Starting a business can feel a lot like driving down a dark, winding road in the middle of the night. You know where you want to go, but are unsure of how to get there safely or what lies between point A and B. To boost your confidence and set yourself up for success, consider the following steps you can take to prepare for your huge undertaking.
What is Your Why for Starting a Business?
Knowing your why is the most important question you can ask yourself – it’s your foundation. What is the idea, passion, or belief that drives your underlying purpose? Very few entrepreneurs are solely driven by money. Freedom typically drives entrepreneurs to stay committed to their goals. The freedom to seize opportunities without having to wait for corporate approval. The freedom to offer a product or service differently; you simply know you can do a better job. Or the freedom to create a passionate, driven team of like-minded individuals.
Every business experiences slow seasons and ups and downs, which is why we offer invoice factoring. When everything that can go wrong does, the answer to this question – what is your ‘why’ – is what will keep you going. If you lack the answer to this question and are not 100 percent committed to your vision, you will be unable to nurture your business, especially during critical periods of growth and expansion.
In the words of German philosopher Frederick Nietzsche, “He who has a why can endure any how.”
Research, then Research Some More
Launching your business venture with confidence requires having a thorough business plan, which can only be developed through hours of research. Start by scoping out your industry. For example, if you're in the temp staffing industry, is there a need for your product or service? If your brilliant business idea has already been claimed, you may need to re-think launching your startup in that particular area.
Aaron Keller, an adjunct professor of marketing at the University of St. Thomas and a managing principal of Minneapolis-based brand development firm, Capsule, says, “It's a big red flag when someone outlines the size of the market – multi-billion dollars – but doesn't clearly articulate a plan for how the idea will meet an unmet need in the marketplace."
You will also need to assess the competitive landscape. Is your product or service an improvement or more affordable than your competitors currently offer? Much can be learned from analyzing your competition’s success and mistakes as a company. Doing so will not only give insight into customer’s buying decisions, but it will also help you determine the most effective marketing methods to reach those potential customers.
Choose the Appropriate Business Structure for Your Startup
When choosing which business entity to form, you will need to research the cost of formation, tax implications, and legal liability. Don’t forget to also consider the cost of ongoing administration, the future needs of your business, and the flexibility that structure provides. What do you foresee or intend for your business to look like in five to ten years down the road? Will you need flexible purchase order financing to stay afloat?
The most basic type of business establishment, a sole proprietorship, means you alone own the company and shoulder the responsibility for assets and liabilities. If your business is a partnership, you will need to research the differences between each type of partnership in depth. For example, general partnerships assume profits, liabilities and management duties will be equally shared by all partners. A limited partnership, on the other hand, is more complex. Further, an LLC is designed to provide you with the limited liability features of a corporation (and tax efficiencies), along with the flexibility of a partnership. All in all, you will need to weigh the pros and cons of each legal structure to determine which entity aligns with your vision and goals.
Develop Strong Business Relationships
Developing meaningful connections is the cornerstone of a successful startup. The relationships you create now will either positively or negatively impact the success of your venture. A mentor’s guidance can provide a sense of accountability, help you plan for each stage of the business cycle (growth to maturity) and increase your management skills (purchases, hiring, inventory, etc.). Whether your business is a large corporation or a small business, an attorney’s knowledge is valuable for both preventative and proactive legal preparation. In addition, working with a CPA will ensure you are aware of all tax requirements and fees.
The business relationships you develop within your company itself (employees, managers, etc.) are equally important, if not more so. It is your responsibility to communicate your vision and mission to them. Without a like-minded team, so many of your goals and ideas will remain just that – goals and ideas. It takes a passionate, hardworking team to make a vision become a reality. How they choose to communicate with your business’ customers is a direct reflection of your motivation, dedication, and commitment.
Spend Time on Your Exit Strategy
It might seem a little odd to plan your exit strategy while also developing a startup strategy. Many entrepreneurs mistakenly miss or skip this step as they work their way down their startup checklist. However, one of the most important things you can do is have a strong exit strategy in place. In the event that the unexpected occurs – financial hardship, injury or death, an exit strategy provides details for the transfer of ownership (succession plan). It also reveals how the business owner plans to reduce or eliminate their stake in the business. It also identifies how they will make a profit if the business is successful, or if it is not, how he or she will limit their losses. It’s important to develop an exit strategy before going into business since it has the potential to influence other business development decisions.
Analyze Your Startup Financing Options
Finding a financing option that doesn’t strap you with overwhelming high-interest rates, fees, and debt is a hurdle every business encounters. If you are a small business and/or part of an industry deemed to be “risky”, funding will be even harder to find. Unlike expenses, cash flow is not constant. Every business will experience times when it needs extra cash to purchase equipment, cover payroll, hire new employees and fund growth. For the startup entrepreneur, working capital is necessary for successfully launching their business venture.
The first option entrepreneurs usually consider is a business loan with their local bank. Unfortunately, the 2008 economic crisis led to tighter lending standards and higher costs, causing banks to reduce the number of loans they issue to small businesses. This chain of events quickly led to a flood of online lenders that offer alternative business funding options, like the merchant cash advance. While this option promises to provide quick cash, it also involves crippling interest rates and massive payments.
As a result, entrepreneurs are increasingly turning to invoice factoring for their working capital needs. Essentially, the factoring company allows the business to factor its unpaid accounts receivable in exchange for immediate cash. This option allows the business to maintain positive cash flow, while also effectively managing its accounts receivable. Ultimately, the business funding option you choose should provide flexibility, the working capital you need (quickly), and offer an experienced support team.
Security Business Capital specializes in helping companies secure the funds they need to operate smoothly, grow their business and take advantage of opportunities. Our invoice factoring services provide the flexibility a rapidly growing business needs to prosper without the high-interest rates and costs. If your startup or small business is seeking alternative financing solutions to meet expenses or fund expansion, we offer a fast, simple and hassle-free setup process. Temp staffing, oil and gas, transportation, manufacturing and distribution, business services and government are just a few of the industries we provide services to.
If you’d like to learn more about our services, get in touch with Security Business Capital for a free quote and/or consultation.