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Tips for Starting Your First Business

7/9/2020

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Maybe you’ve always dreamt of owning your own business or you came up with your business idea while on a quest to fill a need in your own life. Now you need to know:

How do I start this entrepreneurial journey? image

How do I start this entrepreneurial journey?

In this article, we’ll give you 5 key tips to:

  • Understand the risks of starting your own business.
  • Test the feasibility of your idea.
  • Learn about startup financing options.
  • Write a business plan.
  • Meet with bankers or investors.

Ready to go?

Let’s do this.

Risks

It is easy to focus on the upsides of starting a business, such as being your own boss, while not taking the potential risks seriously enough. Here are some of the downsides you could encounter on your way to entrepreneurial success.

  • Financial: Loss of steady income and benefits from your pre-entrepreneur job, potential loss of any personal capital you invest in your business, liability for business debt, and the costs of supplies/equipment before you start turning a profit.
  • Personal: Loss of time, strained interpersonal relationships, and stress.
  • Temperament: Are you well-suited to the challenges and demands of running a small business, such as competition, discipline, and organization?

Feasibility

If you stared the risks in the face and still feel ready for the challenge, the next step is feasibility testing.

One thing entrepreneurs have in common is passion. However, that alone isn’t enough to launch a successful business. You may think your idea is genius, but before you invest too much time or money in it, take a moment to assess the potential viability of your business idea.

Take a moment to assess the potential viability of your business idea image

  • Why will this idea work?: Identify the customer base for this product or service.
  • Sustainability: You need to know your purchasing cycle and come up with a reasonable sales forecast. Only then can you figure out if you have enough capital on-hand to survive until you turn a profit.
  • Competition: You need to know where your customer base is going now to get the product or service you offer. How will your brand compel them to switch?
  • Production: Make a list of resources you’ll need (employees or freelancers, equipment, office or factory space, etc.) to launch. How can you obtain them?
  • Marketing: Figure out how you’ll communicate your idea and message to others, whether you need outside marketing help, and how much you can afford to spend on initial marketing efforts.

Financing

Now we get to the section that is on every aspiring business owner’s mind: where to get the money you need to launch.

The funding needs of a new business are quite varied. For example, many entrepreneurs run their new businesses out of their homes until they can afford to expand. And the availability of website templates and e-commerce platforms makes it pretty easy and inexpensive to run an online-only business.

But businesses that require a physical space, such as retail spaces and cafes, will require more funding from the beginning. Before you apply for a business loan, figure out how much of your own money you can invest in the business. This could mean dipping into personal savings or retirement accounts or having family members invest in your business. Lenders want to see that you have some “skin in the game,” too.

Learn about our Business Lending options for start-up businesses.

  • Equity Investment: Family, friends, or business partners purchase an ownership stake in your company.
  • Business Line of Credit: Flexible revolving credit account.
  • SBA Loans: Government-insured financing for start-up businesses.

How to write a business plan

Now it’s time to take all the information you’ve gathered in the previous steps and use it to write a business plan. This process can be time-consuming, but it’s definitely worth it. Not only will a good business plan help when you’re ready to apply for financing, but it will also help you get clear about what you want to do and how you’ll do it.

How to write a business plan image

Write a Cover Letter (also known as the Executive Summary).

  • Your name and credentials
  • Product(s) and/or service(s) you offer
  • Your market niche and local competition

If your business is entirely self-funded, you can skip these next three bullet points for your summary:

  • Funding needs
  • How you’ll repay a business loan
  • Desired loan term

Describe your business.

  • What type of business are you starting and what is its purpose?
  • What products and/or services are you selling?
  • Who is your target customer base?
  • What need or want do they have that your offering fulfills?
  • Where will you operate? Can you run your business out of your house at first or do you need to rent a space?
  • List any staff positions you need to fill to get your business off the ground.
  • Who are your primary competitors? How will you win market share, i.e. better price or service, etc.?
  • Goals for sales or number of clients
  • Do you have an accountant, attorney, banker, insurance agent, and other relevant advisors for your business?

Projections

  • Worst case
  • Breakeven analysis
  • Best Case

Marketing

Until you can hire a dedicated marketing person or team, you need to think like a Marketer yourself.

  • What are the benefits of your products or services?
  • Who is your ideal customer (age, income, gender, education level, etc.)?
  • Differentiation between your offerings and those of your competitors
  • How will you sell your products/services? i.e. online-only or a mix of bricks-and-mortar and online.
  • How much can you charge to make a profit without pricing yourself too high?
  • Marketing is an investment. Budget for it and take the time to create a marketing plan. Your business won’t just promote itself; you need to be intentional about it.
  • Logo
  • Tagline
  • Presentation and packaging
  • Print communications
  • Digital marketing
  • Website
  • Google My Business and Bing Places
  • Social media profiles

Personal Financial Statement

This consists of your annual expenses, assets, and liabilities, such as life insurance, stocks & bonds, real estate, and other property, debts, and unpaid taxes.

  • Balance Sheet
  • Income Statement
  • Cash Flow Statement

Exit Strategy

An entrepreneur’s exit strategy is a developed plan to sell your ownership in a business to investors or another firm. In other words, an exit strategy provides you with an approach to help decrease or entirely liquidate one’s stake in your business in order to gain a profit. If your business ends up unsuccessful, having an exit strategy allows you to limit your losses.

Once you’ve completed your business plan, sit down with your business banker and/or outside investors to review your plan with an outside party.

The Legal Stuff

This may not be the most fun part of the business start-up process, but it’s arguably the most important. After all, you can tweak your business plan as you go, but if you don’t start on the right foot with the IRS, you could be in for a lot of headaches--and fines. This information will also be necessary for any business funding you apply for.

The legal stuff image

  • Register for a Tax ID: You’ll need an Employer Identification Number (EIN) from the IRS, as well as registration with the Illinois Department of Revenue. You may also have a local tax authority to register with. Talk to an accounting professional to ensure you haven’t missed anything.
  • Business Licenses: Check the business licensing requirements in your state, county, and municipality. Review the Illinois state government page on Registration, Licenses, & Permits for businesses.
  • Business Structures: Choose between a sole proprietorship, partnership, LLC, or corporation. The U.S. Small Business Administration has more information about each type here.

Banking and Insurance

Even if your business is a sole proprietorship, you’ll want to separate your business and personal bank accounts. This makes accounting easier across the board.

  • Browse business checking and savings accounts from Town and Country Bank and Peoples Prosperity Bank.
  • Sign up for appropriate business insurance to protect you from liability and disaster.

Partner with Town and Country Bank and Peoples Prosperity Bank for all of your business banking needs!

Headquartered in Springfield, IL, Town and Country Bank and Peoples Prosperity Bank in Quincy have a mission to empower the financial well-being of our communities, one person at a time. With 11 branches and one Loan Production Office, we specialize in helping businesses succeed. Our bankers are the best of the best and offer a comprehensive suite of innovative products and modernized services—all with a hometown touch. To get help and advice with your business start-up, contact our business bankers today!

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