How to Start buissness

How to Start a Small Business
Setting Out the Basics Writing a Business Plan Covering the Legal Side Managing Your
Finances Marketing Your Business Launching your Business
Edited by Ben Bardot, Eliabeth !ouglas, "unt B#, Ben $ubenstein and %& others
"re you one o' those (ho drea) o' o(ning your o(n business* You+ll be your o(n boss, and the
ca,tain o' your destiny-.)aybe even a ca,tain o' industry# /s it hard* Without a doubt# /s it
challenging* "bsolutely# !o you have to be (ealthy and (ell0educated (ith a lengthy resu)1* 2ot
at all3 Can you do it* "s the )agic 40ball says, 5"ll signs ,oint to yes35 So ho( do you do it, and
)ake it (ork* Plan, ,lan, ,lan3 6here are so)e tried and true (ays head do(n the ,ath o' creating
your o(n business, and there is no ti)e like the ,resent to get started3
Steps
Part 1 of 6: Setting Out the Basics
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Have an idea. /t )ight be a ,roduct you+ve al(ays (anted to )ake, or a service you 'eel
,eo,le need# /t )ight even be so)ething ,eo,le don+t kno( they need yet, because it hasn+t
been invented3
• /t can be hel,'ul-.and 'un-.to have ,eo,le (ho are bright and creative 8oin you
'or a casual brainstor)ing session# Start (ith a si),le 9uestion like: 5(hat shall (e
build*5# 6he idea is not to create a business ,lan, 8ust to generate so)e ideas# Many
o' the ideas (ill be duds, and there (ill be 9uite a 'e( ordinary ones, but a 'e( (ill
e)erge that have real ,otential#
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Define your goals. !o you (ant 'inancial inde,endence, eventually selling your business to
the highest bidder* !o you (ant so)ething s)all and sustainable, that you love doing and
(ant to derive a steady inco)e 'ro)* 6hese are the things that are good to kno( very early
on#
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reate a wor!ing name. You could even do this be'ore you have an idea 'or the business,
and i' the na)e is good, you )ay 'ind it hel,s you de'ine your business idea# "s your ,lan
gro(s, and things begin to take sha,e, the ,er'ect na)e )ay co)e to you, but don+t let that
hinder you in the early ,hases-.create a na)e that you can use (hile you ,lan, and don+t
)ind changing later#
• For a bit o' 'un, take a cue 'ro) the Beatles, (ho o'ten use 'un na)es 'or a song
be'ore it is 'inalied, like Yesterday, (hich had the (orking title o' 5Scra)bled
Eggs#5
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Define your team. Will you do this alone, or (ill you bring in one or t(o trusted 'riends to
8oin you* 6his brings a lot o' synergy to the table, as ,eo,le bounce ideas o'' each other#
6(o ,eo,le together can o'ten create so)ething that is greater than the su) o' the t(o
se,arate ,arts#
• 6hink o' so)e o' the biggest success stories in recent ti)es include >ohn Lennon and
Paul McCartney? Bill @ates and Paul "llen? Steve >obs and Steve Woniak? and
Larry Page and Sergey Brin# /n every case, the ,artnershi, brought out the best in
both sides o' the e9uation, and every one o' the) beca)e billionaires# /s a
,artnershi, a guarantee o' being a baillionaire* 2o, but it doesn+t hurt3
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hoose wisely. When choosing the ,erson or ,eo,le you+re going to build the business (ith,
be care'ul# Even i' so)eone is your best 'riend, it doesn+t )ean that you (ill ,artner (ell in
a business o,eration# 6hings to consider (hen choosing your co0leaders and su,,ort cast
include:
• !oes the other ,erson co),le)ent your (eaknesses* Or do both o' you bring only
one set o' the sa)e skills to the table* /' the latter, be (ary as you can have too )any
cooks doing the sa)e thing (hile other things are le't unattended#
• !o you see eye to eye on the big ,icture* "rgu)ents about the details are a given,
and are i),ortant 'or getting things right# But not seeing eye to eye on the big
,icture, the real ,ur,ose o' your business can cause a s,lit that )ay be irre,arable#
Be sure your tea) cares about the and buys into the ,ur,ose as )uch as you do#
• /' intervie(ing ,eo,le, do so)e reading on ho( to s,ot real talent beyond the
certi'ications, degrees or lack thereo'# Peo,le+s innate talents can o'ten be so)e(hat
di''erent 'ro) the conventional education strea)s they+ve ,ursued Bor 'ailed toC and
it+s i),ortant to look 'or 5click5 Byou get along (ith the)C and latent talents as )uch
as ,a,er credentials#
Part " of 6: #riting a Business Plan
