Before starting a business
I guess you’re here as you‘re curious enough to start a business, right? Then get on! This page is a guide for your reference in starting a business. There are lots of factors affecting in starting and running a business; thus, this page will lead you to some basic principles.
Starting a business is never been easy. But, if you are serious, if you really desire to succeed, it doesn’t matter how many times you fail until you get what you needed to be done. I have split the topics in 4 sections to expound and understand simply the fundamentals in business: before starting a business, when starting a business, buying a business, and running a business.
It is indeed exciting to think on starting a business. But, to save time, money, and effort you must be aware on things involved not just in starting but as well as in running a business. When you have a business, it doesn’t stop there. The responsibility is always yours- from setting up the business, purchasing office equipment and machinery, hiring staff to business operations. Now, let’s get started with the basic- before starting a business.
Goals with personality
First thing’s most, you need to have a reason before thinking to start a business. Reasons such as: want to be free from debts, want to earn a stable income, want to make a living on your own, want to enjoy in the future the benefits of being an employer, and others. Whatever it is, your reason should be a little personal goal to keep you motivated. You have to remember that you are on your own now. Be self-motivated. You will never know what will happen tomorrow. The economy usually fluctuates. The market is unpredictable. And no matter how your business is affected by the downside of the economy, as long as you have your goal, you will have a reason to continue. You have to stick to your reason or goal whatever the outcome is. Similar in life, if you have a reason to keep on living, it doesn’t matter how difficult it is. Have you still remembered the first time you swim? There was a fear of drowning, right? But, you have conquered that fear because your goal was to learn to swim. I guess you still remember the countless times you were almost drowned, but you’ve tried until you learned it!
What I’m trying to say is, before starting a business, you need to have a personality. A personality to conquer fears, a personality of perseverance and tolerance, and a personality to get things done right away (not procrastinating things). Above all, you should know the risks; accept the circumstances. Now, assuming you have those personalities, what’s next?
Evaluate yourself. Are you ready to take risks? What business would you like to get into? Do you have a hobby that you can make profit of? How about things you’re good at? Your skills or talents will be a waste if you keep on waiting for the opportunity to come. Do you have enough money to generate the business? If not, how are you going to finance the business?
After starting a business, are you ready for the operation? Bear in mind that operating a business is beyond working for yourself. There are lots of things to consider: expertise, management, technical skills, financial stability and long term development. The importance of self-evaluation is to consider whether or not you are suited to self-employment and understood the risks involved. Do you think running a business is suited for you? Are you ready to face the disadvantages of having own business?
Business analysis forecasts challenges and may help you face and overcome them. Through this process, you analyze your idea if the business is likely to succeed. You must realize that running a business is a lifetime financial commitment. When the business starts to fall, you should know where and how to generate investments to save the business. You should think of succession plan and recovery plan.
The analysis helps you get started. It will make you realize whether or not your idea is feasible. It will help you determine the supply and demand of the product or service. Furthermore, it will help you find out your competitors and whether or not your business can sustain in the market, and for how long.
To get started with business analysis, you have to create your own business plan. It’s the first step to thoroughly think the concept of your business, and decide on your own business goals and objectives. The plan involves researching in all business aspects: gathering information, analysis, and evaluation. In addition, the plan will help you define and meet your goals.
Networks and seminars
Seminars provide intensive exposure to any topic along with presentations and further discussions conducted by a specific expert. So, prior starting a business, it’s the best idea to search for events, seminars and workshop, and webinars for business start ups. This will be your chance to study the business further. You might not enjoy reading and taking classes but, you may ask detailed questions to the expert about the business you’re going to start. On top of that, experts usually have networking access that can help you find business partners. You will have an opportunity to meet different people who share the same interests as yours. With seminars, you’ll meet people to give suggestions to solve common problems in starting a business; and you’ll find an advice to handle those challenges. With networks, the relationship continues and professional connections start after the seminar.
Finding further advice and support
Business consultants can help you further with this matter. If you have lots of professional connections, you might find a great consultant from them. Sometimes, when relationships continue, they’ll give you a free consulting service. You may contact a trusted business consultant in your local area to find your niche and discuss issues on starting a business. Using business consultants’ idea and advice can be helpful but, don’t think that you are less smart than them. Their advice may be true but you still have your own common sense. As you work with experts, continue to reflect on your experiences, observe and stay fair about their recommendations.
