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Business ownership seems to be more common than the 9-to-5 these days. People everywhere are “quitting their employer” to “stop trading time for money” so that they can create “generational wealth” and lead a “balanced life”.
That all sounds good until you jump in and realize you traded your 9-to-5 gig for a 24 hour, 7 day a week commitment that is keeping you broke and burned out!
Okay, I’m exaggerating but entrepreneurship and business ownership comes with a responsibility that you can’t really leave behind when you clock-out for the day like you do as an employee. So before you make the investment of time and money to start a business, follow these 10 steps first!
Step 1: Be Intentional About the Life You Want to Lead
Oh, you thought I was going to start with the research? No! Being a business owner myself, I learned that the “why” is the foundation that everything else is built on. The why is the fuel to keep you going when things don’t always go as planned. And the why gives you something to reflect on when making decisions about the direction of your business.
So “why” did I call this step “Be Intentional about the life you want to lead” instead of “Define your Why”? Well, I want you to deeply reflect on the life you are building towards. I want you to take a holistic approach to designing a business that will support that life. This isn’t a get rich quick scheme and is definitely not for the faint of heart. Like the saying goes, how you do anything is how you do everything. So, having a thorough understanding of who you are and what you want your life to look like is an important first step. Some questions to ask yourself:
- If I could do anything with my time for the next five years, what would I do?
- What motivates me to get things done?
- Do I envision a change in my relationships that may significantly impact my time?
- What do I currently do very well?
- What are my financial goals?
- How well do I manage my finances?
- Why do I want to start a business?
- Do I currently have any habits that may get in the way of my success?
Step 2: Do your Due Diligence
“Do your what, Christian?”
I’m sorry, I’m writing this during tax season. I mean, do your research.
As my mother used to say, “there’s nothing new under the sun”. There are millions of small businesses in the United States, and the pandemic brought about many more. Although you may have a brilliant idea, chances are you have competition already in the market or coming soon. Things to research about the competition:
- How are they priced?
- Who do they target?
- What differentiates your offering from theirs?
Research doesn’t stop there. Other things you want to know:
- What are the risks involved in this industry? Knowing this will help you decide whether or not you want to take on the risk. It will also help you determine the type of insurances you may want to carry.
- How will you manage the business? Businesses have to be worked on and worked in. If you are going in solo, you’ll have to manage both until you bring on a team. What does that look like and does it align with your vision from Step 1?
- What is the financial investment initially and over the next 3 years? Include the cost of legal, accounting, and other professionals that will help get you started on the right track.
- What options are available to you to fund your start-up? Consider savings, friends/family, grants, crowdfunding, investors, and lenders. Remember, it takes money to make money.
Step 3: Define Who You are Talking To
Preferences are different from person to person so it is important for you to understand your target audience so that your offering appeals to them.
Yes, your product or service may speak for itself, but you have to get the people’s attention first. And then you have to give them the experience that makes them want to continue to work with or buy from you.
- Who is your customer (age, gender, income, profession, etc.)
- What is most important to them?
- How do they like to interact with businesses like yours (online, phone, in-person)?
- What problems are they trying to solve right now?
Having a target customer (or customer avatar) makes it easier for you to analyze what works and what doesn’t work. Which will save you time and money (and energy) in the long run. Remember, everyone is not your customer and you may hinder your growth trying to prove otherwise.
Author Insight: As a service provider, working with different individuals and businesses allowed me to learn the type of client I don’t have synergy with which helped me to understand how important this step is. If I would have invested more time here initially, I would have saved myself from trying to build relationships with the wrong clients. Again, not everyone is your customer, and that is okay!
Step 4: Define Why You Are Talking to Them
Here comes that Why again!
If your purpose is solely to make a profit, it is likely that you’re probably going to be chasing venture after venture. It is a known fact that businesses often times take two to four years to really see a profit. So, if that is your motivation, you may give up prematurely. We will dive more into this later.
Back to the point. Your “why” for going into this particular business should be embedded in your mission. And your mission needs to connect to your defined audience. Bonus: Having a mission that is also aligned with your passion will help to keep you focused when things get a bit difficult. Focus yields results!
Why does this matter? You’ll be faced with a plethora of decisions to make about your business. It is not always easy to determine the right or wrong answer. Having a strong mission that is connected to the most important aspects of your business, you and your customer, will help you make decisions that don’t pull you away from this.
Step 5: Choose a Structure
Now that you have a solid foundation to build on, it’s time to select a structure.
Your business structure will dictate your taxes, how much paperwork you will have to manage, whether you can have employees, how you raise money, your personal liability, and your level of privacy. The insights you gathered from the previous steps well help you to decide which business structure is best suited for your business.
The most common structures are:
- Sole Proprietorship
- Partnership
- Corporation
- S Corporation
- Limited Liability Company (LLC)
The choice may seem obvious, but it is important to consult with a trusted advisor with experience with different structures AND an understanding of your specific industry and goals. What’s right for today may not be best for your future goals, and some structures may be cumbersome to change in the future. Yes, you can do things for little to no cost on your own, but that doesn’t mean you should.
Resource: Refer to Small Business Administration’s Choose a business structure webpage for details about each type of business structure.
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Great info!