While it is true that you will probably be venturing onto someone else’s turf, this is still your small business and you will suffer the losses if it is done incorrectly. Resolve from the beginning that you are taking personal responsibility for starting your small business.
Small businesses are ideally built on unique ideas, services or products. However, starting a successful small business requires a series of steps involving in-depth planning, finance and law. The first smart step is obtaining business training and assistance through local business development centers and an attorney, who can help with all the subsequent steps of establishing and running your business. Second select your business location, based on a host of factors such as your target market, zoning, finances and such. Third, decide on the legal structure of the business, whether it will be solely owned, a partnership, a corporation, etc., and then set up that structure and register the business name by complying with State and local laws. Fourth, obtain State and federal tax ID numbers, unemployment and disability insurance, and workers’ compensation insurance. Fifth, obtain any required federal, state and local licenses and permits for your business. Sixth, obtain financing, often with the help of a “Business Plan.”
The “Business Plan” – a graphic and verbal design for starting and running the business – is a work-intensive, sometimes excruciating exercise that can help a business owner refine his/her ideas and appeal to possible investors. Business Plans have variable elements but some basic components are the Private Placement Disclaimer, Executive Summary, Company Description, Market Analysis, Organization and Management, Service or Product Line, Marketing and Sales Management, Funding Request, and Financial Projections. The “Private Placement Disclaimer” designed to meet requirements of the Securities Exchange Commission, explaining that the information is intended only for the recipients and that any securities discussed in the document are not registered with the SEC and are exempt from registration, that securities are not being offered or sold, etc. The “Executive Summary” comes first in order of the unique sections about your business but is often written last because it briefly and pointedly sums up the information developed in all the other sections and sells your ideas so the reader quickly grasp the Business Plan and possibly invest. The “Company Description” gives: the type of business; the needs your business will meet; the ways your service/product will meet those needs; the potential customers; and the unique characteristics that will help your business’ success. The “Market Analysis” explains: the industry in which your business will operate; your target market’s unique traits; the percentage of the target market you expect to attract; anticipated pricing, discounts and gross margins; analysis of your competition, including its impact on the target market and its strengths and weaknesses; regulations or laws related to your business, the time/effort/cost involved in meeting those requirements and the ways in which your business will meet them. “Organization and Management” illustrates – often with diagrams and narrative descriptions – your business’ ownership, legal structure, each department and its function, management/employees, their detailed qualifications, their duties, and their compensation/benefits. “Service or Product Line” describes your unique product or service, how it will satisfy your customers’ needs, its competitive advantages, its stage of development, its life cycle and where it is in the cycle, any intellectual property rights, the existence of any trade secrets, any legal agreements pertaining to the service/product, current research and development and their anticipated results for both you and your competition. “Marketing and Sales Management,” including your: marketing strategies for market penetration, internal and external growth, distribution of the product/service, and communication with potential customers; and sales strategies for your sales force and sales activities. “Funding Request” sets forth the amount, type and terms of funding needed, your business’ projected funding needs for 5 years, the intended use of the funds, and prospective financial situations that might influence an investor. “Financial Projections” illustrate – with graphs and narrative descriptions – your business’: financial history, including ratios and trends; and prospective data, including anticipated income, balance sheets, cash flow, capital expenditures and budgets, ratios and trends, all of which should coincide with the terms of your Funding Requests section. You should also prepare an “Appendix,” a separate group of documents complimenting your Business Plan. The Appendix is normally given to a potential investor at his/her request and it usually includes: your/your business’ credit histories; resume(s) of key management/employees; reference letters; any product pictures/designs; detailed market studies; legal documents including licenses, permits, copyrights, patents, contracts and leases; any relevant published literature; the names, addresses and phone numbers of your professional consultants, such as accountants and lawyers. These are six basic steps to starting a successful business; however, you will have other specific steps to complete, depending on your business.
DO’S AND DON’TS
DON’T be intimidated by the process or the people.
DO obtain business training and assistance through local business development centers and an attorney.
DO select your business location.
DO decide on the legal structure of the business, set it up and register the business name by complying with State and local laws.
DO obtain State and federal tax ID numbers, unemployment and disability insurance and workers’ compensation insurance.
DO obtain any required federal, state and local licenses and permits for your business.
DO obtain financing, often with the help of a Business Plan, including the:
a. Private Placement Disclaimer;
b. Executive Summary;
c. Company Description;
d. Market Analysis;
e. Organization and Management;
f. Service or Product Line;
g. Marketing and Sales Management;
h. Funding Request;
i. Financial Projections.
DO also prepare an Appendix as a separate group of documents complimenting your Business Plan.
[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information cannot be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]