day-to-day operations, how much you pay in taxes, and the paperwork you must file on a monthly, quarterly and annual basis. You’ll also need to consider which structure gives you the right balance of flexibility, benefits and protection.
Before you decide what business structure type to use for your small business, you’ll need to understand your options. Here is a summary of the various types of business structures to see which is the best fit for your small business.
- Sole Proprietorship: This is the most common type of business structure and is a good option if you prefer to retain complete control of your business. A sole proprietorship is owned and operated by one person and a separate business entity is not created. This means your business assets and liabilities are not separated, and both business expenses and personal income are listed on your personal tax return. Also, sole proprietors are liable for the business’ debt, liabilities and losses, so if your business goes into debt, your personal assets may be at risk.
- Partnerships: A partnership is a business that two or more individuals own and operate together. There are two types of partnerships:
- General partnerships are owned by two or more people who manage the business together and assume responsibility for the partnership’s debts. They have equal shares of all profits and losses which are taxed at the personal income level.
- Limited partnerships have at least one general partner who owns and operates the business while assuming liabilities for the partnership. There’s also at least one limited partner who serves as an investor for the business with little to no business decision rights. In other words, general partners have control and responsibility while limited partners get ownership without taking on the responsibility and risks.
- Corporation: A corporation, or C Corp, is separate from its owners and is treated as an independent legal entity. C Corps provide you with the strongest protection for personal liability, however they are more complicated than other business structures, requiring extensive recordkeeping and reporting.They are also double taxed, meaning that you will pay income taxes twice on the same source of income - once when the company is taxed as a business entity and again when each shareholder’s personal income is taxed. Experts consider C Corps a good option if you plan to expand your business to add investors as shareholders.
- S Corporation: Also known as an S Corp, S corporations avoid double taxation by passing profits and losses directly to the owner’s personal income without subjecting the business to corporate taxes. S Corps are limited to no more than 100 shareholders, all of whom must be U.S. citizens.
- Limited Liability Company (LLC): A limited liability company has a flexible business structure that lets you take advantage of many of the benefits found in sole proprietorships, corporations and partnership business structures. An LLC separates business and personal liabilities, providing you with liability protection, and all owners share tax responsibilities without double taxation. In many states, LLCs have a limited life and you may have to dissolve or reform your LLC if someone joins or leaves the business. To learn about LLC rules in Louisiana, visit the Louisiana Secretary of State's office If you live in Mississippi, you can find information at the Mississippi Secretary of State's office and in Texas, visit Texas Economic Development to research their requirements.
As you consider which business structure will be best for your long- and short-term business goals, you’ll also need to plan for the personnel needed to help you along the way. Be sure to note key staff and management positions, including which are needed in-house, whether full- or part-time, as well which functions can be outsourced.
Now it’s time to take a deep-dive into the products or services you plan to offer. For this section of your business plan, you should:
- Create a detailed explanation of how your product or service works
- Establish a pricing model for your product or service
- Define your customer base
- Outline your sales, distribution and fulfillment strategies
- Provide an overview of your competition and explain how your product or service is better
Next, you need to supply a simple explanation of what your marketing strategy is and how you plan to execute it. Address how you will persuade customers to buy your products or services and develop plans for customer loyalty that will lead to repeat business. Try to include key marketing messages that can be used to highlight the strengths of your business and focus on what sets your business apart from your competition.
Finally, you’ll need to create financial projections to account for your company’s planned expenses, demonstrating how you’ll generate revenue, and projecting the cash flow you’ll need in order to profit and grow. Most small businesses fail because they didn’t properly plan for initial startup costs, so be as detailed and realistic as possible when outlining your financial needs. Be sure to account for:
- Space – customer facing, back office, manufacturing, assembly, fulfilment and storage
- Equipment and supplies
- Licenses and permits
- Business insurance
- Professional legal services – initial startup, ongoing business consultation
- Professional accounting services – monthly, quarterly and annual financial support for taxes, bookkeeping, reporting, projections, etc.
- Initial inventory
- Employee salaries and benefits
- Advertising and marketing
- Website development, software, cyber security, IT support
It will take time to build a comprehensive business plan, but it’s a worthwhile endeavor and one that will help you understand the intricacies of establishing your small business startup and what it will take to grow and succeed.
If you’re unsure how to start, a quick Google search for “writing a business plan” will turn up plenty of free resources including templates, examples and comprehensive how-to guides like this one from Inc.com.
4. Be advised
Successful entrepreneurs encourage new small business owners to find mentors who have the time and experience to advise you as you establish and grow your business. The best mentors have walked the walk themselves, with insights to help you navigate your industry and a willingness to go with you on your journey. Find your advisors early and seek their guidance every step of the way, particularly as you build your business plan.
5. Passion project
At the end of the day, the best way to ensure that your new business succeeds is to stay true to what drives you. If you’re not passionate about starting a business and committed to doing whatever it takes to succeed as a small business owner, then no one else will be either. Investing your time and energy won’t be easy, but possessing an unrelenting drive will see you through the challenges and help you achieve small business success.
At Origin Bank, we understand small businesses. Our trusted advisors are available to help, with expert guidance and financial products to turn your startup dream into reality. Learn more at Origin.Bank and connect with us today.