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reate a $usiness plan# " business ,lan hel,s to de'ine (hat you think you need to launch
your business, large or s)all# /t su))aries the sense o' your business in a single docu)ent#
/t also creates a )a, 'or investors, bankers, and other interested ,arties to use (hen
deter)ining ho( they can best hel, you and to hel, the) decide (hether or not your
business is viable# 6here are seriously good books available on (riting business ,lans that
cover )any cha,ters, and you should avail yoursel' o' at least one o' these as a guide
Bbooksho,s, libraries and online are good ,laces to 'ind theseC# /n a nutshell, your business
,lan should consist o' the 'ollo(ing ele)ents:
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ome up with an e%ecutive summary. 6here (ill need to be several basic ,arts in your
business ,lan# 6he 'irst is the eDecutive su))ary# !escribe the overall business conce,t,
ho( it (ill be )onetied, ho( )uch 'unding you (ill need, (here it stands currently,
including its legal standing, ,eo,le involved and a brie' history, and anything else that
)akes your business look like a (inning ,ro,osition#
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#rite your $usiness description. !escribe your business )ore s,eci'ically, and ho( it 'its
into the )arket in general# Who (ill you be selling to, and ho( (ill you deliver your
,roduct* /' you are a cor,oration, LLC, or sole ,ro,rietor shi,, state that, and (hy you chose
to go that route# !escribe your ,roduct, its big 'eatures, and (hy ,eo,le (ill (ant it#
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ome up with some mar!eting strategies. You must kno( your )arket i' you are to be
success'ul, so s,end a great deal o' ti)e analying 8ust (ho it is that (ill (ant your ,roduct,
and ho( you ,lan on a,,ealing to the) to take cash out o' their bank account and give it to
you# What is the sie o' your )arket, (ill there be o,,ortunities to eD,and the initial )arket,
and (hat are your sales ,otentials* When you understand these variables, you (ant to sell
the) to the ,erson reading your business ,lan#
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Do a competitive analysis. "s you develo, the above sections, you (ill learn (ho your key
co),etitors are# Find out (ho is doing so)ething si)ilar to (hat you are ,lanning, and ho(
have they been success'ul# >ust as i),ortant is to 'ind the 'ailures, and (hat )ade their
venture 'all a,art#
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#rite your development plan. Fo( (ill you create your ,roduct* /s it a service that you
are o''ering, or i' it+s )ore co),leD-so't(are, a ,hysical ,roduct like a toy or a toaster-
(hatever it is, ho( (ill it get built* !e'ine the ,rocess, 'ro) sourcing ra( )aterials to
asse)bly to co),letion, ,ackaging, (arehousing, and shi,,ing# Will you need additional
,eo,le* Will there be unions involved* "ll o' these things )ust be taken into account#
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Plan your operations. Who (ill lead, and (ho (ill 'ollo(* !e'ine your organiation, 'ro)
the rece,tionist u, to the CEO, and (hat ,art each ,lays in both 'unction and 'inancials#
Gno(ing your organiational structure (ill better hel, you ,lan your o,erating costs, and
'ine0tune ho( )uch ca,ital you (ill need to 'unction e''ectively# Gee, in )ind that your
business (ill continue to evolve and that this (ill be a rough idea o' (ho is needed to kee,
things 'unctioning? as the business gro(s, you+ll likely )ake changes to the hiring ,lans to
'it (hat is ha,,ening at the ti)e# "lso, in a nu)ber o' cases, the 5sta''5 is you and
(ho)ever you can consult, such as your la(yer and accountant# 6his is 'ine, as long as you
sho( that you+re ,re,ared to ,ay 'or eDternal advice and hel, until your business is ready to
take on sta''#
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over the financials. Succinctly, this describes ho( )uch you ,lan on s,ending, and ho(
)uch you+re )aking# Since this is the )ost dyna)ic ,art o' your ,lan, and ,erha,s the )ost
i),ortant 'or long0ter) stability, you should u,date this )onthly 'or the 'irst year, 9uarterly
'or the second year, and then annually a'ter that#
Part & of 6: overing the 'egal Side
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onsider finding an attorney or other legal advisor. 6here (ill be )any hurdles to lea, as
you go 'ro) (orking sti'' to over(orked and under,aid s)all business o(ner# So)e o'
those hurdles (ill be co),osed o' stacks o' docu)ents (ith rules and regulations, ranging
