Step One: Pick a product you want to sell or a service you want to provide. This may seem simple, but you need to pick something that will compete with an existing business or be something new and in-demand to the public. If you’re stuck on what type of business to start, I suggest reading The Million-Dollar, One-Person Business.
Step Two: Decide if you want to form an entity or remain a sole proprietor (DBA “doing business as”). I highly suggest forming an entity to protect yourself from liability. Sole proprietorships/DBAs don’t cost anything to setup and seem easy, but can cause you trouble down the road.
Step Three (optional): If you form an entity you need to pick from the many forms: LLC, S-Corp, C-Corp, LLP. Each form has different benefits as far as tax and personal liability. Generally, you should register with the state you reside in as an LLC if you are forming a small business with zero to a few employees. A lot of states have self-help business formation guides located on the secretary of state websites.
Step Four: Decide if you are going to have a storefront or website, or both! Nowadays, a lot of product based businesses are doing really well online and don’t need a storefront. However, if you offer a product that sells well in person – such as craft beer – then you will need a store front. Also, a lot of service based business do NOT need a store front, just setup a great website and be very flexible when it comes to answering calls and meeting with potential clients.
Step Five: Create a serious marketing strategy. You can go to a local chamber of commerce in your town and get a mailing list for all of the businesses and people registered there to target. Also, you can create ads through facebook and instagram to target individuals on social media. Check out Guerrilla Marketing to learn more about boosting your small business’s marketing tactics.
Step Six: Make your first sale and remember to put aside a percentage of the sale to cover year-end taxes (set aside about 25% of all sales to safely cover taxes).
Step Seven: Scale your business. To scale your business you need to assess your marketing strategy and adjust it to be more effective. This means if mailing advertisements works the best, then go to the next county over and get that chamber of commerce mailing list to market in that county as well. However, if you are seeing more people engage in sales through social media ads, then invest more money into advertising online. For scaling a business read the book I mentioned earlier The Million-Dollar, One-Person Business.
Step Eight: Review your businesses financial health after about 3-months (1 business quarter). At this point you need to see if you are at least breaking even and covering overhead costs. If you are covering overhead, then you are doing great! This means you will very likely turn a profit with just a little more marketing or a few more hours worked each week. If your are still operating in the “red”, then you need to close show or rebrand your business to bring in my more revenue.
Step Nine: See if there are any tasks you can automate. So its been months and months since you opened your business and you are doing everything from balancing books, marketing and pitching sales…. Now you need to find programs to do some of this for you (so you stay sane). There are great programs out there like quickbooks that can balance your books and track a bunch of financial analytics for $10-$20 a month. Or maybe you can use a marketing program that shoots out emails to a mailing list every week or once a month (i.e. mailchimp). The point is you have to keep evolving and becoming more efficient to turn a profit!
Step Ten: Set up a retirement plan – this is huge in my opinion. Too many small businesses start to see success and just spend their profit or income they are receiving. I suggest you take your profit and invest 20% back into marketing, 35% into your overhead costs (which includes taxes), 20% your income, 10% set aside for business emergency costs (i.e. broken equipment), and most importantly set aside 15% for YOUR retirement. You can do a Roth IRA, SEP-IRA, or Traditional Roth. If you are a self-employed business owner then you should read Solo 401(k) In a Nutshell to understand your retirement options.
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