So you’re thinking of launching a new business?
You’re not alone – entrepreneurialism is the backbone of our nation, and while it is never easy, success is within reach for anyone with grit and integrity. No matter the industry or type of business, there are proven ways that the majority of current successes have reached their goals.
Victoria Treyger, Chief Marketing Officer of Kabbage, Inc. offers the following eight steps to starting a business, in her own words below:
Step 1: Choose Your Product
What will you sell or offer? Is it a product or is it a service? How will you differentiate yourself and your business from your competitors? How is what you offer different or better than what’s already out there? What is your expertise? What is your passion? If you’re not sure, take a moment to think back to past performance reviews you’ve received in the corporate world. What characteristics and traits stand out as your strengths? Build on these and see how they can translate into starting your own business.
Step 2: Identify Your Perfect Customer
This is crucial for anyone starting your own business. Knowing who your target audience is and then catering your product to fulfill a need is the perfect formula for success. So how do you define your target market? Is it men, women, teens? Are they older? Married? Single? Veterans? Moms?
Know Your Target Market: Knowing your target market and what appeals most to them will help you refine your product offerings. It will also help you develop strategic marketing plans. A printed flyer mailed to young millennials will miss the mark, since these folks get the majority of their news and information online. And vice versa, a targeted banner ad campaign on specific websites may be lost on a demographic that does not spend a lot of time online.
Do Your Research: There are ways to do research – some is free and some comes with a price tag. You can start with your local Better Business Bureau, your local Chamber of Commerce, and your library for some demographic information. The local convention and visitor bureau also has residential demographic information that can be helpful when starting your own business. Also, go online and check out your city or town’s website as well as your county offices
Step 3: Know the Market.
Do you know what your competition is doing? How are they winning customers – and more important – how are they keeping customers loyal? What differentiates their product or services from those that your business offers? Businesses with similar products and services can co-exist in the same markets. But it’s up to you to know exactly how your product is different. Make yourself stand out.
Know what your market responds to by doing some simple focus group research. It can be as simple as having cookies and hot cocoa on a cold day and inviting people to chat with you about their needs. Or, a quick email survey through providers like SurveyMonkey can be a quick and easy (and free!) way to gather critical market research to grow your business.
Step 4: Know Your Worth
It’s important to not underestimate yourself or the price you charge for your products or services. Owning your own business does not mean you give away your services cheaply.
That said, when you’re first starting out as a business owner, you also do not want to overestimate your pricing structure. Do some research and see what your others in a similar business charge for their products or services. As a new business owner just starting your own business, you may want to consider starting out low with your pricing. This gives you a chance to build your reputation and credibility as a quality provider. Once your business is a bit more established and your income is more steady and regular, you can consider raising your prices. At that point, you’ve probably earned a loyal and steady customer base as well.
There are many resources online that can give you estimates of salaries for your industry. These may not always be possible when you start your own business. You will have other expenses as a startup that people working for corporations simply won’t have. Take these into consideration when planning your expenses in the short and long term.
Step 5: Get your finances together
Do you know what kind of startup capital you will need? Do you need to get a business loan? Will you borrow from friends or family or have investors or partners? Will you need to borrow against your home or your 401k? Use this time to gather your projected income as well – it often takes time for a new start up business to turn a profit.
Do you have additional sources of income to get you through the leaner times until you begin to make a steady income? You will need to make sure your credit is in good standing – excellent, in fact – if you plan to get a business loan. If your finances are not quite where they should be, consider going in with a business partner. Perhaps your expertise and their financial strength will help make starting your own business a less stressful venture.
You will also need a Tax ID number. But first you must decide what kind of business you will have. In general, you most businesses are one of the following: a sole proprietorship, a partnership, a corporation, or a limited liability corporation. Do your research and find out which one makes the most sense for you. Then, make sure you are following all tax guidelines for the type of business you’ve selected. Again, there are many resources online – one of the best is the sba.gov, which is the Small Business Administration website.
Step 6: Get a nest egg
Many experts recommend having about six months of savings in the bank. This isn’t just for emergency use; this will be your go-to money while you build and grow your business to turn a regular profit. Put some money aside while you continue to work at your corporate job. This way, when you do leave your steady job and are ready to start your own business, you’ll have a bit of a nest egg to lean on while you get up and running.
Tip: If you are married or have a partner with whom you share living expenses, make sure they can carry a bit of the financial burden while your new business gets off the ground. Emotional as well as financial support is key for an entrepreneur when you start your own business.
Step 7: Write a business plan
There are many resources online to teach you how to write a business plan. Basically, a business plan is a detailed roadmap of where you expect to take your business. It is a clear picture of who you are, what your business is, how you will reach your target customers, and your plan for revenue and profits. Your business plan is a critical factor when applying for business loans. In fact, it is the very first thing – in addition to your credit reports – that a bank loan officer or other nontraditional lender, such as Kabbage, will look at. Lenders review your business plan to make sure you are a good risk. Don’t be fooled into thinking that your business plan needs to be long and lengthy.
Step 8: Seek out free counseling and assistance
The Small Business Administration has local offices in every state. They offer free counseling and training for small business owners. Their services are invaluable to any start up. They can help you develop a business plan, a marketing plan, as well as help you navigate what you need to know about filing and paying taxes as a small business owner. Many of their services and training programs can be found online. Others require that you attend training classes or one on one meetings with small business advisors. These resources are there for your benefit – take full advantage of all they have to offer. And attend as many of their networking events as possible – it’s a great way to meet other small business owners and promote your products and services.
Starting your own business is an exciting adventure! It is possible to take your passion and drive and turn it into a profit-making business where you are your own boss. Follow these steps and do your research and you’ll be well on your way to becoming a successful business owner.
