There are always opportunities to start a business. The coronavirus disruption has given some entrepreneurs the time and space they need to be creative and to think of new business ideas. Additionally, the unreliable employment situation is acting as an inspiration for people to make the leap and go it alone.
However, if you’re serious about creating a business, then you’ll need a business plan – and lots of advice.
For most people, creating a business plan is one of the hardest tasks they undertake in the early days of their business.
But help is available.
Business plan templates
There are lots of business plan examples and templates online, including some here on Sage Advice. These are excellent starting points because they ask questions that you need to answer if you hope to attract interest in your business – and therefore get customers.
What are those questions that you should answer in a business plan? At a minimum, you should include the following information:
- Description of your business and objectives
- Your products or services and their pricing
- Who you anticipate your customers to be
- Who you consider your competitors
- What people will be involved, in terms of staffing, existing investors, or even mentors
- How you intend to make your business a success
- Any key financial figures
- The volume of sales you expect
- Profit or loss statement projected for the first three year
- The level of investment required
Understanding business types
You will need to decide what business type best fits your goals for your tax declarations. You might want to become self-employed. Or you might want to create a limited company – something known as incorporation. There’s also the possibility of a partnership, which is somewhere between the two, but is much less common because self-employment or a limited company ticks most boxes.
Sole proprietor
This is the simplest kind of business entity., and legally it comprises just one person: yourself. Accounting is therefore equally simple. After you’ve deducted tax and expenses, whatever is left is yours.
However, as a sole proprietor you are also personally liable for any debts your business might create and you must also use your own vehicle or property, because your business is not a separate, legal entity.
Limited liability company
The benefit of an LLC is immediate: it is a legal entity, so it can take on debts and can own things like cars, equipment, and properties.
Your profits and losses can be passed through to your personal income without being subject to corporate taxes. LLC members are considered self-employed, so they must pay self-employment tax towards Medicare and Social Security.
In some states, LLCs have a limited life and other rules for when members leave and join. An LLC may be ideal for owners with significant personal assets that they want to protect, and/or those who want to pay a lower tax rate than what is required of a corporation.
How to set up your business
So, where you do you get started if you want to create a business?
Step 1
Speak to an accountant about your plans. They can register you as self-employed, or create a company for you. Accountants have experience that they’re happy to share. They can point you in the direction of free funding (or you can just read our free eBook – see below).
Step 2
Speak to a bank to create an account specifically for your business–even if you are planning to be a sole proprietor. The IRS has the legal right to examine your business accounts and if you use your bank account it can become intrusive.
Step 3
Get the tools. Use accounting software. Get a good cash flow forecasting spreadsheet (again, see below for our free example). Using the right tools from day one will significantly reduce the amount of admin work you have to do–and leave more time to pursue your dreams and goals. Good accounting software will issue and send invoices for you, for example–and even follow up with them.
Step 4
Figure out where, or how, you’re going to operate the business. Will you need a dedicated space, like an office? Will you need a vehicle? What equipment and supplies will you need? Really dig down into details and be as pragmatic as possible.
Step 5
Set a date. When will you start your business? There’s no time like the present–and you should be careful not to fall into the trap of forever delaying.
