Many people don't start businesses because they believe its hard or complicated to start. They often value the security of the 9-5 over the freedom of entrepreneurship. Then, there are some who feel that its so easy that they can skip certain things and not do others. These people tend to call me when its to late to save the business or close 18-24 months after opening. Either way I think its important to know the fundamentals on how to start one so we can pull the curtain back to expose the wizard for the hesitant ones. Inversely for the eager entrepreneur, I want to express the importance of going the trough the process to get it done right. For each step I will also include how we did it here at OWLS to give you a point of reference. You can do these things in whatever order that you like however I will point out that some things need to be taken care of before others.
1. YOU MUST WRITE A BUSINESS PLAN
I HAVE TO PUT THIS IN ALL CAPS BECAUSE MANY BUSINESSES DO NOT HAVE THEM. THE PURPOSE OF A BUSINESS PLAN IS TO FORCE THE ENTREPRENEUR TO THINK ABOUT THE BUSINESS. IT FORCES YOU TO THINK ABOUT THINGS LIKE WHEN REVENUES FALL AND AN EXIT STRATEGY OUT OF THE BUSINESS. ALSO KNOW THAT YOUR BUSINESS PLAN IS A LIVING, BREATHING DOCUMENT WHICH MEANS YOU SHOULD ALWAYS UPDATE IT.
The OWLS Approach: We took a weekend to hammer out our vision and how we wanted the company to run and succeed. We used business plan software to make it look really nice as oppose to a boring word document. We update the our business plan towards the beginning of each year.
2. CHOOSE A BUSINESS NAME
Choose a name that is easy to say and memorable to customer. Also, make sure the name is available to use. And get it trademarked.
The OWLS Approach: We knew we wanted to have a name that could stand out from other consulting firms. Many firms have a person’s name in them or sound very corporate(I abhor vanity). For example, “The Carlisle Group” or “Synergy Initiatives ” or something like those. We wanted a cool but simple name that spoke to what we do. We consult over video conferencing and in person at schools and small businesses. That is how Online and Web-based Learning Solutions was formed or simply, OWLS.
3. GET A DUN & BRADSTREET NUMBER
Its a number that is identified with your business that tracks things like your credit history. Its very easy to acquire one from their website.
The OWLS Approach: They come in handy when bidding for government and school district contracts. It once landed us a contract just because we had one.
4. FIND FUNDING
You will need money for the next couple of things so you might as well go ahead and look for capital now. You can find an investor or maybe financing through a bank. The bank most of the time doesn’t deal with startups because they typically only loan out to established businesses with 100k in revenue each year with 2 years tax returns to prove it. However you may stumble upon one that does. However most get startup capital from savings or family and friends. Tread lightly when dealing with family and friends.
The OWLS Approach: Owls is very low cost so we were able to use savings. However we wanted to establish business credit so we got a Capital One Business Credit Card and a Office Depot Credit Account. Our biggest recurring expenses are getting copies made, office supplies and gas.
5. CHOOSE A BUSINESS STRUCTURE
You must determine the right entity to conduct business: Sole Proprietorship, Limited Liability Corporation, C- Corporation, or S-Corporation.
The OWLS Approach: We went with the LLC option even though we could run easily as a Sole Proprietorship. We wanted the the protection. You can get this done with a lawyer however we chose to go with legalzoom.com
6. OBTAIN A TAX ID NUMBER FOR YOUR BUSINESS
You can get this for free from IRS.GOV. I had to stop a client once from falling for a scam in paying for one.
The OWLS Approach: It was part of the package with legalzoom.com
7. DETERMINE THE TAXES FOR YOUR BUSINESS
Tax rates vary based on industry and state so be mindful of that.
The OWLS Approach: We mainly have to worry about only the Franchise and Excise tax imposed by the State of Tennessee and federal taxes. We don't have to file a separate return since we are an LLC.
8. OBTAIN A DBA FOR BUSINESS
This only applies to sole proprietors and general partnerships. You just have to file a fictitious business name statement.
The OWLS Approach: Since we are set up as an LLC then we have to file an official name as part of the structure.
9. OPEN A BUSINESS ACCOUNT WITH YOUR BANK
Establishing a business relationship with a bank will go a long way in helping your business grow. The first step is opening an account. DO NOT TREAT IT LIKE YOUR PERSONAL ACCOUNT.
The OWLS Approach: We went with Bank of America due to their low fee structure endless amount of amenities, and the resources to help us scale.
10. OBTAIN A BUSINESS LICENSE IN YOUR COUNTY
Don’t get caught doing business without one. You will find yourself in serious trouble and paying back taxes. I once had a client to call me for an initial consultation and when I showed up their were chains on the doors( let the Lean On Me” jokes ensue) placed by the state due to taxes not being paid which in turn led to a revoked license.
The OWLS Approach: Download a form from the county clerk website with Shelby County, fill it out, and mail along with $30. Really simple.
11. OBTAIN THE PROPER CERTIFICATION FOR YOUR INDUSTRY
Contact your state to make sure you have proper certification and licensure for your business. For example cosmetology, law, or child care.
The OWLS Approach: Fortunately for us we did not need additional certifications for consulting in Tennessee. However if we did business in a highly litigious state for example California or New York then we would need those state certifications for consulting.
12. GET BUSINESS INSURANCE
Don’t be caught without one when someone slips and falls in your corner store. Thats not the moment to say you need insurance. I’m telling you this because I have seen this exact example.
The OWLS Approach: Our industry there is not a high need for insurance however some of the school districts we serve require business insurance with certain coverages. We have that in addition to Key Man insurance that provides coverage in case one of the owner dies in order to keep the business running after we are gone. There is even insurance out there for when you lose revenue due to certain events.
13. FIND LOCATION AND EQUIPMENT
I cannot stress enough that this needs to be one of the last things to do. I have seen people get a building and equipment but did not do all the previously mentioned items. You should not be paying for a space when 4 months down the road you still are not open for business. If you do the BUSINESS PLAN( funny how that keeps coming up) correctly you may realize that you don’t even need a brick and mortar location. Im directing that at my people in the pastry and crafts businesses.
The OWLS Approach: We are able to work from home with a dining room we converted into an office. As far as equipment we have one iMac, Macbook Air, and 3 iPhones. The beauty of our business is that we can take it with us on the go. Have you ever typed up a winning proposal in the car traveling to Vicksburg, Mississippi? Well we have.
14. MARKET YOUR BUSINESS
Notice I did not say advertise. You need a marketing strategy. You need to know not only who to market to but how to market to them. For example, digital marketing may not work as well with baby boomers as it will with millennials. A business owner with a good marketing strategy will know the the terms I just said in the last sentence.
The Owls Approach: Our strategy includes networking events, community service, conferences, social media, and pro bono work.