If you’re going to embark on a new project, it’s a good idea to figure out all of the steps that will get you on the right path. It really doesn’t matter if it’s a DIY project around the house or baking a batch of chocolate chip cookies. There are steps involved in doing it the right way.
Starting a business is no different. Sometimes, just having a checklist to allow you to see all the elements that are involved can provide some clarity about what needs to be done, and what resources you need to get started. This list should provide you with an understanding of some of the many pieces that you can / should have in place as you begin this new adventure.
You don’t need to do all of them on day one. But if you’re serious about heading down this path, you should seriously consider doing all these things sooner as opposed to later. Because you’re going to have to do all of them eventually. And there is no time like the present to begin.
This might seem obvious but think about the single item that you are starting with, and also think about how that directs you towards future products or services. Does this lead you to a family of products? You might start with one single item, but knowing where you might be two or five years from now will be helpful in developing your strategic plan.
Be realistic. It’s important that you really enjoy doing it, because starting a business is a lot of work. But think about whether there is really a market out there for what you’re selling.
Once I was talking to a fisherman about my continued lack of success with a rod and reel. He asked me if there were fish in the lake. I looked at him and said, “aren’t there fish in every lake?” He just laughed at me. If you’re going to sell a product, make sure that there’s a market for it, or your time and the money that you’re spending will be wasted.
This is an identifier for what you’re doing. It would be great if there was also a website domain name available, as in “www.mycompany.com,” but those are hard to come by. But your company name should have some instant identification with the products you’re selling.
You can do this yourself or have an attorney do it for you. But there are different kinds of corporate structures. Talk to an attorney to determine what type of company is right for you. Registering isn’t that hard.
The state of Illinois has a pretty easy Do It Yourself company registration process. You may want to create an LLC, a Limited Liability Corporation. This will protect you and your family assets from suits against your company. If you’re in Illinois, visit www.ilsos.gov and scroll down to “Organize a Limited Liability Corporation.”
You get an EIN from the IRS, after answering a few questions on the IRS’ website. There is no charge, and they assign it to you immediately.
If you are going to start a company, it’s vital you segregate your personal expenses and assets from your company’s expenses and assets. Even though you may have formed an LLC, if you use your personal bank account, credit cards, etc., you will be comingling your company and personal money. That opens you up to liability. Start out properly, and it will keep you out of trouble.
You really don’t need a credit card with your company’s name printed on it. But you do need a credit card that you use exclusively for your company. And that includes paying the bills for that credit card from your company’s checking account. Remember, keep company and personal banking separate. Having a bank account and a credit card you use exclusively for your business is mandatory.
There are several basic accounting systems. QuickBooks and Xero are probably the most popular programs for start-ups, and the monthly fees are very low. But make sure that it does what you need. Do you need to manage inventory and shipments? Do you need to run payroll? Does it have a general ledger with numbered accounts? These are all things to look at before you decide.
You don’t need to do this right away, but you should do this when you hit a volume that makes you scratch your head and say, “someday, I’m going to have someone else do this. But for now I’ll just put this aside and try to get it done next week.” That should be your first warning sign.
Don’t delay doing your bookkeeping and keeping it current. There are a lot of part time bookkeeping services that will do this work for you. I can’t tell you how many companies tell us that they need someone to catch them up. Small companies might be behind a few years. Even large companies might be behind 8 -10 months. That’s a real problem. Don’t get behind.
Don’t say that nobody is going to sue you, so you don’t need insurance. If you have employees, you’re going to need workers’ comp at a minimum. Other than that, you probably should have employer practices liability insurance, business liability insurance, general liability insurance, and even if you’re a solo, get some professional liability insurance. If you’re concerned about the cost, get some high deductible coverage. The purpose of business insurance is to protect you against major losses, don’t worry about the deductible.
If you don’t know Excel, just write it down on a sheet of paper, but project what you expect for sales, cost of your product, your insurance, payroll, bookkeeping fees, bank charges, etc. Put down on paper everything that you can think of that you’re going to spend. Then, look at whether there’s anything left for you. Plan it month by month. It’s important that you understand the numbers and the reality behind starting your company.
Starting a company is an exciting adventure. It’s scary. It can be expensive. But if you plan well, and succeed, it’s all worth it. But be strategic and pragmatic. Understand your numbers, understand your market. If you plan well, you will have a greater likelihood of success. It can be a long road. Drive carefully.
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