How to start and grow your businessYour guide to a smart launch

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Your guide to a smart launch

How to start and grow your business

How to start and grow your businessYour guide to a smart launch

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Introduction .............................................................................................................................. 2

Chapter 1: Getting started ........................................................................................................ 3

Chapter 2: Know your market .................................................................................................. 4

Chapter 3: Be visible ................................................................................................................ 5

Chapter 4: The business plan .................................................................................................. 6

Chapter 5: Make it official ........................................................................................................ 7

Chapter 6: Crowdfunding ......................................................................................................... 8

How to start and grow your businessYour guide to a smart launch

According to the Dun & Bradstreet Business Failure index,

Lack of financial management skills and knowledge

Lack of marketing skills and knowledge

of all failures are due to one of two failures of the owners of the business:92%

$

The small business is the backbone of the economy and the cornerstone of every community, but it’s not easy. Seven out of ten new businesses make it to two years, and only half survive past five years. (Source: U.S. Dept. of Commerce, Census Bureau)

If you’re serious about successfully starting a business of your own, research clearly shows that the better you prepare yourself, the greater your chances of success. How do you prepare yourself?

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Boost your startup knowledge.Find out what starting and running your own business really involves by scouring the web. There’s also your bank and the Federal Small Business Administration at sba.gov. The best way to learn is from those who have figured things out the hard way: Never hesitate to talk with fellow business owners who have experienced day-to-day challenges firsthand.

Many people use the services of an accountant when setting up a business, which can help prepare them for tax compliance and expenses. Aside from taking care of the books and filing taxes, a good accountant can be a great source for basic business advice.

If you take care of key startup tasks properly and in the right sequence, you can get your new venture off to a great start.

The good news is that many new businesses more than survive.What kind of business are you? How much time can you afford to commit, and how much money would you ideally like to earn? Be honest and realistic. Answering these basic questions helps you decide if your business objective ought to be a full-time, part-time, spare time, or possibly even a seasonable venture. Do you need a visible storefront, or would you be able to keep it online?

Decide when. You might want to get your business up and running quickly, but if you don’t address key startup tasks first, you risk setting up a business that’s doomed from the start. That doesn’t mean you have any time to waste, but it does mean you should be realistic with your expectations. Fortunately, businesses can be set up quickly. Timing is important, so start your business when demand for your product or service appears to be getting some sustained traction.

Chapter 1: Getting started

Small businesses in the U.S.U.S. Small Business Administration 2014

people are self-employed with no additional payroll or employees (referred to as nonemployers).

and over

22 million

small businesses in the U.S.

There are nearly

28 million

new businesses get started each month in the U.S.

Approximately

543,000 But more employer businesses shut down than start up each month.

How to start and grow your businessYour guide to a smart launch

them. A word of caution: Don’t compete on price alone because it might not be enough to lure customers away. And don’t think your idea is so special that you won’t have any competitors. You will. You just need to be better than they are.

Seek feedback from potential customers.Even if you think you have sound knowledge of potential customers, go out there and meet them to ask about your products and prices. This is the best way to test your idea. If they don’t like your products, it’s time for some reevaluation.

If they like your products but not your prices, find ways to slim your costs to lower your pricing. If you’re not sure how much to charge, ask potential customers what they would pay and tailor your costs accordingly. Don’t be upset by criticism. Learn from it. Feedback from potential customers is valuable.

Decide whom you’ll market to—and how.It’s unrealistic to expect your business offerings to appeal to everyone, so focus on a specific type of person (your target customer) and tailor what you do to his or her needs. Segments of markets are called niches, and success is normally assured if you can become the sole supplier within a niche market. Once you know who your target customers are, think about how they buy. Do they shop online, offline, or both? You need to know exactly how you will get your product or service to your target customers.

What’s your competition like?If you’re going to stay ahead of your competitors, you must know who they are, what they offer, how they sell it, and how much they charge. Focus on their strengths and weaknesses and think about ways you could outperform

Chapter 2: Know your market

Putting it all togetherRE Suspension is a family-owned small business out of Mooresville, North Carolina. The Enders, the family who own RE Suspension, have a passion for racing. That’s why they started a business with the motto: If it has four wheels and you race it, we do suspension for it.

Butch Enders, the dad, has been a racing crew chief and brought up his kids, Jason and Carrie, to love racing, too. Still, Butch wasn’t sure they would follow in his footsteps, but they did. And because it’s a family-owned business, all of them put more into their business and get more pride from it. That doesn’t mean they all do the same job. Even though they’re related, they have different strengths and focus on different things. After all, that’s what teams do.

