20 Factors To Consider Before Starting a Business
Starting your own business can be both exciting and challenging. As you research all aspects of your market, costs and regulations, you can create important foundational documents that will help you succeed, such as a business plan and a budget.
In this article, we discuss 20 factors to consider while creating a framework for your new business.
Why start your own business?
You may be looking for a more flexible schedule or have an idea you absolutely have to see in action. There are many reasons to start your own business, but they all fall into these three categories:
Work with your passion
Running your own business can allow you to make a passion into a profession. While you may spend time as an employee doing something you're interested in, you likely have to fill the rest of your day with other tasks. As a small business owner, you can prioritize whatever it is that you're invested in. Business ownership comes with its own administrative obligations like keeping records and filing taxes, but it can offer you the opportunity to create a product or service you love.
Unique work environment
Starting your own business can allow you greater schedule flexibility and the ability to determine where and how you'd like to work. You can choose your own coworkers or decide to work independently. You can choose only those customers and suppliers that you want to work with. Having all these options might be good for those who are helping care for family members, those working to finish an education or who have needs that a contemporary work setting doesn't fill.
Introduce a new product or solution
Starting a business might be the best way to bring your own ideas into the world. If you start a new business, you are in control of how your merchandise is produced, who is involved, where it's marketed and what it looks like when it comes into the world.
20 things to consider before starting your own business
Here are some factors to consider when thinking about becoming an entrepreneur and creating your business plan:
Consider what need your business fills. This might be a problem or process that your product can speed up, a loss that your product can prevent or a service that your community needs. This might have to do with your location, as well, if you can provide a service like good food or laundry or repair to a neighborhood where that isn't yet accessible.
Consider what your business can do that no other business does. If you have business role models, you might think of what sets you apart from them. Knowing what you alone contribute to the business can help you articulate the value of your brand.
Related: Top 50 Small Business Ideas for You
Consider what makes you the best person to start this business. This might be the passion you're bringing to the project. You might have a network that needs the service you plan to offer, or live in the neighborhood you plan to serve with your business. You might have formal education in the manufacturing techniques for your business, or you might have years of experience doing similar work for other businesses.
4. Business structure
Consider whether you are going to work with any business partners or by yourself. If you plan to work with others, research what kind of business structure fits your situation. A partnership might be best for two or more people who want to share decision making and risk evenly. A corporation or limited partnership can allow others to invest in the business with little or no power over business operations.
Consider the broad market your business can serve. You can think about what geographic range you can cover and what kind of people might have the need that your business answers.
6. Specific audience
After you've discovered your market, you can narrow down your focus to what specific audience you plan to target. Consider these aspects of your potential customer:
Political and religious convictions
You can make better decisions about your marketing, location and packaging if you know what kind of person you'd like to appeal to.
7. Startup costs
Consider how much you'll need for every aspect of your startup. Start with any equipment or technology you'll need for general operation and then move to any raw materials you need and how often you'll need to replace them. If you plan to open a physical location, estimate what your rent and maintenance costs might be. If you don't, consider any vehicle or shipping costs. Next, consider whether your budget should include pay for other employees and how much you need for your own living expenses. Include any services, like marketing, web hosting, design or advertising.
Consider how you can find the money for your startup costs. This may be your personal savings, a business loan from a bank, credit from family or friends or grants from the government or other organizations.
9. Money obligations
After you've decided how to get your money, think about the long-term effects it can have on your business. If you decide to get a business loan, you may be paying back that loan and interest for several years, which is an additional cost to budget for until you have finished. A loan from someone you know might offer you lower interest. Making a formal arrangement on how you plan to pay back all money you borrow can prevent disagreements. Research grants before you accept them, to make sure you can fulfill any obligations involved.
Consider where you can open your business. You might be able to open your business within your own house if you plan on shipping your product or providing a traveling service. If you're looking for a storefront, remember to balance the appeal of the location with what rent you're able to afford. You can also think about material storage, any exceptionally large equipment and what might be convenient for taking deliveries or sending out shipments.
If you have business partners, you might consider how much work each plans to do and any jobs that you don't want to do. You might be able to hire freelancers for specialized work or bring in someone to help you temporarily during a busy season. Thinking about employees before you launch can help you make sure you have the infrastructure to record work in place and know local employment laws before you hire.
Read more: 11 Tips for Hiring the Right Employees
12. Supplies and sourcing
Consider what technology, equipment and materials you need. Think about what you need for each stage of manufacturing and purchasing. A store might require displays, decorations and some kind of payment situation, while a restaurant takes cooking equipment and specialized storage. Add any raw materials to your list and any packaging that you plan on using. You also might want specific phones, computers, printers or fax machines for your business. If you plan to travel, think about company vehicles and the tools you might carry.
Think about whether local or organic sourcing, vegan processing or animal testing is important to you and how this impacts purchasing decisions. Try to test or see materials before purchasing them, if possible. Some suppliers may show equipment at trade shows or send free samples before purchase.
Researching what local business laws can help you avoid violations or fines. Zoning regulations can influence where you put a physical location. There might be industry-specific laws like food preparation standards or liability laws about your obligations to customers. You may need permits to offer certain services or serve alcohol. Knowing federal, state and local taxes can help you set appropriate prices.
Check to see what accounts you need for your business. This might include bank accounts, IRS identification numbers, online commerce accounts or registering with the post office for commercial mail.
Think about how you want customers to see your brand. You can look at other businesses that offer similar services in your area to see what experience they give customers and how they make themselves stand out. You can use this knowledge and your personal values to create a unique brand that sets you apart from others. A cohesive brand can help unify your packaging, your location and your communication with customers.
Consider how you can let others know about your business. You might use your target audience to understand where to advertise. If you're unsure where to start or want a comprehensive plan, you can hire a marketing consultant to create a marketing plan for you.
Related: 7 Ways To Market a Small Business
Think about how far you want your business to reach. This might mean how far you're willing to drive to help a customer, or whether you want to do international shipping. You might utilize other businesses to sell your product, or selling a certain number of items at a bulk price for a retailer to distribute.
Research the businesses that produce similar products or services. You can learn what advertising works for them and what locations they serve. If they serve a similar demographic, you might consider locating further from them or targeting a different market. You can also join a local chamber of commerce or entrepreneurial group to meet others with projects like yours. Researching your competition can also bring partnership opportunities like a bundle promotion or a local street fair or festival.
19. Record keeping
Before you start your business, make a plan to record your sales, income, expenses and operation costs. Staying organized can help you track your budget and file taxes. You might consider hiring an accountant to help you with this, or look into software options that can automate parts of the process.
Consider protecting your own health and well-being by setting some limits for yourself. Determine how you can set boundaries between your work and personal life. Setting specific work hours or a specific number of orders you can process on your own might keep your work manageable. You can also make a contingency plan for when you reach these limits, including who you can ask for help and lower-priority activities you can put off during a rush.
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