While you are going through the process of starting a business, you need to think if how your business will be handled. Would you like to handle it on your own or with partners? Your decision to this impact on the taxes you’ll pay, the amount or volume of paperwork required to do for your business, the ability to face personal liability, and the ability to generate capital.
Sole proprietorship, partnership, and corporation are the common forms of business. Each business form has different consequences in terms of tax. So, your wise decision is needed to match your business needs.
Most form for a business starter chooses a sole proprietorship or partnership. Sole proprietorship is the simplest form as this involves one person to own and operate the entire business. Should you wish to work alone, then this will suit best for you. Earnings for a sole proprietorship are usually taxed once. In addition, you will have a total control on your business, you decide everything. The downside for this is that, you are only responsible for the liabilities. Your assets might be place at risks, and any legal claim will be filed only against you. In terms of raising capital, this could be difficult when borrowing banks and any other financial institution. Most of them are hesitant for a sole proprietorship to make business loans. Overall, you only have to depend on the available financing sources on your pocket.
Partnership contrasts to sole proprietorship: whatever changes, decisions, and liabilities will be shared by partners. This form is more expensive than the sole proprietorship. The business requires more legal and further accounting. Partners contribute resources and divide the profits. The good thing for partnership is the treatment on taxes. In partnership, it doesn't pay tax according to the income, but this passes throughout the profits or losses on each partner.
An independent contractor is primarily referred to self-employed. They’re someone who works for someone else but not as employee. Individuals who have vast experiences, knowledge and with great talents and skills normally engage into independent contractor. In other words, they are likely to provide a service to different companies at the same time. This can be in any form of business person: sole proprietorship, partnership, or can be a corporation; but most of them are the sole proprietors.
In taxation, since independent contractors are considered self-employed or business owners, income received from different companies (whom contractors have worked) will be computed at the end of the year. There is no payroll tax deducted in paying contractors; therefore, they are responsible for compensating self-employment taxes with income taxes and other remittances (social security and insurances).
A sole proprietor is an individual business owned by one person that is not registered as any business entity as such partnership or corporation. An independent contractor is a sole proprietor type that receives pay from contract employers. Both have businesses to talk about but they differ on how income is received considering certain taxes. For a sole proprietor, the tax type is business income tax while payroll tax is for independent contractors. A sole proprietor may receive income from selling products or services, but an independent contractor may receive pay from a contract employer while receiving business income in different sources: sales of product, service or both. At year end, all income received will be calculated in the business’ income tax.
If you have a lot of services to offer but unaware on how you start a business then, consider as an independent contractor. As you go along with this, you’ll start realizing how you’ll going to expand your business. Soon you’ll have to put a service center and employ others then deploy in different location.
Overall, before starting a business, consider these following checklists:
- Start with a goal
- Evaluate yourself if you are capable in running a business
- Have yourself analyze your business if you are likely to succeed
- Attend business seminars and start building networks
- Seek advice and support to handle different challenges in business
- Plan thoroughly your business and know the business type that suites you and your business
- Start writing a business plan
- Know how to finance your business
- Be wise on your marketing plan
- Consider as an independent contractor
When starting a business
Now you have an idea on what to do before starting a business. Let’s heed to the next section of business’ fundamentals “when starting a business”. This is the phase where your investment must initially focus to get your business smoothly started. This covers business registration, taxation obligation and other legal requirements, setting up and managing the office, deciding to get insurance, employing people, and strategic marketing plan.
Business Legal Requirements
Getting your business registered and licensed is the first thing to do when starting a business. This allows you to operate without having to fear of business closure for noncompliance; thus, the reason you need to think thoroughly of what applies to your business.
Now, you might be in doubt whether registering your company gives you a legal protection on your company’s trademark? No, it will never give you protection. Registering your business name or company is different from registering trademarks, both have different processes. But you need to register your company or business name first before the intellectual property (such as a trademark).
If you think that your business needs to register as a company then register a company name. Otherwise, if your business has a different name than your company then register a business name. If you’re unsure on how your business or company be registered as, or if your company needs a business structure, you need to seek a professional advice in your local area about this circumstances. Furthermore, you need to understand the obligations when you become a company or business owner.
Speaking of registering a business name, it’s different than registering a company. Unlike registering a company, it doesn’t create a lawful entity. Only a registered company creates this. Registering a business alone doesn’t allow the practice of privileges which a company is authorized (example, limited liability or a corporate tax rate).