Butch said, “I love what I do, and I love coming to work. I don’t ever want to retire.”

“It’s just a different type of job, knowing that you’re part of this legacy. It’s incredibly rewarding,” Carrie said.

“One of my goals in life was to have my kids be my best friend,” Butch said. “And I think I accomplished that.”

Sage is happy to be a part of a strong family business, enabling them to focus on their love of racing and their family . . . instead of software.

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foot traffic, but also consider size and type. Be diligent in your search and always negotiate. Everything you decide will ultimately impact your bottom line.

Work out your startup costs—and how you’ll cover them.You need to minimize your startup costs. If possible, use what you already have until the business generates enough profits. Alternatively, borrow and exchange with other businesses. You might need to buy tools, equipment, stock, and furniture, but only buy if there’s a sound business reason and you have no other option. Explore secondhand options first. Don’t expect to get a loan or grant to help start your business—you’ll probably have to use your own money. Some investment from your family might be an option, but get a basic legal agreement drawn up to make sure everyone knows where they stand. You might have to wait until you can draw wages, so think how you will manage in the meantime.

Choose the right business name.Pick the right one, and it will help pique interest. Pick the wrong one, and it will create an added hurdle. Keep it simple. As a general rule, choose a name that tells people what you sell. Something that’s memorable, short, and easy to say. The point is to distinguish your business from others. Draw up a short list of your preferred choices and test them out on people who will tell you the truth.

Remember, your business can operate under a different name than your company name. (A “doing business as”

form takes minutes to complete.) And you can change your company name later, if you like.

Create a brand identity.Having your own distinctive brand is vital. Your brand helps associate your business with a company experience. A positive brand “touch point” helps set you apart from the competition.

Think of branding as what comes to mind when people think of your business. It should evoke your business’s personality and what it stands for—your values and culture. As a visual anchor, the brand identity includes a logo, color scheme, and typeface. Although you need to minimize your startup costs, paying a professional designer to create one that will hold up over time is likely going to be money well spent. Finally, be sure your branding is applied consistently throughout your business, from a web presence, product badging, signage, stationery, and the full range of print collateral and packaging.

Create a business website.Starting a business without having your own web presence is almost inconceivable (regardless of your intention to sell online). Apart from being relatively quick and cost-effective to create, many prospective customers will head for your website to check out your business and products before they buy or find you in person. Having a well-designed, easy-to-use website that showcases your wares is key. There are many DIY website-creation solutions that are simple to use and can deliver impressive results.

Own your business idea.Great ideas are at the heart of all viable businesses. Coming up with a new idea could provide the basis for a startup success. Whether you’ve identified a gap or void in the marketplace or have something that works in conjunction with another popular product or service, keep researching. Knowledge and understanding may be your greatest assets. Even if you plan to enter a well-populated market with a me-too product, think of an original idea that sets your business apart and provides added appeal.

Improve your offer.Use your newly gained market knowledge to increase the appeal of your products or services. This might simply involve a few tweaks or more drastic overhauls. By now, you should know your product, how you will market it, and how much you’ll charge. When launching your business, concentrate on things you’re most likely to sell. Don’t take chances on untested products.

Decide where you’ll be based.Location and its associated costs provide most businesses with one of their biggest overheads. You must minimize your startup cost because you’ll stand a better chance of breaking even. If you can, set up and run your business from your home. If possible, create a separate workspace (spare room, basement, or garage for example) to establish a clear line between home and work. If you need more space or a storefront address, start your search when the time is right. Location is critical for businesses that rely on

Chapter 3: Be visible

How to start and grow your businessYour guide to a smart launch

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Although a guide to organize your business plan is provided on the following page, be sure to take advantage of a secure tool that allows you to build a business plan online: Build your business plan on: sba.gov

Organizing the plan.A. Executive summaryIf investors don’t like your executive summary, they won’t read any further, so this section is critical. Describe what your business does and what market need it solves. Make sure you include “unique success factors,” the handful of reasons your business will be successful, and your fundamental financial projections.

B. Company overviewCreate a profile of your company and its current stage of performance. Address where you are located, when you were formed, and how your company is registered.

C. The marketProvide a description of your marketplace and the competitive landscape. How large the market is, what its condition is, and the trends to consider. Identify who your target customers are; if applicable, profile your audience by its demographic makeup and lifestyle patterns.

D. Competitive analysisList your competitors with a brief summary of their market position (strengths and weaknesses). Also include your distinguishing strengths, which supports your pursuit to be more successful than others.

