Which of the following is the most common way of starting a new business?
Being an entrepreneur is a dream to which many people aspire, and a worthwhile financial goal. Still, many first-time business owners, and even experienced pros, can sabotage their best efforts through typical mistakes. When you're ready to roll-up your sleeves and start your own business, keep your eyes open for these four issues. Though they might sound simple, these have been make-or-break issues for the fortunes of countless aspiring entrepreneurs. Show
1. Do you have a formal business plan? If not, you need one. Not creating a business plan is perhaps one of the most common mistakes, and it's a troubling one, because business plans can help you identify issues with your idea, and also help market to potential investors or other sources of funding. Before you start on a new venture, draft a simple business plan that identifies your proposed product or service, the costs involved, your funding needs, your competitors, potential customers and market opportunity. Also detail realistic challenges your business can expect to face. The Small Business Administration (SBA) offers step-by-step simple business plan creation guides. 2. Don't assume being frugal is the right way to spend. With a business plan in hand, you'll have a better sense of your funding needs, which will help you avoid two classic traps: over- or underspending. Some entrepreneurs misjudge costs, and end up spending more than they budgeted, while others spend too little to give their business a realistic chance, in the mistaken belief that being careful and frugal is always the right way to proceed. Do your best to estimate actual costs of funding your venture through launch and the first year. The SBA offers a great start-up costs tool that helps estimate new business funding needs. Then, find ways to secure the capital you'll need. More from Invest in You: 3. Identify the right partners. The same issue of too much or too little is present when considering business partners. In many cases, you can't launch a venture alone — you'll need partners or investors for funding and know-how. But you can overdo it, by bringing on too many people, diluting your profit, and confusing your strategy. Your business plan will hopefully have considered this issue, but think further about who should really be involved, and what impact it'll have on your venture. 4. Get to know your customer before you start. Do you really know your customer, and market? Do you know whether they have a desire or need for your product or service, or whether your proposed pricing makes sense? Do you intend on competing on price, quality, service, or all of the above? Get to know your customers and market. Many businesses stumble because they fail to understand their target market. And when you're ready to expand, don't assume new customers in different areas will have the same tastes and priorities — get to know them, too. 5. Don't skimp on marketing. Too many entrepreneurs have good products or services, but do a lousy job of marketing. If you know your customer and market, this should be less of an issue. You'll know what blogs they read, and where they hang out in real life and on social media. You can market to them based on their habits and lifestyle. Don't assume traditional advertising is dead, either. Depending on your business, billboards or radio ads might make sense, and overreliance on social media might backfire. Whatever you do, you must market. If you're shy, don't understand marketing well, or don't see its value, hire someone who can help. Entrepreneurship can be the adventure of a lifetime, but like any adventure, it can also be a challenge. Preparing yourself for the common mistakes many business owners make will make your path to success easier. SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox. You have a winning idea plus the passion and skills to make it a success. But the process of actually getting your business off the ground can be overwhelming. Trust us, you’re not alone. In partnership with the U.S. Chamber of Commerce and Upnetic (an online services platform for small business owners, startups and entrepreneurs), ADP® has created an e-book that provides a roadmap to business ownership. We also collaborated on a webinar offering advice for those who are launching or relaunching a business in the wake of the pandemic. As you continue to perfect your business idea, here are a few things to keep in mind to help you get off to a smart start. What do you need to start a small business?Every successful business started from the ground up. No matter how eager you are to get a product into market, taking the time to create a solid foundation now will help increase the chances of your business surviving long-term. Some of the basic things you may need to start a small business include:
What is a good business to start?A good business to start is usually one that fills an unmet consumer need. Think of any everyday problem that’s yet to be solved or ways to improve an existing solution by making it faster, cheaper or easier to use. Preferably, your idea should be something that you’re passionate about or have some existing level of expertise. Choosing the entrepreneurship that’s right for you will also depend on your financial situation. Some businesses, such as dog walking, have low start-up costs, while others, like a restaurant, may require considerable investment. And if you’re looking for a get rich quick scheme, you may be disappointed. Most small businesses take considerable time and effort before turning a profit. Starting a business from homeMany entrepreneurs start a small business because they like the idea of working from the comfort of their home and setting their own hours. And while this is a great perk, it also limits the type of business you can create. Manufacturing products, for example, might not be feasible from your living room. Additionally, you may need to consider the zoning and legal restrictions in your particular neighborhood, and how your business will affect your neighbors and those who live with you. How to start your own small businessTaking an idea to market or making a dream become reality typically takes a series of carefully planned business decisions. While not every business follows the same path, most take some of these steps: Step 1: Perform market research around