Protecting the business name
As been said that protecting the business name doesn’t mean of giving the business owner an exclusive trading rights. The law that exists today doesn’t have trading or branding protection when registering a business name.
Another thing to remember, when you register your business name, it doesn’t warrant you an ownership of the name. This doesn’t stop others from doing similar in registering a name. It doesn’t give you exclusives of using its part of the name. This doesn’t prevent others who have registered a name as a trademark.
To comply with the legal obligations, it is your responsibility to register your business with separate protection on any intellectual property such as a trademark or a brand. This is what you need to be aware of a business owner.
Each state or territory has different laws in governing registrations, permits, and licenses. Therefore, you have to check your local area about processing the legal documents.
Note in choosing a business name
There are names restrictions when choosing a company or business name (check for your local registrar’s office). Normally, restrictions are made to ensure the business will not mislead people about the business activities. You can’t use a name that will mislead connections with any organizations such as government. A person or a company may take action against you or your business having a name or similar registered. Therefore, check thoroughly for your proposed name whether there’s similar or identical name already registered.
Obligations for business owners
As a business owner, you need to know what laws apply to your business. You have to be aware of the rules and regulations in complying with legal obligations: registrations, licenses, contracts, and leases. For you to comply with your legal responsibilities, you need to search more information from the government about licensing, permits, registrations, approvals, standards and guidelines.
Licensing or acquiring permits depend on the particular business. Example, in food business, it requires additional licenses. While permits and licenses vary from territory to states, it is better to find out the exact information from your federal government to make sure that you are doing the right thing.
When entering into a contract with independent contractor, as a business owner, you need to determine whether or not an individual is categorized as “independent contractor”. The status of an independent contractor will affect the rights and obligations. They maybe work as an independent contractor while they are working for others as well.
Setting up and Managing the Office
Setting up an office with the right equipment will enable you and your workers work efficiently and comfortably. Workers may do more in a lesser amount of time and may spend not as much of money. For startups, you can make use of these 3 approaches to get the equipment: purchasing a brand new, repairing the existing equipment, and trading-in to purchase new equipment.
The “one-size-fits-all” doesn’t exist. What works for other business may not work for you. So there is no way you can determine a perfect design for your workspace. However, there will always be the best workspace that will make the office productive, efficient, and comfortable. For a productive workspace, everything inside the office should be organized: from the equipment, to recording system, and communications. All should work together. In an efficient workspace, if it’s set up correctly, you can have both time and cost effective. Workers will do more in less time and money. A comfortable workspace will help workers do their work at their best with least stress and pressure on their body. It may not be perfect as it seems but what matters is that, it works for all.
Speaking about productive workspace, the equipment and its layout and organization should be amenable for workers to get the job done without interference. It’s by using the equipment to become productive that is hassle-free anywhere. If for example, workers are using a solar calculator, you know the fact that it won’t function in a dim corner of the office.
Being productive in the office is not limited to using the right equipment. It should focus the entire system as a whole such as office system, office layout, and the right department or personnel that will take care of the office problem.
- Office System
Office system is the term used to organize office works; where each department has a system in computing, recording, reporting, filing, and communicating. The office system is made up to properly arranged out routines. There should be someone would facilitate the job of other sections and maintain the organization.
- Office Layout
This consists of the space required and its utilization to deliver practical arrangements of the physical factors. The arrangement should be functional and procedural. Example, paper works should be according to its flow and be placed in one section or the person who handles office activity. Environmental conditions should be taken care in terms of temperature (using air conditioning or supplemental heating), light, and noise. Oftentimes, the layout is based on practical and personal preferences and not on scientific basis.
Overall, you can create a productive workspace by making a plan with response to the following questions: is your office mainly for private use? What equipment do you frequently use to do the job?
There are two factors which determine the efficiency of the workspace: time, and money. When striving for efficiency, make sure that the equipment’s productivity is not compromised. It must balance the time while considering the cost against the ability of the equipment to function properly. For example, you are using a single phone line to do both phone and fax. This for sure operates the machine at a lower cost but this may not be productive when the other party wants to send you fax while you’re making phone calls. You know the fact that the fax won’t do its job when someone is on the phone at the same line.
