Choose a suitable business structure (sole proprietorship, LLC, etc.). While you don’t have to incorporate before your first sale, you will want to do so in the first year. Consult a tax specialist to understand what form of business will work best for you. Depending on your industry and offerings, you may want to consider business insurance and liability.
Outline your marketing and sales strategy. Now that you’ve decided who you’re going to sell to, figure out how you will do it and how you will get eyes on your product or service. Will you sell at public events like festivals or online running products out of your garage? There are many cost-effective solutions out there but having a strategy will help you from feeling like you need to chase every shiny object or opportunity that presents itself. Establishing business goals and a strategic plan will also give you a road map to direct you. A plan helps you decide what is worth your time and what isn’t in that crucial first year.
In line with your strategic plan/goals, create financial projections, including costs, pricing, and potential profit margins. Hobby businesses are often a labor of love, but if you enjoy eating and shelter, you need to understand if you’re succeeding or not. Plans give you that objective measure. There are many businesses that while they bring in money, still fail. That’s often because they don’t have a solid plan and end up growing too quickly where outlay overcomes earnings.
Step 3: Legitimize Your Business
Register your business with the appropriate government agencies. Obtain necessary licenses and permits. Check to understand your state and local obligations as well as federal.
Set up a dedicated business bank account. This will help keep your business expenses and earnings separate from other sources. Consider securing a business credit card or using a personal one for business-only expenses. Again, consult with a tax professional so you understand what you can write off for your business and so you keep accurate records and receipts.
Step 4: Build Your Brand and Market Your Business
Craft a compelling brand identity that resonates with your target audience. Utilize online platforms like social media and e-commerce websites to reach customers. You can begin doing these things for free (outside of the cost of your time).
Explore offline marketing options like local events and networking opportunities. The chamber has a wealth of information and connections. As the Voice of Business, they can help make the right introductions for you and lend your business legitimacy. It’s sometimes difficult to get people to take a chance on you. Chamber membership tells them you are a legitimate business with a vested interest in the community, not a hobby that may close shop tomorrow.
Step 5: Manage and Grow Your Business
Most people assume that the first year of business is the most perilous. That isn’t the case. Data from the Bureau of Labor Statistics indicates that while nearly 20% of new businesses fail within the first two years of opening, the riskiest time comes later. 45% of businesses close during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
While no business is a sure thing, if you implement efficient processes for production, inventory management, and customer service, you’re on your way to managing smart growth. Also, track your business performance through data analysis and adjust your strategies accordingly.
Regardless of how you initially funded your venture, consider seeking funding and exploring expansion opportunities. Your local chamber is a great source to find out about these and educate yourself on what’s available.
If you’re one of the estimated 42% of Americans who want to own a business, know that you’re in good company. Business ownership is one of the most fulfilling and challenging things you’ll do. It requires passion and perseverance and is anything but glamorous. However, if you’re like most of us, you’ll find that there’s nothing like it. It’s addictive. Just don’t be surprised if you realize you can never work for anyone else again.
Christina Metcalf