E. Marketing Describe your products and/or services and your desired brand positioning. Address how you will create visibility, how you plan to promote, and how you expect customers to know about your company’s offerings. Also, explain how your products or services will be distributed and reach the customer.

F. Operations Your operations plan should detail the key operational processes your organization needs to accomplish on a daily basis to achieve success. In addition, it should identify the milestones you need to meet over the next one to three years in order to achieve success.

G. FinancialsThis section is necessary for investors. Here’s where you identify costs and revenue and how your company will be profitable. Be sure to highlight the assumptions that impact your financial projections. To make it easy, you may wish to look into the advantages of using Sage solutions.

Let people know you’re there.If your business is to get off to a good start by generating sales, “prelaunch marketing” is essential. Knowledge of your target customers will tell you how best to reach them with your messages, but explore low-cost marketing options first (for example email, postcards, and other direct mailings). Avoid paid-for advertising. Using social media can be an effective way to raise your profile. Make sure your website is optimized for search engines. If you have a great story, try to gain free publicity through the local media or trade publications.

Write your business plan.By now, you should be able to produce your startup business plan.

Writing your business plan enables you to focus your thinking by having to explain what your business is, where it fits into the market, who your customers are, what you sell, and how.

If your business plan is to have any credibility, your figures must add up, while your executive summary must be engaging.

Find out about Sage Advice. It makes light work of everything from developing a business plan to forecasting your cash flow.

In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve results.

Gone are the days when a business plan needed to be a long, formal college paper. While every business benefits from going through the business planning process, only a small subset needs a meticulous document once required for investors or supporting a bank loan.

Make it simple and pertinent. Don’t bother with anything that doesn’t have a business purpose. You don’t need to describe the management team unless you need to for outsiders. And you don’t need an exit strategy if you’re not writing for investors and have no reason for exit.

Chapter 4: The business plan

How to start and grow your businessYour guide to a smart launch

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Chapter 5: Make it official

You may be asked to estimate annual gross receipts. Do your best to estimate accurately, but don’t agonize over it. You’re just providing an estimate.

C. Tax ID formComplete a business personal property tax form (if necessary). Businesses are taxed on “personal” property, just like individuals.

If you are required to file a business personal property tax form and you plan to work from home using computers and other assets you already own, you won’t need to list those items.

If you purchase tangible personal property during your first year in business, you will list those items when you file your business personal property tax form the following year.

D. Ask your city or county about other permitsEvery locality has different requirements. For example, a “home occupation permit” may be required to verify that a business based in a home meets zoning requirements. Your locality may require other permits. Your city or county agency will be able to provide you with all the answers you need.

Open a business bank account.If you set up a company, you should open a company bank account. As a business owner, you could use your personal account, but it’s advisable to have a separate business bank account so you can more easily distinguish business and personal income and expenditures. Contact your bank to ask about its fees and services, but also look around for the best deals.

Set up your books.By law, you’re required to keep bookkeeping records for six years, which is why bookkeeping software benefits business owners who want a built-in way to stay on top of finances while also automating effective file storage. Finally, find out about expenses you can deduct from your business income to minimize your tax liability and retain all receipts and invoices as proof of purchase.

Register your business.You’ll need to get your Employer Identification Number (EIN), which is a federal tax number used to identify your business. You don’t need an EIN unless you will have employees or plan to form a partnership, LLC, or corporation. But even if you don’t need an EIN, having one is recommended: It’s free, it takes minutes, and you can keep your Social Security number private and reduce the chance of identity theft. If you don’t have an EIN, your SSN identifies your business when filing your taxes.

Note: If you’re using an online legal service to set up an LLC or corporation, don’t use it to get your EIN. Instead, apply online at the IRS website. You’ll have your EIN in minutes.

Organizing the plan.A. Official business nameGet in touch with your state’s administrative offices to register your business under a trade name or—if it’s an option—your personal name. In most cases, you’ll get approved on the spot.

B. Business licenseYour county or city will require a business license. The form takes minutes to fill out. Use your EIN instead of your Social Security number to identify your business (for privacy reasons if nothing else).

How to start and grow your businessYour guide to a smart launch

What is crowdfunding?Seeking financing from a “crowd” of potential backers and more often than not over the Internet.

As a startup, you’re proposing to produce a product or project if you’re able to raise a target amount of money. If the campaign fails to reach its goal, the cash goes back to those who’ve pledged.