'ro) building covenants to city ordinances, county ,er)its, state re9uire)ents, taDes, 'ees,
contracts, shares, ,artnershi,s, and )ore# Faving so)ebody you can call (hen the need
arises (ill not only give you ,eace o' )ind, it (ill give you a )uch0needed resource (ho
can hel, you ,lan 'or success#
• Choose so)eone (ith (ho) you 5click5 and (ho sho(s that he or she understands
your business# You (ill also (ant so)eone (ith eD,erience in this area, as an
ineD,erienced legal advisor could lead you to legal trouble or even 'ines and ,rison
ti)e#
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(et an accountant. YouHll (ant so)eone (ho can de'tly handle your 'inancials, but even i'
you 'eel you can handle your o(n books, youHll still need so)eone (ho understands the taD
side o' running a business# 6aDes (ith businesses can get co),licated, so youHll need Bat a
)ini)u)C a taD advisor# "gain, no )atter ho( )uch o' your 'inances theyHre handling, this
should be so)eone trust(orthy#
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)orm a $usiness entity. YouHll need to decide (hat ty,e o' business entity you (ant to be,
'or taD ,ur,oses and ho,e'ully to eventually attract investors# Most ,eo,le are 'a)iliar (ith
cor,erations, LLCs, etc#, but 'or the vast )a8ority o' s)all business o(ners, you (ill need to
'or) one o' the 'ollo(ingI7J:
• " sole ,ro,rietorshi,, i' you (ill be running Bnot including e),loyeesC this business
on your o(n or (ith your s,ouse#
• " general ,ro,rietorshi,, i' you (ill be running this business (ith a ,artner#
• " li)ited ,artnershi,, (hich is co),osed o' a 'e( general ,artners, (ho are liable
'or ,roble)s (ith the business, and a 'e( li)ited ,artners, (ho are only liable 'or
the a)ount in (hich they invest in the business# "ll share ,ro'its and losses#
• " li)ited liability ,artnershi, BLLPC, (here no ,artner is liable 'or anotherHs
negligence#
Part * of 6: +anaging ,our )inances
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over your startup costs. Fo( are you going to 'inance your business initially* 6he bank,
venture ca,italists, angel investors, S)all Business "d)inistration BSB"C, your o(n
savings: these are all viable o,tions# When you start a business, be realistic# You (ill
,robably not roll out o' the gate )aking 7KK ,ercent o' (hatever you ,ro8ect, so you need to
have enough ready reserve to 'und things until you are really u, and running# One o' the
surest roads to 'ailure is under0ca,italiation#
• $e)e)ber the 'our F+s 'or invest)ent: 'ounders B,eo,le (ho share your ideaC,
'a)ily, 'riends and 'ools
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Have more than the minimum. You )ay deter)ine it (ill take LAK,KKK to start your
business, and that+s 'ine# You get your LAK,KKK, buy your desks and ,rinters and ra(
)aterials, and then then the second )onth arrives, and you+re still in ,roduction, and the rent
is due, and your e),loyees (ant to be ,aid, and all the bills hit at once# When this ha,,ens,
your only likely recourse (ill be to ,ack it in# /' you can, try to have the reserves 'or a year
o' no inco)e#
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Pinch those pennies. Plan to kee, ,urchases o' o''ice e9ui,)ent and overheads to a
)ini)u) (hen starting u,# You do not need a)aing o''ice ,re)ises, the latest in o''ice
chairs and ,ricey art(ork on the (alls# " broo) cu,board in the best address can be
su''icient i' you can art'ully steer clients to the local co''ee sho, 'or )eetings every ti)e
B)eet the) in the 'oyerC# Many a business start0u, has 'ailed by ,urchasing the eD,ensive
gi)os instead o' 'ocusing on the business itsel'#
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runch some num$ers and plan ahead. Chart your (ay to 'inancial success# What ,rice
do you intend to sell your ,roduct or service 'or* Fo( )uch (ill it cost you to ,roduce*
Work out a rough esti)ate 'or net ,ro'it-'actoring in 'iDed costs like rent, energy,
e),loyees, etc#
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hec! out your competitors. Gno( ho( )uch are they selling a si)ilar ,roduct 'or# Can
you add so)ething to it Badd valueC to )ake yours di''erent and hence )ake it a )ore
enticing ,rice* For eDa),le, ,erha,s your co),any (ould like to ,rovide an additional year
o' guarantee at no cost, or a re,air ,art 'ree0o'0charge or an additional gadget (ith the initial
ite)#
• Co),etition isn+t 8ust about the goods or services the)selves# /t is also about your
social and environ)ental credibility# Consu)ers are increasingly conscious o' the
