THE BLOG
07/28/2016 08:10 am ET Updated Dec 06, 2017

Things to Do Before Starting a Small Business

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The idea of starting a small business can be very intimidating. The pressures and pitfalls loom large, making one wonder if it is worth the effort. But with zeal, planning, and diligence you can deal with, if not avoid most of these pitfalls. The key here is a good foundation. So, without further ado, here are a few steps that will help you start your small business with every chance of success.

1. Come up with a business idea
If you already have something in mind, that's great. But if you don't you can look up for various business ideas online and consider their feasibility. Do not confuse this with a business plan. That comes later. At this stage, you just want to brainstorm ideas, either alone or with a few others.

While considering ideas keep your talents and skills in mind. Do you know about the field you're planning to venture into? Do you have experience in it? Your own experience and skills can add a lot to the field you've decided to work in.

At this point, you may also want to consider whether you're planning to do this alone or bring in additional partners. Both sides will have their pros and cons. If you do plan to bring in someone else, keep in mind that their skills complement yours.

You might also consider coming up with a name for your business at this point, just to have a vision of what you intend to create. You need not keep it permanently, especially if you think of something better later. Just make sure it isn't already in use.

2. Write a business plan
A business plan encapsulates everything you want your business to be. The first thing to write down is a description of your business. State whether you will be the sole owner or a corporation or LLC and why. Describe your potential customers and the marketing strategy you intend to adopt. Know who your competitors are and why they have been successful or otherwise. Know how you plan to create or manufacture your product or offer your service and what the costs involved are. State how your business will be organized.

At first, don't write out a detailed plan. That is best left for later or for when you're approaching investors, so they can determine the feasibility of investing in your business. But to clarify the idea of your business to yourself and to set goals, you can create a short business plan that encompasses some of the important points - what you plan to achieve with your business, why you are setting up the business, your goals, strategies, and your action plan.

3. Plan your finances
Chances are high that you will need at least a small amount of capital to start your business. Just the basic operational requirements can cripple a business if you haven't planned for them. Determine where you will obtain this capital from - a small business loan, a line of credit, investments or savings. Keep an eye on your running costs. Estimate how much you can afford to spend on the essentials and try to keep the costs at a minimum. Wastage is a no-no.

Don't just focus on the costs involved in starting your business. To be on the safe side, try to have enough money set aside that you can run your business for at least six months without showing a profit.

You may decide that image is everything and splurge on expensive business premises, furniture, and the whole nine yards. Beware, many businesses have floundered because they spent too much initially. This is the time to focus on your business. The trappings of success can come once you're actually successful.

4. Look at the legal aspect
The first thing you'll need to do is look around for an attorney or a legal advisor. There are several rules and regulations involved in starting up a small business. Ignorance of these is not an excuse. At the same time, you may not have the time and knowledge to take care of this yourself. Look for someone who specializes in the paperwork and legal issues involved in starting a business.

You will also need an accountant. Someone has to keep an eye on the financial aspect of your business, the debit and credit, payroll, licensing fees and taxes. Again, you may not have the time to take it all on yourself. Hire someone you can trust or approach reliable firms.

At this point, you will also need to establish what sort of a business entity you are going to be. This decision depends on how your business is being financed. You may choose to be the sole proprietor. If you have partners you will have to decide whether you want to be a general partnership, a limited liability partnership or limited partnership.

If you don't need a business loan or definitely think you can make strong, consistent income in the business, some debt would be acceptable as long as you stay committed to paying (securing a low finance rate wouldn't hurt either

Clear all outstanding
As much as you can trade comfortable under the umbrella of some PPI insurance policy. It is advisable to clear all outstanding that might keep your business lagging in the process, most especially, the credit card or personal loans that you can't run from. Always have it at the back of your mind that your business has a long way to go and there would be reason for some funding in the future which could be better aided by some financial institution, with this in mind, clearing all outstanding debt before starting your business should be prior to your business and if not done, has tendency to create room for business instability.

If you have decided to start a small business, you are in for an adventure. Prudence and proper planning can prevent this adventure from turning into a disaster and give you the financial freedom that you have always craved. Good Luck!!