Nothing can beat the joy of owning your own business and not working for someone. Many people have the idea of starting a new business of their own, but unfortunately, only a few people are taking the bold step of starting a business. So many people fail in becoming entrepreneurs because they lack clues about what’s needed in building a new small business or there is fear of going under after launch.
Starting a small business can look like an enormous task when you lack the what-to-do knowledge as a potential entrepreneur. According to Statista, there are about 32.5 million small businesses in the US in 2021. This portrays there’s a high possibility of your new small business flourishing if you follow due process. This article will guide you on the step-by-step process you need to take to build your small business.
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What is Small Business?
A small business is a company or organization with employees who are less than 100. Small businesses operate on a small scale with the tendency of growing into medium-sized businesses over time. Small and medium-sized businesses (Smb) have the same building structure. Meanwhile, a medium-size business can be defined as any enterprise with over 100 employees.
How To Build A Small Business
Just as stated earlier, starting a new business is not rocket science. There’re steps you need to take in building a new business, which are:
Before doing anything related to building your small business, you need to research the small business you want to start. Figure out the risks you can encounter in the business and other enterprises in the same market.
Get a Business Plan
To build a new business, your first focus must be on writing out the plan for the new business. As an about-to-emerge entrepreneur, you must delineate what your business is all about and the problems you are setting out to solve. Your business plan must include; a strategy to defeat your competitors, who your audience are (adult or children; male or female; educated or illiterate; middle-class citizens or upper class), and your product’s exhibition/marketing method. You must figure out the basic needs for your new small business at this stage; discover what you must purchase for the production, where to get them, how much they cost for the repair, and how many you need to purchase to keep your business running.
Choose Business Name
Another essential stage of building a small business is by picking a business name. Choosing a name that suits the product/service you’re planning to launch is essential. Also, you may want to research the name to discover if there is any other enterprise using the same name. Ensure there is no other company using the same name you’ve picked for your small business.
Create a Website For Your Business
Once the name of your small business has been created, the next step is to create a website for your business. You can use your business name as your domain to make things easier for your customers to locate you online.
Pick Business Location
After the name and website of your new small business have been sorted, the next stage is to pick the location of your new small business. As a small business owner, it is better to establish your business in an area with a stable ecosystem. The situation of your business in rural areas with a good economy can influence its success. Understand where your targeted audience is and situate your business close to them. The location of your business can affect your taxes rate and legal requirements, so you need to be wise with your decision.
Fund Your Business
Funding your new small business is another thing to focus on at this stage. You need to figure out the estimate of the money you need to launch your new business. According to the U.S. Small Business Administration, a new small business can cost around $3,000 to launch. This amount will cover some expenses of registration, licenses, permits, and even rent (if you are planning to have a brick-or-mortar business).
Choose a Business Structure
Your business structure will influence the taxes you pay and how you get to operate your business every single day. You need to decide if your business is going to have a sole proprietorship structure or a partnership structure. If you plan on owning the business all by yourself, then your structure will automatically be a sole proprietorship. This structure will enable you to merge both your business assets and liabilities with your assets and liabilities. The major problem with this structure is the reluctance of banks to loan you money. But it is a good choice for new entrepreneurs. If you are going to need a partner in your new small business, then the Partnership structure should be your go-to business structure.
Register Your Small Business
Before you can start operating a business in any environment, there is a need for proper recognition. This is mainly observed by the government. It is important to register your new small business with the government to facilitate hassle-free operation. Having your business registration number will not only grant you access to the operation but will also assure your customers of your credibility.
Get a License and Permits
After registering your small business with the government-established body, the next step is to get a license and permits for operation. Licenses and business permits can be different from place to place, depending on the requirements of each location. This simply means the requirement to be licensed for operation in New York may be different from that of London. You just have to find out all you need to acquire in your location to get your business permits.
Get Tax ID Number
You will also have to enroll your business to get a tax identification number (this can be from both federal and state levels). Remember, your business structure will determine your tax returns.
Open a Business Bank Account
The last thing you will need to do to get your business going is to open a business account for your small business. This is important to keep track of your revenue and help you manage your tax payment. Having a separate account for your business is a good way of observing the activities of your business as it grows.
Major Challenges of Building a Small Business
As a new small business owner, there are chances of you encountering some challenging situations in your business. But the major challenges that can affect your business operation are monetary and poor planning.
Having a good business plan and ideas means nothing when you don’t have the financial strength to actualize them. Many small businesses go down a few months/years after they started operation due to financial problems. According to the U.S Bureau of Labor Statistics, 20% of new businesses fail to live beyond two years. One of the reasons behind their failure is poor funding. To sustain your company from going under, you can consult financial institutions for a business loan. Some banks specialize in financing Small and medium-sized businesses (Smb).
Poor Business Plan
Your business can fail if you don’t take out time to scrutinize your business plan. A diligent assessment of your business plan is important for the success of your business. A poor business plan may render you bankrupt shortly after launch.
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Following the step-by-step guide in this article will not only help you in building a successful small business of your choice but can also ensure that you don’t fall short in your business endeavor. Though socioeconomic factors like recession and subsidy can affect your business market, understanding how to manage tough situations like those will help keep your business afloat.