need to sho( that your business is concerned (ith labor conditions and isn+t
da)aging the environ)ent# Certi'ication endorse)ents 'ro) re,utable organiations,
such as labels and stars, can reassure custo)ers that your ,roduct or service is )ore
aligned (ith their values than one lacking the certi'ication#
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+anage your running costs. Gee, a close eye on your running costs and kee, the) in line
(ith your ,ro8ections# Whenever you see so)ething s,ent (aste'ully-like electricity,
,hone ,lans, stationery, ,ackaging-look around, and esti)ate ho( )uch really need, and
)ini)ie or re)ove the cost in every (ay ,ossible# 6hink 'rugally (hen you start u,,
including hiring ite)s instead o' ,urchasing the) and using ,re0,aid ,lans 'or services your
business needs instead o' locking yoursel' into long0ter) contracts#
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)ind a way to get paid# You (ill need to do so)ething to get ,ay)ent 'ro) your clients or
custo)ers# You can get so)ething like a S9uare, (hich is great 'or s)all businesses since it
re9uires the )ini)u) a)ount o' ,a,er(ork and the 'ees are )ini)al# Fo(ever, i' you 'eel
unco)'ortable (ith technology, you can go the old 'ashioned route and get a )erchant
account#
• " )erchant account is a contract under (hich an ac9uiring bank eDtends a line o'
credit to a )erchant, (ho (ishes to acce,t ,ay)ent card transactions o' a ,articular
card association brand# Previously, (ithout such a contract, one cannot acce,t
,ay)ents by any o' the )a8or credit card brands# Fo(ever, the S9uare has changed
that, so donHt 'eel locked in or li)ited to this o,tion# !o your research#
• 6he S9uare is a card s(i,ing device (hich connects (ith a s)art,hone or tablet and
turns that device into a sort o' cash register# You )ay have encountered this device in
the businesses you 're9uent, as they are beco)ing co))on at co''ee sho,s,
restaurants, street 'ood stands and other businesses Blook 'or a ,ostage0sta), sied
,lastic s9uare ,lugged into a tablet or ,honeC#
Part - of 6: +ar!eting ,our Business
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(et a we$site# /' you+re selling online, get your eco))erce in gear and either build a
(ebsite, or have one built 'or you# /t+s your store'ront, so anything and everything you can
do to )ake ,eo,le want to visit, and want to stay, do it#
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Hire professional designers. 6hey )ay cost )ore initially, but a (ell ,resented and
trust(orthy site is essential# /t needs to look ,ro'essional and (ork (ith ease# /' you are
including )oney transactions, invest in security encry,tion and check that your )oney
trans'er co),anies are sound and reliable#
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Discover your inner pu$licist. You )ight truly believe in your ,roduct or service but it
(on+t 'ly unless everyone else believes in it too# /' you+re ne( to advertising and )arketing
or you dislike doing the sales ,itch, no( is the ti)e to overco)e such 'eelings and ,ut on
the ,ublicist ,ersona# You need to develo, an eDcellent short ,itch to convince ,eo,le they
need your ,roduct or service, one that re'lects the value, ,ur,ose and ,otential o' (hat your
business is o''ering# Write do(n this ,itch in )any (ays until you 'ind one that you 'eel
satis'ied says it all and is so)ething you can say readily# 6hen ,ractice it like cray3
• Fave interesting, eye0catching business cards ,rinted#
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Spend time developing an e%cellent social media presence. 6his can be done (ell be'ore
the business is ready, increasing antici,ation# Mse Facebook, @oogleN and 6(itter, and any
other social )edia you ,artici,ate in to build eDcite)ent and s,read the (ord# You (ant to
build a bu so that ,eo,le (ill begin 'ollo(ing your ,rogress# BBe sure to choose business
accounts 'or your business and kee, your ,ersonal accounts se,arate# 6he )essages you
send should be tailored di''erently, de,ending on (hich account you+re sending 'ro)#C
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.mplement your mar!eting and distri$ution plans. With your ,roduct being built or
services develo,ed, and a reasonable eD,ectation on (hen either is ready 'or selling, begin
)arketing# /' you (ill be advertising in ,eriodicals, they (ill need co,y or i)ages at least
t(o )onths in advance o' ,ublication# /' you (ill be selling in stores, get ,re0orders sold,
