An exciting business idea makes you want to get up and get moving right away but directing that energy in the wrong direction or doing too much too fast could ultimately lead to failure. Before you start selling products or services, you need to follow a few steps to ensure legality and safety in the business world.
Create a Business Plan
If you hope to take out a business loan or find investors, you’ll need a business plan. Even if you can fully fund your new endeavor yourself, a plan will help you to stay on track and ensure you’re reaching your financial goals and production schedules. You can make either a traditional business plan or a lean startup plan, but keep in mind that investors may ask for more information if you present them with the latter.
- Traditional Plan: A traditional plan is best for requesting financing. Although you can mix and match sections to get exactly what you need, it typically includes an executive summary, a description of the company, a market analysis, organization and management information, information about the service or product, marketing and sales information, and a request for funding.
- Lean Startup Plan: This plan is best if you want to get started quickly or have a relatively simple idea. The most common type of lean plan is a business model canvas, which usually includes key partnerships, activities, and resources, customer relationships and segments, a value proposition, cost structure, and revenue streams.
Go Through the Legal Process
The earlier you get the legal aspects of your business out of the way, the easier it will be for you to start selling your product or service. You’ll need to trademark your company name as well as handle any relevant patents or copyrights. You must also decide on a business structure, such as a corporation or partnership, and file for federal tax identification numbers.
Registering your business and obtaining a company bank account is important for being viewed as reputable. Don’t forget that you may need a license and permits to operate if you intend to run a specific kind of company. Examples include those dealing with firearms, tobacco, or alcohol. If you are unsure of the legalities of your company, it is best to consult a business lawyer.
Purchase Business Insurance
Before you start operating, you need to find the best business insurance. At the very least, you should have professional liability insurance, which will protect you and your company if someone is injured due to your product or service. If you have a business property, you’ll want to get a policy for it as well. Other types of insurance include product liability insurance, vehicle insurance, and if you have employees, a workers’ compensation policy.
In addition to these traditional policies, many people overlook two very important policies: home business insurance and business interruption coverage. If you plan to operate your business from your home, your homeowner’s policy will not cover your company’s inventory or equipment, so be sure to purchase a separate policy. Additionally, business interruption coverage ensures you can still pay your bills if a disaster occurs that keeps your company from operating normally, such as if there were a fire or flood.
Do a Test Run
Nobody wants to spend a million dollars to get a company off the ground only for it to be a flop. Before you spend a large amount of money, do a small test run. This type of market research allows you to create your product or provide your service on a smaller scale, gain feedback from customers, and then make your company even better before you broaden your market.
Regardless of the type of business you run, vet the people you work with. From your partners and investors to your employees and insurance agents, your company is only as good as the people you have on your team. Create an excellent team and you’re more likely to have a successful company.