6 Essential Considerations When Starting a Small Business

As a consultant who assists entrepreneurs in launching and expanding small businesses, I‘ve seen firsthand how proper planning and preparation sets up companies for success.

If you have always dreamed of being your own boss, then now might be the perfect time to take the leap. Over 500,000 small businesses open each year, driven by passionate founders with big ideas. But the risks can be substantial without thoughtful consideration from the start.

From defining your core business to getting finances in order, here are 6 essential things to think through as you start your small business journey:

1. Define Your Idea and Fill a Need

Starting by clearly outlining your offerings is key. Conduct thorough market research to identify customer pain points, then refine how your product or service solves them. 93% of new businesses fail due to lack of demand for an idea or service. Don‘t fall into this trap. Ask yourself targeted questions:

  • What problem does my business solve?
  • Who are my target customers and what do they need?
  • How large is the market opportunity to serve them?

You must address a compelling market need and determine realistic growth potential for long-term success. And above all, your concept should align with your personal passions.

2. Construct a Comprehensive Business Plan

A strong business plan serves as the backbone for crucial decision making as you launch and scale your company. Key components include:

Executive Summary – High level overview of key business details
Company Description – Mission, offerings, competitive advantage
Market Analysis – Target customers, industry trends, competitors
Financial Projections – Startup costs, sales forecasts, 5 year projections
Funding Requirements – Capital needed to launch and grow

Having this document prepares you to secure financing, hire talent, and continually revisit as a planning tool. Consider enlisting help from a Small Business Development Center.

3. Pick the Right Business Structure

As of 2022 over 90% of small businesses are structured as limited liability companies (LLCs). This minimizes personal liability if your business accrues debt or faces legal action. Other common formations include C-corporations and S-corporations. Key differences:

LLC S-Corp C-Corp
Owner Liability Protection Full Limited Limited
# of Owners 1+ 100 max Unlimited
Tax implications Pass-through Pass-through Separate entity

Consult with legal and tax advisors to decide what works best for your goals.

4. Comply with Licenses, Permits and Regulations

All businesses must comply with regulations at federal, state and local levels. Exact requirements vary based on location and industry. Be sure to:

  • Register your business name/entity formation documents
  • Apply for an EIN from the IRS
  • Check state license requirements
  • Obtain necessary permits and insurance
  • Learn about industry-specific regulations

Consider services like LegalZoom that help owners stay compliant. Failing to adhere to requirements can lead to hefty fines.

5. Get Your Finances in Order

It takes money to make money when launching a business. Evaluate options:

Savings – Ideal source but can be limited
Investors – Equity financing from individuals
Crowdfunding – Leverage crowdsourcing platforms
Small Business Loans – Over $650 billion lent annually

Work with a Small Business Accountant from day 1. They assist with taxes, payroll, bookkeeping, insurance policies, payments systems and overall financial management. Institute sound processes early on.

6. Create an Online Presence

Claiming your digital real estate helps establish credibility and drive sales.

Website – Primary online hub for customers
Social Media – Engage followers on the right platforms
Local Listings – Google My Business, Facebook Pages
Email List – Collect emails to market to customers

Content and social media marketing helps expand reach. Prioritizing areas with highest ROI prevents wasting effort.

Owning a small business can be extremely rewarding. With passion, persistence and proper planning, your entrepreneurial endeavor can thrive for many years to come. Revisit these building blocks periodically to set your new company up for success.