and shel' s,ace allocated# /' you (ill be selling online, get that e0co))erce site ready to
sell# /' you+re o''ering a service, advertise in a,,ro,riate trade and ,ro'essional 8ournals,
ne(s,a,ers and online#
Part 6 of 6: 'aunching your Business
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Secure space. Whether it+s an o''ice, or a (arehouse, i' you need )ore s,ace than your
garage or your s,are bedroo), no(+s the ti)e to get that#
• /' you don+t generally need an o''ice beyond your ho)e, but )ay occasionally need
)eeting s,ace, there are o'ten ,laces do(nto(n that can address those needs# "
9uick @oogle search on 5business )eeting rentals Iyour cityOstateJ5 (ill deliver
,lenty o' rental o,tions in your area#
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Build your product or develop your service. Once you have the business all ,lanned,
'inanced, and have your basic level o' sta''ing, get going# Whether that+s sitting do(n (ith
the engineers and getting the so't(are coded and tested, or getting )aterials sourced and
shi,,ed to your 'abrication roo) Baka 5garage5C, or ,urchasing in bulk and )arking u, the
,rice, the building ,rocess is the ti)e during (hich you ,re,are 'or )arket# !uring this
ti)e, you )ay discover things such as:
• 2eeding to t(eak the ideas# Perha,s the ,roduct needs to be a di''erent color, teDture
or sie# Maybe your services need to be broader, narro(er or )ore detailed# 6his is
the ti)e to attend to anything that cro,s u, during your testing and develo,)ent
,hases# You+ll kno( innately (hen so)ething needs t(eaking to )ake it better or to
)ake it less like a co),etitor+s stale o''erings#
• @etting 'eedback# Friends and 'a)ily )ake great resources 'or asking 9uestions and
getting 'eedback..don+t hesitate to use the) as your sounding board#
• 2eeding to increase the sie o' your ,re)ises# 6his ha,,ens )ore o'ten than
eD,ected# Once the stock starts ,iling u,, you )ay 'ind it ends u, in your living
roo), bedroo) and the garden shed# 6hink rental o' storage ,re)ises i' needed#
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'aunch your product or your service. When the ,roduct is all built,
,ackaged, coded, online, and ready to sell, or (hen your services are 'ully
(orked out and ready to go, hold a s,ecial event to launch your business# Send
out a ,ress release, announce it to the (orld# 6(eet it, Facebook it, let the (ord
resound to all corners o' your )arket-you have a ne( business3
• Fold a ,arty and invite ,eo,le (ho can s,read the (ord 'or you# /t
doesn+t need to be ,ricey..,urchase the 'ood and drink 'ro) bulk
discount stores and get 'a)ily and 'riends to hel, (ith catering Byou can
give the) a ,roduct or service in returnC#
•With the advent o' the internet, online businesses are ,robably the easiest (ay
to start and very )uch less eD,ensive in ter)s o' start0u, cost than an o''line
counter,art#
•"l(ays ,rovide value and service to those (ho )ay be your custo)ers, even
i' they are not currently# When they do need your ,roduct, you (ant the) to
think o' you 'irst#
•!on+t be a'raid to eD,eri)ent (ith ,rices#
•6ry to add )ore and )ore great ideas as you go3
•Gee, learning, and be ada,table to change# Find buddies, )entors, local
business0related organiations, /nternet 'oru)s, and (ikis to discuss the daily
details o' running a s)all business# /t+s )uch easier 'or everyone to ,er'or)
their core businesses (ell and ,ros,er (hen they don+t (aste ti)e and energy
5reinventing the (heel5 on housekee,ing#
•You can also consider trading on eBay or Overstock#
•Most direct selling co),anies have lo( start u, ca,ital co),ared to a
traditional brick and )ortar business# You can also break even rather 9uickly
co),ared to the traditional business#
•" 'ranchise is a great idea although the start0u, ca,ital is (ay too high 'or
)ost ,eo,le#
#arnings
• Be(are o' business ,ro,ositions that see) to o''er 5so)ething 'or nothing#5
6hey ,robably involve taking so)ething 'ro) so)ebody-usually you# 6here
are innu)erable variations, so)e )ore ,olished than others# EDa),les include
,yra)id sche)esI;J and advance0'ee 'raud#I<J
• Be(are o' ,eo,le (ho ask 'or )oney be'ore giving you business# 6rade leads
to ,ros,erity through mutual gain,I=J so a business should be (illing to ,ay you
to (ork 'or it# B" 'ranchise store or ho)e0sales business )ay have legiti)ate
start u, costs, but they should re'lect a reasonable cost o' getting you started in
the business so the )anagers (ould )ake )oney through your success, rather
than 8ust by getting you in#C