The question isn't who is going to LET me; it's who is going to STOP me.– Ayn Rand
What is Your Why?
The Below Filters Will Help You to Determine Why You Want to Start a Business in the First Place
It may be challenging to process, but let's start by what you would like to do.
If you want to work 20 hours a week and not have employee headaches and make a good living (i.e., $100K+), then that is different from an idea that changes the world, which will force you to work 80 hours a week, that you want to be a Billionaire from.
Allow yourself to put a few filters in place to help you decide. These questions are supposed to be your worst-case answers.
IF it turns out BETTER than great, but if not, it is better to be prepared in advance, so you know your limits AND equally as important the limits of your loved ones the decision affects.
Most people go into starting a business too optimistic about timeframes to success and how that may affect significant others. It is good to get them on the same page at a minimum.
These Questions Will Help You to Find the Path that is Right for You:
- Money based questions:
- How much money do you truly need to live a happy life (It is probably less then you think)?
- How much are you living on now, and are you satisfied with that (think replacing this income with your new business)?
- If you have 2 incomes, could you downsize to one income and cut costs to live that way for a full year minimum?
- Lifestyle based questions:
- Do you want to manage employees?
- Would you like to be free to work anywhere?
- Do you want to have the option of being free from working in an Office?
- Family-based questions:
- Would you be ok spending very little time with your family if you were working 80 hour weeks?
- How much time is essential for you to spend with your loved ones at the very minimum to maintain connected relationships?
- Are you willing and able to sustain the pace that you choose for 5+ years?
Filtering down with questions will help you to realize that what is in front of you based on your answers. DON'T worry about anything else other than HONESTY here.
When you have answered the above questions and had time to really digest them, then you are ready for the next phase which is planning.
Determine the Size & Type of Business First
There are different levels of ambition for your initial small business.
Understanding the difference between a “small business” and other types of businesses is really important so you can accurately breakdown the process.
What you determine here will likely change who you think you need (if anyone), what vendors you work with, how operations are set up, and how you will be marketing your business.
Small businesses, by definition, can be much larger than $1M.
Let's examine this a little further. These are my own filters to help you through making a decision.
Option 1: A Lifestyle Business
- The reality: Does NOT have to consume your life, relationships, time, energy, and life balance
- Control: You decide how big or small you want to take the business
- Freedom and flexibility: Yes
- The real boss: YOU are the boss
- Revenue goal (1st year): $100,000
- Revenue goal (2-3 years): $1-5M
- Exit time frame: Can be 2-5 years or never
- Employees: 0 (Skillsets are outsourced)
- Time allocated weekly once established: Goal is 20 hours or less
- Physical office dependent: No
- Geographic location-dependent: No
- Potential for a sale: Yes
- Typical exit: private sale
Option 2: A Startup Business
- The reality: DOES consume your life, relationships, time, energy, and life balance
- Control: You must grow and prove a revenue trajectory if you want to have an exit event
- Freedom and flexibility: No
- The real boss: The investors, VC's or banks you take capital from
- Revenue goal (1st year): $100,000
- Revenue goal (2-3 years): $1-5M
- Exit time frame: 5 years
- Employees: Yes
- Time allocated weekly: 60-80 hour weeks, from the start and continued until exit
- Physical office dependent: Doesn't have to be, but is probable
- Geographic location-dependent: Doesn't have to be, but is probable
- Potential for a sale: Yes
- Typical exit: private sale or IPO
Neither one is right or wrong, it just depends on you as an individual and your goals for the legacy you want to leave.
Choosing Your Niche
This is a BIG decision. Whatever type of business you choose, you'll be spending massive amounts of time in it over the next 3 to 5 years. So although you don't have to be overly passionate necessarily, you do have to at least have an interest in the subject matter.
This is for a couple different reasons.
Firstly, every business that starts off will be times where it gets hard, and you have to be able to weather those storms and continue working when it gets hard. If you do not have an interest in the types of business you are building, you are much more likely to quit.
