By Stephen Spears
The historic change in economic and social factors over the last three years has altered the way people approach their work and careers. Whether it’s flexing between a local hybrid work office or fully telecommuting to a role based an entire coastal time zone away, more and more people have made the leap into new ways of making a living, prioritizing their lifestyle and values in the hunt for a job that gives them meaning.
For many, this has meant translating their personal interests, skills or hobbies into a small business, turning what was once a little dream into their reality. According to the U.S. Chamber of Commerce, a record-breaking 5.4 million new business applications were filed in the U.S. in 2021, with nearly as many (5.1 million) filed in 2022, prompting the Chamber to declare that entrepreneurship is booming in the U.S.
From creative fulfillment to profit opportunities to flexible schedules, there are many tangible benefits to being the owner of a successful small business. And while the path to get there is not a one-size-fits-all formula, there are a few key steps that every small business owner should consider before making the commitment to best position themselves for longevity and success.
Do your research first
While it may seem obvious, conducting diligent research before launching your small business is critical to getting started on the right foot. Do the work to truly understand what your product or service is, who your customer base is, where the demand is – all the questions explored in a market analysis, which the U.S. Small Business Administration (SBA) recommends each small business owner should conduct.
A market analysis will include customer demographics, which also helps identify opportunities and limitations for attracting customers. The more you learn, the more you can determine how to meet customer needs while maintaining a competitive edge. This analysis will also be helpful to share with future banking partners or investors, who you will eventually need to partner with to obtain a consistent means of financial capital so your business can continue to grow in a healthy and sustainable way.
Create a solid business plan
Once you’ve obtained the necessary market information and financial partners, the next step is to develop a strong business plan to help guide the future of your business.
A quality business plan provides an important roadmap to help guide, operate and grow your business.
According to the SBA, key components of a business plan include:
- Executive summary: The business mission statement, with your product or service, leadership team details, employees, and location.
- Business description: The problems your business will solve and consumers, organizations or businesses you aim to serve.
- Market analysis: Research about your customer base and competition.
- Organization and management: Your business’s structure, including leadership details.
- Service or product line: Products or services your business will sell and customer benefits, copyrights, or patents you hold or will seek.
- Marketing and sales: Marketing strategies, plans for attracting and retaining customers, and sale processing details.
- Funding request: An outline of your business’s funding requirements.
- Financial projections: A financial forecast and outlook for the next five years.
- Appendix: Relevant supporting documents such as licenses, credit reports and patents.
When ideating on your business plan, consider whether there are any government or association certifications that are available to you as a small business owner, as securing these credentials can provide significant opportunities to grow your customer base and profit.
Many U.S. government agencies and corporations save a percentage of their contract budgets solely for minority-owned businesses. According to NerdWallet, in 2022 the SBA’s Surety Bond Guarantee program (which helps small businesses compete for government contracts) helped distribute more than $2 billion in contracting awards to small businesses.
Qualifying businesses can apply for minority-owned certification status with the National Minority Supplier Development Council. Other certifications include women-owned small business certification and veteran small business certification.
Particularly for entrepreneurs who are new to the process and working long hours to launch their business off the ground: Establish boundaries, both personally and financially.
Many people will source from their personal finances when starting their business. To avoid any future blurry lines or murky accounting, it is important to remember that you, as an individual, are one entity, and your business is another. Think of your business’s finances and your personal finances in the same way, with your role being the bank, at least at first – you’re lending both your time and your money.
Part of this includes allocating a salary to yourself, even if the thought gives you hesitation. If you’re investing time, energy and finances in your business, it only makes sense to plan for when you can begin collecting your return on it. The ideal moment is as soon as you have a good sense of your business’s cash flow.
Maintaining these boundaries includes keeping clear and accurate business records, as well as opening a business checking and savings account and obtaining a business credit card. Use these accounts to pay bills, order supplies, complete employee payroll and fulfill any other business-related financial transactions. Always keep your personal funds and expenses in a separate account. Finally, make the investment of working with an accredited accountant who can help you conduct a full financial audit to review your business’s financial statements and accounting activity, identify potential issues, and assess performance.
Turning a personal skill or hobby into a thriving small business is no quick or easy feat; but by putting in the work to truly understand your offerings and who they will serve, creating a small business plan and establishing boundaries early on, hopeful small business owners will be one step closer to making their dream a reality.
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