Small businesses angry at depletion of COVID-19 relief funds without warning
(ENTREPRENEUR) Small businesses are in shock when they find out COVID-19 relief funds are no longer available, with an email update from the SBA.
In May, the Small Business Administration (SBA) sent out an update to borrowers of the Economic Injury Disaster Loan (EIDL) for COVID-19 relief. The EIDL program is now out of funds, according to an email sent to borrowers.
The loan program formally closed back in December 2021, but there was a period when small businesses who had already received funding could request additional money. That period is now officially over, and the $345 billion that was allotted for COVID-19 relief is gone.
The impact of EIDL
Many owners and entrepreneurs are outraged and frustrated with the lack of transparency from the SBA. There was no warning that the funds were almost depleted and many businesses were relying on that loan money to keep their businesses afloat as the economy rebounds. However, SBA Administrator Isabella Casillas Guzman praised the program,
“The SBA has delivered historic economic relief to millions of America’s small businesses through the COVID Economic Injury Disaster Loan program…”
According to an SBA press release, over $390 billion in aid was distributed to nearly 4 million businesses.
Small businesses still need help
In May, Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO), told health ministers that COVID-19 and its effects are not over. Here in the United States, life seems to be getting back to normal, if you discount the horrific inflation and gas prices, which are further impacting the recovery of small businesses.
Congress has been wrangling with legislation (H.R. 3807) that would offer more funding for those that were hit hard due to covid. Getting the House and Senate to agree on this legislation is expected to be difficult. So, no guarantees that more help is coming.
The SBA recommends that businesses who need more resources contact their local SBA office. Virtual appointments can be made for those who wish to avoid contact.
Regularly update your succession plan – it isn’t for setting and forgetting!
(ENTREPRENEUR) You may think that once you have a succession plan in place, you’re set for life, however, it’s recommended to continually update them!
We’ve written before about how the everlasting success of the business will need to outlive you, and this is best conjured up in a succession plan. This is especially true for small business owners and entrepreneurs that have built an empire for themselves but aren’t sure what the future will hold beyond their passing. This is the exact reason that succession plans shouldn’t be set and forgotten, but instead consistently updated.
What are some of the obvious reasons that you may need to update your succession plan?
- Health Issues
- Marriage or Remarriage
- Changes in health in executors or guardians
- Changes in the law
- Changes in Residence
Now, for the not-so-obvious reason: It should be updated when any personal circumstances changes, which most likely happen often. This is why a will is like your home, an investment that needs to be properly maintained, and if it is, it will last a very long time.
Examples include changes in economic or parental status, as well as designations or fiduciaries. Elders could be aging, siblings may be having their own life changes, as well as if any dependents are born with or develop special needs.
“Every state has different laws regarding the administration of a will,” he said.?“For instance, states vary regarding the required residence of an executor, inheritance tax laws, and whether a child can be disinherited by omission.”
The recommended procedure is to review wills and powers of attorney at least every five years.
Lastly, when should a will update to a trust?
- When you have some significant assets (more than $500,000) in your own name.
- If you have special needs beneficiaries.
- If you have properties in multiple jurisdictions (multiple states or even counties).
- If you have beneficiaries you want to control distributions to (e.g., distribute at ages 25/30/35).
- If you have kids from a previous relationship you want taken care of.
- If you may want asset protection (special trust needed).
- If you are a big dog (over $22M if married), to save taxes.
Should your severance agreements include confidentiality clauses?
(ENTREPRENEUR) Confidentiality clauses and NDAs have long been tied to severance agreements – but is that notion becoming outdated?
Severance agreements and their ilk have long included confidentiality clauses, often comprising an exhaustive list of actions former employees may not take should they desire to keep the benefits listed in the agreement. Carey & Associates P.C.’s Mark Carey breaks down the knowledge you’ll need to successfully incorporate a severance agreement – including a stern warning about the future of confidentiality clauses.
There is a long list of things you’ll need when curating a severance agreement, but we’ll start with Carey’s honey-do-nots.
Carey’s primary recommendation is avoiding a non-compete clause where, previously, there wasn’t one.
“As employment lawyers, we see this tactic used every day, but you do not,” he says.
This is because most employment lawyers will advise that a non-compete agreement is largely unenforceable, which sets a poor precedent for an otherwise airtight document.
Carey even recommends against reviewing prior non-compete clauses for the same reason.
He also eschews what he calls the “21 days to sign – or else” philosophy, and he advises that employers should loop themselves into the non-disparagement clause so that employees cannot be blacklisted – something he refers to as “a very real phenomenon.”
What a severance agreement should include is a non-admission provision, a payment provision, a release of all claims to cover any feasible scenarios regarding employee disclosure, a challenge to agreement, a “no other amounts are due” section to release the employer from future responsibility, and a mandate to return any company property. This is a truckload of information, so you’ll want an employment lawyer to help you through the process.
But what Carey warns against is the future of confidentiality agreements, or NDAs. While these provisions have long accounted for employee silence in the face of abusive or corrupt employers, Carey posits that, one day, “confidentiality provisions in employee severance agreements will be banned as a matter of statute and public policy.”
This assertion comes in the wake of the #MeToo movement and the uncovering of the manner in which powerful people were using NDAs to buy silence from the people who suffered under their direction. Carey points out that it’s a non-partisan issue; corruption isn’t aligned with one specific political party, and the option to come forward with allegations of misconduct is a courtesy that should be afforded to all.
Whether or not confidentiality agreements are ethical is a moot point, and Carey does recommend continuing to use them when necessary – but, sooner or later, one can safely assume that the landscape of severance agreements will change, arguably for the better.
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