8 Tips For Starting Your Own Business

Wouldn't it be great to be able to quit your job, be your own boss and earn a paycheck from the comfort of your own home? The good news is that with a little planning and some startup money, it is possible! Here we'll examine some important steps to follow when starting your own business.

Not everyone is cut out for the challenge of starting their own business. There are several personality traits that are common among successful entrepreneurs, including discipline, frugality, self-confidence, good communication skills, humility, honesty and integrity, superb record-keeping skills, motivation, good health, optimism and more.

(For more, see: Are You An Entrepreneur?)
 

Before you quit your job to become an entrepreneur, you must first think of a concept, product or service that will generate a steady stream of income. This may sound easy, but for most people, this is actually the hardest part. You should conceive a plan that puts your knowledge, experience and expertise to use in the most profitable way possible. Once you settle on an idea, research the marketplace to see how similar businesses have fared and how tough your competition would be.

Smart Tip: Start with areas you already have a great deal of interest in, and equipment and materials for. This will help lower startup costs.

If you're married and/or have kids, you should also be asking your family how they feel about your working from home, as your decision will affect them both financially and psychologically. If the response is negative, spend time addressing any concerns and decide whether your goal is worth continuing against their wishes if you are unable to change their minds.

(For related reading, see: The Pros and Cons of Working From Home.)

If you are considering a home-based business, remember that your home's primary function is to serve as a dwelling for you and your family—not as a warehouse or meeting place for your business and its clients. If you're considering a computer-based business, make sure you have the technology necessary to give your idea a fighting chance.

Smart Tip: Make sure you have a dedicated, private area to work. This area should be free of noise and distraction.

Numerous studies have shown that one of the major reasons new businesses fail is poor planning. If you are starting a business, you must have a business plan. This will serve as a road map for you and will show your bank and/or investors what you're doing and why they should invest in you. It should include a mission statement, executive summary, product or service offerings, target market, marketing plan, industry and competitive analysis, pro-forma financials, resumes for the company's principals, your offering, and an appendix with any other pertinent information.

It's great to own a business, but ultimately you will probably want to retire or move on to other challenges. With that in mind, make sure your business plan includes how you will transfer, sell or close your company. If your business depends on your unique knowledge and contacts, it may not be able to be assumed by another party.

(For more, see: 4 Steps to Creating a Stellar Business Plan.)
 

Most businesses require startup income. Ideally, this investment will help you break even after a year, but even successful businesses can remain in debt for the first few years. Potential sources of funding include a small-business loan from your local bank, tapping into your savings, money from other investments, borrowing from family or friends and, as a last resort, credit cards.

One of the best things you can do before you take the entrepreneurial leap is to build an emergency fund to fall back on in the early months. Three months of living expenses is a minimum goal for a new business owner, but even more will help take the stress off of you and let you spend your energy on your company.

Smart Tip: Try to avoid racking up costly credit card debt that could cost 20% or more in yearly interest fees. You should also avoid borrowing against your 401(k) or other similar plans as this could adversely affect your retirement.

Without a budget, a business runs the risk of spending more money than it is taking in, or not spending enough money to grow the business and compete. There are a number of ways you can plan your budget. These include researching industry standards, giving yourself a cushion, reviewing the budget periodically, and shopping around for services and suppliers.

Smart Tip: While many firms draft a budget yearly, small business owners should do so more often. In fact, many find themselves planning just a month or two ahead when unexpected expenses throw off revenue assumptions.

(For more, see: Six Steps To A Better Business Budget.)

A number of resources are available to help entrepreneurial hopefuls get off to a great start. Free information and assistance is available from your local Small Business Development Center (SBDC) and SCORE offices. Both are associated with the U.S. Small Business Administration (SBA). The IRS can even provide free assistance, including accounting and record-keeping, through the Small Business Tax Education Program.

Nearly three out of four businesses are no longer in operation after two years, so you'll have to find ways to adapt as the business expands and to conquer new challenges. Prepare yourself for the event that growth requires you to move the business out of your home and into an office space. In addition, after the rush of a small-business launch and the initial influx of curious customers, many small businesses reach a plateau. Any business must constantly adapt to changing market conditions, new business tools and new sales opportunities in to continue to grow and prosper.

(For more, see: 10 Breakout Ideas for Small Businesses.)