To date, there are two primary types of crowdfunding:

Type 1: Peer donorsThe first is the peer-oriented donation-based model. In this model, a person joins a campaign and makes a donation with the purpose of supporting the company (or nonprofit) with a tangible incentive. Incentives can include the product made, perks (like giveaways), or rewards.

Type 2: Investor donorsThe second model is investment funding, where businesses in search of raising capital can sell stakes online in the form of equity or debt. Funders then become owners or stakeholders and have the potential for financial return.

The latter is currently only open to accredited investors. Title III of the Jobs Act is likely to broaden the opportunity for nonaccredited investors to help fund startup businesses while buying their very own stake in company profits.

Crowdfunding has not been used to sell securities because regulations make it impractical for reasons that involve cost and the oversight of registered securities.

Navigate the wide world of crowdfunding.Many new businesses are looking beyond traditional funding; they’re asking peers and investors to get them off the ground. Crowdfunding has helped raise capital for public education, art projects, smart apps, and everything in between. It has also made Kickstarter a national brand. When you consider the proliferation of crowdfunding sources over the last five years, the grand sum of $5.1 billion in crowd capital shouldn’t be any surprise.

(Source: Massolution Crowdfunding Industry Report on behalf of Crowdsourcing.org)

Chapter 6: The wide world of crowdfunding

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How to start and grow your businessYour guide to a smart launch

Make the most out of your crowdfunding campaign.Trends indicate that companies that launch a crowdfunding effort are more likely to succeed when they offer a menu of options and different price points to their prebuyers. Campaigns also hit their goals by sticking to three basic strategies:

A. Create a compelling case to back youA video is practically mandatory: It serves as your commercial and demonstrates your professionalism and how you’re in it for the long haul. It’s no secret that the public will associate the production quality of your clip with your trustworthiness. Successful campaigns include a very clear product or prototype depiction. Animations or illustrations depict what’s in the project and the benefit to the viewer. Be strategic and creative in telling a compelling narrative. Support it with interesting data.

B. Start with your own networkLaunch your online funding effort by reaching out to your own network. Tell everyone you know about your campaign. Ask them to spread the word and share. You’re unlikely to get donations from others until the momentum gathers traction from your own network of believers.

C. Market itThink about the communication vehicles necessary for your project. Add the project to your website. Engage your network to share. Use of social media such as YouTube, Facebook, LinkedIn, and Instagram are essential.

When telling your story—whether on social media or a standard pitch to the media—be prepared with a strong and consistent message. If your product is made with a

mission for environmental sustainability, lead with your green message. For instance, “Our dog poop bags have been saving the Earth since 2007. How? Because we make ours with a 100% biodegradable material that breaks down with your compost.”

Add incentives, rewards, or prizes. If there are small things you can do to reward people for giving, do so. Even if it’s something simple as a sticker with your logo on it, giveaways may be worth the investment.

Look beyond the honeymoon.Congratulations! You’ve reached your crowdfunding goal! Now what?

If your firm doesn’t make enough money to support a project, is late to market, or releases something that falls short of the promise, that brand-advocating community you worked so hard to build could easily turn against you. Under normal circumstances, a private company has the luxury to flop quietly. Not so with crowdfunding. You’re living in a world fueled largely by social-media buzz; if you fail, you fail in front of a very large—and engaged—audience.

Before you leave the gate, be sure to figure out everything involved in following through with your obligations to investors. Think in terms of planning, logistics, and profitability. What are you committing yourself to when you receive $50 from someone? Will it mean $100 in costs? Passing these margin-killing costs on to the buyer is a prudent strategy designed to protect your bottom line.

Given all the potential headaches that can emerge, you may wonder if crowdfunding is even worth the risk. It can be, as long as you don’t expect the campaign to carry your company indefinitely.

Know before you start.Many of the various crowdfunding sources take a percentage. Some do so from your potential customers. Some only take a portion of the money you collect.

Fees are based on the percentage of amount received. The industry norm is to charge a percentage based on the amount “collected.” It’s important to distinguish between the amount “collected” and the amount “raised.” The amount raised doesn’t always translate into dollars in your pocket. Keep in mind that credit card numbers have a way of being incorrectly entered and declined. Therefore, you want to make sure the funding platform only charges you on the amount received.

Tax considerations, too.The first challenge is raising money of course, but you also need to consider what the IRS will need. According to Forbes, you’ll pay at least 40% in taxes on the amount raised without taking the proper steps to prevent the year-end tax hit. But don’t let the numbers scare you off. There’s no greater value than seeing your dream realized. When it comes to taxes, just be sure to talk to a specialist.

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