You may have a business idea, or at least an idea that may blossom into a business. If not, take a few days and start jotting down some ideas, or at least areas you want to further explore. Once you have a list of business ideas, look for themes. Most people who do this step will notice a theme based on their interests and skills.
A theme could be service-related, like providing care to the home-bound or as a handy person or virtual executive assistant. Ideally, you should focus on businesses within your skill set and, most importantly, something about which you have an absolute passion. Once you’ve completed the list, focus on the 3-5 ideas that interest you the most and start diving deeper into the individual businesses.
Now, ask and explore the following:
- Are you expert enough in the particular area that you’ll be able to sell a product or perform the service?
- How much money will this require to start? (Figure this out and double it.)
- Do you have or will you need to secure the resources required to capitalize the idea? If so, from whom?
- Will the investment of time fit into your current schedule? Will this start as a part-time endeavor and morph, if successful, into a full-time business?
- Who is currently fulfilling the need for this product or service? Or, if it’s entirely new or unique, what will it take to educate potential customers and who will provide the education?
- What is the competition and are they making money? One thing I always cringe when I hear is that, “There is competition but we just need x percent of the market to be successful.” Be wary of businesses that “just need.”
- What is the competition doing that’s good and what could be improved upon? In other words, how will you differentiate?
- What type of business license will you need?
- Do you need industry specific insurance or just general liability?
- Will you take on investors/business partners?
- If you are developing a specific product, you may also want to consider asking some of the following questions:
- Is this patentable? If so, is there already a patent on the product?
- How much money will it take to produce my product?
- How much inventory will I need and where will I store my inventory?
- Who will manufacture my product and at what cost?
- Given the cost to manufacture, what price can I charge to make a reasonable margin?
- What are your ideas for a business name and logo? Remember to search for the domain name early in the process.
- What state will you incorporate (if you choose to go that way) your business in? States all have different rules about registering a business.
- What form of business entity will you start? Once you file the business with the state, you’ll need to file for a Federal Employer Identification Number (EIN).
These and many other factors should be evaluated prior to starting your business. You may not have all the answers and the ones you do have could be wrong. Nevertheless, it’s good to think about them and commit them to paper. This is the most important step and often one that’s skipped by many budding entrepreneurs.
Once you have some ideas on the questions above, it’s time to start the process of formation. Setting up a business can be as simple or as complicated as you want to make it. My advice is to start with the basics and evolve your structure as you and your business evolve. The good news is that if you screw it up, it’s relatively easy to undo and redo. The only caveat is that some of these changes, particularly to the business structure, may have tax implications.