6 Questions To Ask Before Starting a Business
All businesses start from zero.
Getting your first 100 customers is notoriously difficult. Starting a business is not an easy task.
There are many things to consider before taking the plunge. In this blog post, we will discuss some of the most important questions you should ask yourself before starting a business.
1. What type of business are you going to run?
This is probably the most important question you should ask yourself as it has the power to save you a lot of money and hassle.
The most common types of businesses are:
Sole Proprietorship/ Sole Trader
This is usually a self-employed freelancer. Sole Proprietorship is the simplest type of business to start, and there are no special forms or licenses required. A sole proprietorship is owned by one person and operates under that person’s name. The owner is responsible for all debts and liabilities incurred by the business.
A partnership is similar to a sole proprietorship but is owned by more than one person. Each partner is responsible for the debts and liabilities of the business.
Limited Liability Company
A limited company is a company ‘limited by shares’ (if they make a profit) or ‘limited by guarantee’ (if they are not for profit).
This means a limited liability company is a type of company structure where members are not made personally liable for debts beyond the capital they invested.
This means the company:
○ is legally separate from the people who run it
○ has separate finances from your personal ones
○ has shares and shareholders
○ can keep any profits it makes after paying tax
A corporation is a separate legal entity from its owners and is typically more complex to set up. Corporations are subject to different rules and regulations than other types of businesses, so it’s important to consult with an attorney before deciding to form one.
CEO and Founder of Conklin Media, Dave Conklin suggests choosing the business structure that offers the most personal and financial protection. Each type has its own set of rules and regulations, so it’s important to do your research before deciding which is right for you.
2. How are you going to finance your business?
In other words – how much money you will realistically need to start and grow your business and how you will obtain it?
There are 7 ways to finance a business:
1. Bootstrapping: fund your start-up yourself
2. Get support from friends and family
3. Join an accelerator or an incubator program (popular in tech businesses)
4. Venture capital funds (for high growth startups mainly)
5. Reach out to the Angels Investors
6. Try crowdfunding
7. Request a small business grant from a government or a loan from a bank
Estimate your start-up costs and ongoing expenses, and make sure you have a solid plan for generating revenue.
It is also important to think about the financial implications of starting a business. There are many risks associated with running your own company, including the possibility of losing money. Make sure you are aware of these risks and that your business plan accounts for them.
If you are not comfortable managing your finances, consider hiring a financial advisor to help you get started. This person can guide everything from budgeting to investment planning. Taking the time to plan financially can help ensure the success of your business.
3. Are you aware of your legal requirements and rights?
A lawyer can help you with all sorts of legal issues, from trademark and copyright law to contract law. You can also look for a lawyer who specialises in small businesses or startups. It’s important to have a good relationship with your lawyer, so make sure you communicate well and feel comfortable working together. A lawyer is essential for any business, no matter how small. A law firm Beyond Law will have a deep understanding of the latest legal changes and how to use them to benefit your business.
A lawyer can also help you to register your business with the state or your country. This process can vary depending on the state/country in which you reside, so it’s important to do your research ahead of time.
In addition, you’ll likely need to obtain a tax ID number and register for unemployment and workers’ compensation insurance.
4. How are you going to market and promote your business?
Having a solid marketing plan in place will help you reach your target audience and increase sales.
There are many different ways to market and promote a business. Some of the most common marketing and promotional tactics include advertising, public relations, social media, and search engine optimisation.
It is essential to create a marketing plan early on to track your progress and make necessary adjustments along the way. Your marketing plan should outline your goals, target markets, budget, and strategies.
You may also want to consider hiring a marketing or public relations firm to help with your marketing and promotional efforts. These firms have experience in creating successful marketing campaigns and can help you reach your target audience.
5. Are you going to have employees or independent contractors?
Many business owners wonder if they should hire employees or independent contractors. The answer depends on many factors, including the type of business, its location, and the work that needs to be done.
Independent contractors are self-employed individuals who contract with another company to provide services. They are not employees of the company and do not receive benefits such as health insurance, paid vacation days, or retirement savings plans.
Instead, they usually invoice the company for their services at regular intervals.
Hiring employees can be more expensive for a business owner than hiring independent contractors because the employer is responsible for withholding taxes from employee paychecks and paying unemployment, workers’ compensation, and Social Security/Medicare taxes (if you’re in the US).
However, employees typically have a higher level of job security and may be more invested in the company’s success.
6. Do you have an exit strategy?
Not all companies have to have an exit strategy from the get-go, but it helps, especially if you are planning to raise money from investors.
Your exit strategy is also helpful for when things don’t go as planned and you need to sell your company.
Your exit strategy will help you get your money back.
What are your options? What should you do right now to make selling your business as smooth as possible?
Talk about this with your lawyer.
It’s important to plan for the worst-case scenario and have a solid exit strategy in place to avoid disaster and protect yourself and your investment.