Secondly, equally important is that if you are going to spend time in something, why not choose something you like, as you will be spending ⅔ of your waking hours doing it.
Choose Your Business Structure
This is extremely important and is entirely dependent on which type of business you plan on running. Is it a small business that you intend to raise money for, or is it an independent lifestyle business that you do not have to raise money for.
First, don't let this be a roadblock, as you can later change the structure of your business. You'll want to go with what is fast and easy to maintain until the venture has legs and warrants you to do something different.
If needed, you can choose an initial business structure and work with your accountant to change it down the road.
Research the Name
The name for your business in your brand should personify your target audience. Remember, it doesn't matter what YOU think is a good name, it matters if YOUR target audience identifies with it.
So how do we go about researching the name?
Let's Break Down a Simple Way to do Your Initial Business Name Research:
- Google search
- Simple free trademark database search through USPTO
- Social media search with the dominant players
What you are trying to avoid is getting six months down the road to build a brand and then not knowing that there was already something similar that could come back to bite you later.
As this is not necessarily the end of the world, it can be easily avoided upfront.
How to Incorporate
After you have identified your niche, researched the type of business structure you will go with, and have done your due diligence searching through your chosen name, the next step is to incorporate.
You can hire a lawyer to do this, but now there are effective lower-cost ways of setting up your small business.
I have found from using many different Corp filing services that IncFile is very easy and user friendly.
Included in Their Packages are Currently the Following:
- Verify company name availability
- Preparation & filing of the articles
- Registered agent service
- Online access to incorporation documents
At this stage, if you have never done it before, you will feel extremely uncomfortable with setting this up. It will feel like you should not do this on your own.
Curb those thoughts and press forward. If you make a mistake, it is not the end of the world, you can fix it later with your accountant.
The most important thing is finishing the setup so that you can move on with setting up the small business bank account. Without your initial LLC paperwork, you can't get an account.
Next, you want to make sure to get the basics to operate. DON'T GO OVERBOARD, you only need a few things at first. You don't need paperclips and a bunch of little things, focus on the things that will make the business run.
How to Setup the Home Office
There is no need to go overboard here. However, the essentials are vital.
These are things assuming you are in a home-based office to start, but would not waste upon moving to a “Co-Working” space or a full-blown office.
1. The Desk
This is where you spend two-thirds of your life, make sure it is a place that you want to go to every day, whether it is in a home office or not.
2. The Chair
This is actually your health and your back. This is often overlooked, but VERY important as back problems affect everything in life, from typical day to day movements to sleep.
If you have the means to do so, take care of this upfront and keep your back healthy.
3. A Reliable Computer
If possible, try to get a reliable, fast computer. There is nothing worse than having a slow computer, which will slow everything else you are doing down. You can get by if you have to with whatever computer you currently have, but if you have the means, this is a priority.
4. Keyboard and Mouse
The keyboard and mouse. This is the same concept as your chair. I have a close friend in finance that had to get surgery in BOTH of his hands in his 30's due to not having the proper equipment and doing high volume computing. The result was costly, and the physical therapy was not fun.
5. A Two Monitor Setup
Context switching is one of the biggest time killers. So if you are working on a single project and you have one screen that you have to open and close windows and documents will cost you TIME and SPEED in the long run.
6. A Small Printer
You should not need to print many things at first, so a small printer will work just fine. They are relatively inexpensive and convenient vs. going to a shipping center to print single documents.
7. A Small, Yet Effective Scanner
This I have found to be INVALUABLE. It keeps everything easily on the path of paperless organization. Having stacks of papers around is subconsciously distracting even if you do not realize it.
You only have so much energy during the day, so using your energy subconsciously on random stacks of papers around you does not help in the startup game where the BATTLE is ENERGY.
The ILLUSION of Needing a Physical Office
Many people think they need a board of directors and 17 team members to run a business. Unless you are going BIG, you only need you at first. Every other function outsource to a vendor.
