Starting a new business is both exciting and terrifying. You know what you want to do and you have a vision of what you want the company to become. But how do you get there?
Every new business owner can create their own path. While every path is slightly different, don’t reinvent the wheel. There are certain steps you’ll need to take that others have taken before you. Use their knowledge and advice to make things easier and faster on yourself as you forge ahead.
You don’t know everything
This is a difficult concept for many people to grasp. Realize now you do not know and will not ever know everything about running your business. Once you accept this fact, you will be much better equipped to focus on the parts of the business you can control.
Be acutely aware of on the job learning. This is imperative to making sure the mistakes you make do not repeat themselves. At the very beginning, you may not be at a place to hire any staff so you may feel stuck doing everything on your own. This is not recommended and leads to more problems both within the business and the home.
Paul Graham, entrepreneur extraordinaire, explains: “The low points in a startup are so low that few could bear them alone. When you have multiple founders, esprit de corps binds them together in a way that seems to violate conservation laws. Each thinks ‘I can’t let my friends down.’ This is one of the most powerful forces in human nature, and it’s missing when there’s just one founder.”
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Be receptive to advice from others who have been down this path before. It might even be beneficial to locate a mentor. Remember, you may be an expert in your field but you are not an expert in setting up a business.
Seek legal advice before starting a new business
Related to the first point, seek out legal advice. “But why do I need a lawyer before I get into trouble?” you might ask, the fact is before you need a lawyer is the best time to get a lawyer. Preventative and proactive legal preparation has the ability to keep you out of trouble, saving you time, money and energy down the road. Spending less today to protect yourself tomorrow is the first step you should take when creating your new enterprise.
Not only do you need to prepare for potential trouble, but there are also myriad of regulations regarding businesses. Should you set up as an S Corp or an LLC? What are the cost differences and tax implications? Do you know which licenses you need to have as a property management company? Do you know how to check to see if Nail and Hammer Construction Corp is available to use? You certainly don’t want to go through the time and expense of creating collateral based on the name of someone else’s business. If these questions are all new to you, seek out legal counsel and get the right guidance to ensure your business gets off on the right foot.
Yes, you will eventually need to pay employees but focus on yourself first. When starting a new business you probably thought you will pump all the profits back into the business. That is a noble endeavor but what about food, the roof over your head, your family? You may need to cut back on some luxuries but you most certainly need to feed yourself and your family. You cannot forget to plan for those essentials.
Write one. Seriously. I like to tell people creating a business plan is like creating a blueprint for building a house. You certainly wouldn’t want to build a house without a blueprint, right?. Having a business plan is essential, if you are not sure how to create one you can find a step by step guide to creating your business plan here. The United States Small Business Administration also provides guidance to help you create your business plan, even providing some templates.
Do not view your business plan as a chore. You are excited about this new thing you’ve created and you want to do the fun stuff. I get it. But you have to eat your vegetables before you get to the dessert.
Mark Twain once said: “If it’s your job to eat a frog, it’s best to do it first thing in the morning. And if it’s your job to eat two frogs, it’s best to eat the biggest one first.” What did he mean by that? The frog is that thing on your to do list that you have absolutely zero motivation to do and that you’re most likely to procrastinate. Eating the frog gets the worst part of your day out of the way and lets you get to the fun stuff. So write that business plan and get to the fun parts!
When starting a new business think of the competition
Pay attention to competition. You are not the only landscaper or construction company in town. Do research on your competition. Find out if they advertise? Are they having difficulty obtaining new business? Are they offering services for much less than you? How do you find answers to these questions?
You can call your competitors and ask them what they charge for a 500 square foot landscaping overhaul. You can visit their physical location and see how busy they are. But most advertising now is done online. You can use a tool like Adbeat to see all of the ads for a competitor and even find competitors you didn’t know existed. Moat is a free ad search tool that allows you to search your competitors by name and see what ads they have posted. Moat even provides a list of where the ads have been placed so you can target your own advertising.
You are not the only fish in the pond. But don’t be intimidated. Embrace the competition and let it force you to improve. Remember, business is all about people and if you don’t have people, you don’t have a business.
Speaking of people, hiring will become a necessity, if it hasn’t already. But before making your first, or seventh, hire, you need to understand the additional legal obligations and implications involved when interviewing potential employees. Can you ask candidates about criminal history? Can you run a background check before you offer someone the job? How much do you have to withhold in payroll taxes? What do you need to do when you terminate an employee? What records do you have to keep? How do employees record their time? Have you properly classified the employee as exempt or non-exempt? These questions are just the tip of the iceberg when it comes to employees.
But before you even get to those questions, how do you find qualified candidates? You want to make absolutely certain you hire the best person for the job. Turnover costs money. A Society for Human Resource Management study from 2016 found it takes businesses 42 days to fill an open position and costs $4129.00 per hire. You can post on job boards but many people apply for jobs without being qualified or even bothering to read the job description. Not only is this frustrating for you but it wastes your increasingly valuable time. One trick I recommend is requiring applicants to use a code word in the subject line or body of the email when applying.
Federal and State Registration
When starting a new business ask yourself, have you received your FEIN? Do you know what that is? Federal Employer Identification Number. If you heeded some of the advice from above and sought legal counsel, they would have obtained your FEIN when registering your business.
Have you registered with your state’s labor department? Once you bring on employees, you have to pay state unemployment compensation taxes for each employee you hire. These payments go into your state’s unemployment compensation fund, sort of like insurance for people who lose their jobs and do not immediately find a new one. If you don’t register, your state won’t know where to credit the funds being withheld by your payroll company.
Speaking of payroll, are you doing that by yourself and manually calculating all the local, state and federal withholdings for both the employee and the business? It might be tempting to do so but this is an incredibly complicated area of employment and it’s best left to the experts who can help you avoid costly tax and payroll fines. Remember, you can’t do it all.
This is the tip of the new business iceberg. We could go on for days about what needs to be done before and after you start your new business. Maybe we will.
If you only leave with one takeaway, remember this: plan. You can’t plan for every scenario but you can plan for many. Doing so will avoid potential pitfalls and costly legal battles down the road. It also serves to give you a clear path so you know what comes next.
Author: Bryan John Driscoll
Bryan is a former lawyer, current freelance writer and HR consultant. Bryan prides himself on being able to provide quality written pieces and consulting expertise to his clients in a timely and defect free manner. Bryan loves to travel and, if he had his way, would constantly be jetting off to another destination.