The first 5 steps to starting your own business

Entrepreneurship, it’s been said, is the great equalizer. No matter where you were born, where you were raised or what sort of education you’ve received, every American has the opportunity to try their hand at starting their own business.

But as romantic a notion as being your own boss is, beginning a business is no small feat. Building your company will take hard work, plenty of time and a good amount of money. To grow a healthy business, be sure to start out right.

Every good company begins with an idea. It could be something you’re passionate about – but it doesn’t have to be. As long as there’s a need for it in your community (or you can create a need for it), you have the potential to be successful.

Once you have that business idea and know that there’s market for it, it’s time to start taking concrete steps to establishing your company and setting it up for success, from writing a business plan to opening business bank accounts.

There are a number of such steps, but we’ve distilled the list down to five of your most important action items to address in the early stages of starting your own business.

Step 1: Draft your business plan

One of the very first things you need to do is put your business plan down on paper. It’s a fundamental step to planning out your operations and making the case for your business to financial institutions, which you’ll likely need to work with to fund your idea. Your business plan may also be read by landlords, potential investors and third-party partners.

Keep in mind that your business plan isn’t like a school book report to furiously type out at the 11th hour. The more detail and professionalism you can give your business plan, the more persuasive your argument will be.

Some of the most critical parts of a thorough business plan include:

  • An executive summary of your business idea.
  • Market research and valuation.
  • Description of your products and/or services.
  • Organization and management flowchart.
  • Competitor analysis and their market share.
  • Branding concept.
  • Your marketing plan and what channels you plan to use.
  • Request for funding.
  • Financial forecasts of how you see your business performing over its first 12 months, second year, third year, etc.

According to the U.S. Small Business Administration, you have options for how you want to present your business plan, depending on your intended audience. You could opt for:

  • Traditional format: A highly structured document that lays out all the details in a comprehensive fashion. Any lender you work with will likely prefer this type of plan.
  • Lean startup format: This is more of a high-level synopsis of your full business plan, containing the most crucial elements. Investors might be more interested in a quick overview of the most salient points.

Your business plan is like a roadmap that’ll tell you and interested parties (think: investors, lenders, landlords, etc.) how you plan to make money in the first three to five years. It’ll explain the market and what needs you’re fulfilling.

According to Business News Daily, some commonly overlooked yet highly important aspects of your business plan include:

  • The just-in-case plan: Not everything in life, or in business, goes smoothly all of the time, but luckily, you can account for that. Business News Daily suggests having a goal to meet within a specific timeframe, and a backup plan in the event that the goal isn’t met.
  • Employee engagement plan: Not all businesses will hire employees right away, but those that do need to make sure everyone hired is as excited as the founders. Working for a brand-new company can feel like a risk for some people, so it’s critical that everyone feel engaged and a part of the team. Spell out exactly how you’ll inspire this feeling in your employees.
  • Marketing plan: The one ingredient every single business needs to find success is the right marketing plan. If people don’t know about you, they can’t support your company. Write out what you intend to do to get the word about your business out.

Step 2: Fund your business

The next step to establishing your business is securing seed capital, typically through a business loan or selling an equity stake to investors. While you might have enough financial resources to commit some funding upfront, it’s unlikely you’ll want to sink everything you have into the venture from the outset.

The money you get may be used for real estate, inventory purchases, employee wages, general expenses and other outflows.

This step is where your business plan comes in handy. You’ll need to present your case to the financial institutions you are requesting funds from, whether your local bank, a credit union or an investor. Your business plan should denote exactly how much you are requesting and your plan for managing that debt.

An alternative to traditional forms of financing is the crowdfunding route. Increasingly, more startups are looking to the community to fund their initial operations, with the promise of some return on that investment down the road.

However, small business loans remain the No. 1 source of funding for many entrepreneurs. When talking to prospective lenders, be sure to cover points like:

  • Interest rate.
  • Repayment terms.
  • Any restrictions on funds.

Step 3: Settle your legal obligations

There are several official approvals and legal requirements that must be satisfied before you can open your doors. For example, you’ll need to determine how you’ll incorporate your business and what structure it will take, either an:

  • S-corp (sole proprietorship).
  • Partnership.
  • Limited liability corporation.
  • Corporation.

Which one you choose will affect how your business name is legally written and how you file taxes. Once you have your name figured out, it’s time to get it registered.

You’ll also need any applicable business licenses, depending on the municipality your operations will reside in. And don’t forget about your Employer Identification Number (also called a Federal Tax Identification Number), which is necessary for tax-filing purposes.

Additionally, be sure to buy your website domain name as soon as you’ve determined your business name.

Step 4: Get started with business banking

It’s probably safe to say that you want to start a business because you want to make money. But what are you going to do with that cash once it starts rolling in?

Before you even get a cash register or point-of-sale solution, you’ll need to open up a business banking account to help you manage your finances. Some of the accounts you should consider include:

  • Checking account: A checking account is the primary account that many businesses use to manage money coming in and going out. Your business will have its own bills and vendor payments to make, and Bank Midwest has three tiers of business checking, based on your transaction levels.
  • Savings account: Even businesses should put away money for a rainy day. An interest-bearing savings account can put your money to work and earn for your business.
  • Merchant account: You’ll need a merchant account to accept credit cards and other forms of customer payments.
  • Sweep account: This type of account “sweeps” funds in and out from a primary operating account automatically, saving you time and earning you interest (or providing you some other benefit).

Blog Illustration First 5 Steps To Starting Your Own Business

Step 5: Seek professional guidance

Your core operational team will likely be small during the early stages of your startup. However, the lender you work with may be able to provide other services and advice that can help you establish your business for the long haul and meet your ongoing financial needs.

For example, Bank Midwest offers a suite of other business banking products and services besides bank accounts. You can talk to us about:

  • Business credit cards and how they can be used to manage cash flow.
  • Financing for real estate and machinery acquisitions.
  • Insurance policies (e.g., general liability, umbrella, employer-sponsored health care).
  • Business investments, financial strategy and employee retirement plans.
  • Trusts, estate planning and succession planning.

Bank Midwest can help launch your business

It can be intimidating to start taking the steps to making your business dreams a reality. The right financial partner can help you navigate this process and connect you with the people, products and services to drive business success.

While it takes a lot of hard work and time, being your own boss can be highly rewarding. Don’t be afraid to take your success into your own hands and start your business.

Contact us today to talk about your business needs, or download our eBook “Starting a Business: A Primer” for more insight and help.

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