There are HIGHLY profitable 1-2 person operations out there using modern technology and well-organized vendors.
It is an illusion that is false. Most of the time, we just don't think we can do it alone. Other times we may be scared that if we fail, there will be no one else to blame, which is true.
We ALL fail, it is part of the process. There is no shame in it, the only shame in not doing it when you have the ABILITY and the tools now via the internet to TRY.
The internet has removed the middlemen. Made them obsolete. There is no PERMISSION needed.
Trust yourself, trust your instincts, acquire the skills, and work hard.
The People Plan
The plan here is the least amount of people as possible at first. But on a shoestring, it DOES mean having the proper foundation in place so that you can hire people later.
What do I mean by that?
There is no getting around the legal aspect of needing to incorporate to protect yourself personally. It is also a necessity to have some type of accounting in place. Also, there is going to be a need for ongoing, simple, but essential legal guidance.
Everything suggested is going to assume that the average person will be operating off a shoestring budget.
You can do it all yourself initially by using proven vendors. This will save you from wasting precious money in the startup phase.
The Following Resources Fill in Some of the Initial Key Components of Starting a Small Business:
- IncFile is a good source for incorporating as it is VERY user friendly.
- LegalZoom makes sense for simple forms that walk you through the process. They also are responsive when it comes to phone calls for customer service.
- Freshbooks is a simple and inexpensive way to do the accounting initially yourself until you have the extra resources to hire an accountant.
Now that your people/vendors are in place, move on to one of the most important pieces of this puzzle.
Understanding the cost structure by creating a SIMPLE financial plan.
The Financial Plan
A simple startup budget in excel can work at first. You MUST understand the monthly costs to operate the plan you are trying to execute. This step is not negotiable.
This way, you can determine if you have the money you need to start or you have to decide if you want to go out and get the cash you need to start.
A good rule of thumb at first is if you don't have all the money to start, brainstorm on ways you can reduce the cost to have the money on your own to start.
Filter Questions to Help You Through That Process are as Follows:
- What are the total costs to launch this business (add 25% to the base amount)?
- How long do I anticipate to get to breakeven (add 25% to this timeframe)?
- Can I take do this on my own without outside investment (recommended)?
- Is there a way I can reduce the monthly cost to do this without outside investment?
- If not, how much capital will I need to get to anticipated breakeven (add 25% to his timeframe)?
Keep in mind the most crucial part of this is the COST STRUCTURE. Your projected revenues don't matter much.
If you understand the expenses on a project, you can truly determine how feasible it is.
Now that you understand this, the next thing to NOT overlook is how are you going to get customers.
This is where the Marketing Plan comes into play.
The Marketing Plan
Starting a small business, not knowing how you are going to market it or thinking through that aspect, is a COMMON critical mistake.
You need to clearly understand how you will get the EYEBALLS to your site in the first place.
If you have the best plan, without your target audience being able to see it via your targeted marketing plan, it will not work. This is a launch and pray method.
You know that you can do paid advertising, but where will you do it and how much will it cost?
A Recommended Marketing Mix
The recommendation is to choose at least ONE FREE way of advertising that doe NOT depend on PAID advertising and commit to becoming an expert at it.
Examples of this are SEO and your favorite social media channels. For effectiveness, master ONE platform at a time.
You will want to have a FREE method that you master in case things ever get so bad that you can't do PAID advertising anymore, you still have a way to sell.
The First Step in this Journey is to JUST START
Now that you have an idea of how to start a small business, what you want to do it go back to the beginning of this post and start working through the initial questions.
If you do not have time, save this post and come back to the questions.
If you want to truly change your life, begin with this structure step by step.
By taking these steps, you'll have a much higher chance of succeeding.
You'll not waste your time going months or YEARS into a project to find that you have made a mistake and you should have started something totally different.
Most importantly, you'll start off with a framework and will be LESS likely to get STUCK and quit.