Lay out the workflow to save time. What do you most do in your office? When you determine the equipment you frequently use, it will make sense to put the equipment nearby. The efficiency of the system is more significant than how it looks; the same thing in time. Time is money. When a system helps you work faster, it saves you money. In addition, it allows you to work on other areas which generate profits.
The main source of discomfort is from the improper arranged workstation. When people in the workspace are exposed to a poor designed environment, they become unhealthy. They may acquire physical ailments such as fatigue, body pain, irritated eyes and so on. Chances are, workers may tend to absenteeism.
To avoid the possible problem, you should take into consideration in purchasing adjustable chairs and desk that will allow workers to become flexible in their position. Encourage workers to do occasional breaks for a couple of minutes every hour or two to stand up, move around, and stretch arms and body. Take out the noisy equipment that interferes to workers to do their job. Or you may place a heavy carpet or a rubber mat to help absorb noise.
Deciding to get insurance
Good workers are the best asset to improve the business; thus, retaining the right people is very essential. Workers generate value and can produce a great return on investment. And to get this happen, the needs between the business and workers must be met. This requires understanding of the obligations for workers to maximize their skills.
While hiring people is important as it allows meeting customers demand, some factors need to be considered. You need to decide the type of their employment whether employee or independent contractor. If you choose workers to be employees, decide whether you want them employed full time, part time, casual, or fixed term. Deciding your workers employment status will help you determine their wages and other conditions.
Whether or not you want your employees be insured is your choice. However, aside from retaining the best people as its advantage, there’s a great reason why you need to do so. First, in the event of accident or illness inside the workplace, insuring employees protect the business against too much compensation or costly claims. Second, you as an employer are responsible to protect employees against financial adversities due to workplace accident.
There are other insurances to consider aside from workers insurance. These could protect your business and you as an owner:
- Professional indemnity- it is a type of insurance that will protect the business against legal action engaged for losses due to professional negligence. It provides indemnity from client’s loss in financial, material or physical due to negligence acts which your business is involved.
- Liability insurance-it’s a type of insurance that covers you and your business from being liable for injuries or damages to another property or person. Although this insurance is optional, but it is recommended for all businesses as there maybe is a case that either you or your business will be sued for negligence. The liability insurances you may consider are public liability and product liability. Public liability is a kind of insurance that protects your business against financial risk due to being held liable for an economic loss, damage of property, death or injury to a third party resulting from your (owner) negligence. Product liability protects your goods and services against claims causing death, injury or damage. This type of insurance covers any events happen to another person or business due to the failure of products and services.
People are the most complex problem in business. They are the only thing in business that they cannot be standardized. Since people are dynamic and not static, one thing is sure about them is their uncertainty. Technical process maybe learned and mastered; offices or buildings maybe built according to its required specifications; material’s requirements maybe thoroughly figured; and complicated machines maybe developed to perform with precision; but if the human part is overlooked, complex problem in business begins.
Human beings by nature and environment are selfish to the extent. It is therefore important that before hiring an employee, you know the traits and personality of the person. At least you have the characteristic requirement for a certain people you want to employ. One of the good traits to look for is altruist. Such trait has a high regard and devote interest to others. It’s a desirable and aspired trait but it’s hard to find among the group in its simple and ideal form. Other traits aside from hard working you have to consider are cooperative and disciplined.
Business is about people. You may not always give your people what they want but if you are good at them, success will come to you. You have to know what will motivate your employees and what inspires them. Those will be the reason that they can stay long in your business. The key is, identify the strength of the individuals and know when and how to use their strengths.
Part of the problem in personnel is money. Employees want to receive enough or more money to live according to their standard of their living. The problem is, when an employer pays more just to get the job done, the cost as it increases will be reflected to the finish product. As customers pay more, the orders might decrease. At some point, if the employee cannot have the desired money, either he will look for another job or will be no longer interested to work. Two economic objectives are being opposite thus must be reconciled: the employer’s desire to lessen the production cost and the employee’s desire to get the desired returns. The good thing is that, both objectives can be attained through increasing worker’s efficiency. In other words, teach your employees to accomplish different jobs in less effort and time.
Give enough training to your employees to increase their efficiency. When this aspect is done, it can lower the production cost and increase salaries (where employees can get their desired returns). Overall, when it is hard for you as owner to employ the right people, you can always rely to the ability of the manpower agencies or hire a human resource to manage your employees and personnel function.