your ideaMarket research can help you mitigate risk because it lets you know how much of a demand there is for your product or service and the level of existing competition. It also provides demographic information on your target customers, such as their income and where they live. You generally have two options when it comes to research – review existing sources or conduct your own analysis. Relying on previously gathered data can save you time and money, but it might not be current or specific enough to your target clientele. If you start your research from scratch, you have the advantage of engaging with customers directly through focus groups, one-on-one interviews and surveys. Step 2: Create a business planA business plan explains your goals and how you hope to achieve them. If you need funding for start-up costs, many investors will want to see your plan so they can assess your potential profitability. Business plans can also help you attract partners and employees. When creating a business plan, you can take a traditional approach or create something lean. Traditional plans have comprehensive details and are often required to achieve a business loan. Lean plans, on the other hand, are shorter and may use more charts than written copy. They’re often ideal for simple business models that plan to start up fast. Whichever plan you choose for your new business, most include at minimum:
Step 3: Finance your businessStart-up costs are one of the obstacles that sometimes prevent people from ultimately pursuing their dream. The good news, however, is that even if you don’t have much money at your disposal, there are several ways to fund your business, including:
Step 4: Choose your business structureHow you plan to structure your business – sole proprietor, corporation or something in between – will typically have legal and tax implications for the foreseeable future. That makes this decision a critical one. Some of the more popular business structures are:
Step 5: Choose your business nameAfter you’ve determined your structure, it’s time to decide how your business will be recognizable to the public. Your business name should:
You’ll also want to make sure your business name isn’t already taken. Contact your state filing office or search your state’s online database to verify availability. Even if the name isn’t in use, it may still be protected under trademark, so you may also want to check with the U.S. Patent and Trademark Office’s (USPTO). Once you’ve settled on a name that suits your organization and confirmed its availability, you should trademark it and purchase a recognizable version of it as a domain name. Then, create a presence on social media channels (LinkedIn, Twitter, Facebook, Instagram, etc.) by opening accounts with your business name. Additionally, some business structures require a doing business as (DBA) name, which is a fictitious or assumed name that’s different from your business entity name. A DBA may sometimes be necessary to open a business bank account. Step 6: File registration documentsRegistering your small business with the government may not always be necessary, but it might avail you to personal liability protection and legal and tax benefits. Federal registration State registration
Local registration Step 7: Apply for EIN or Tax IDAs soon as your business is registered, you might want to apply for an employer identification number (EIN) from the IRS. This number is necessary so you can file your federal taxes, hire employees and in some cases, open a business bank account. You can apply for an EIN on the IRS website. In addition, some states have their own tax ID numbers, which you may need to pay state income tax and unemployment tax. Check with your state for the specific application process. Step 8: Open a small business bank accountYou’re going to need somewhere to deposit all those hard-earned dollars, but what type of account best fits your current requirements and future goals? Given that you’re just starting out, you may need:
How to open a bank accountAfter you’ve found a bank that suits your needs, gather the necessary paperwork to open a business account:
How to apply for financingParticularly at the start, you may need to apply for a business line of credit to keep things moving. These short-term loans are useful for bridging temporary working capital needs, such as inventory purchases or operating expenses. To apply for a line of credit you usually need to provide the bank with proof of revenue. If approved, they may set a limit, which like a credit card, allows for continuous borrowing and repayment within the agreed duration of the loan. Step 9: Obtain any necessary licenses or permitsBefore you open for business, take a moment to make sure that you have all the correct licenses, permits and insurance policies to operate legally. The last thing you want at this stage is to be shut down by a government agency. Which licenses and permits do you need?If your business operates in certain industries, such as agriculture and broadcasting, you might need a federal license. Other industries, like health care, typically require professional licenses. Even if you don’t fall into one of these categories, you may need some form of permission to conduct business. Freelancers and consultants, for example, sometimes have to have a home occupation permit. Which insurance do you need?Your insurance needs will depend on what type of business you have, but there are also requirements that vary from state to state. Examples of types of insurance you may need to consider include:
Step 10: Choose your accounting and payroll systemBefore you make an initial sale or hire your first employee, you most likely need a method of managing your finances and paying the people who work for you. You can tackle these important tasks yourself using spreadsheets, hire an accountant or work with a payroll provider. If you’re a solo operation or only have a few employees, a manual approach to payroll may save you money. It is, however, time consuming and comes with the most risk because you could be fined for mistakes. Hiring an accountant might give you more peace of mind, but they’re usually expensive and you may lose some control of the process. A payroll provider, on the other hand, is often the best of both worlds, giving you control and risk reduction, while also saving you time. Payroll providers like ADP offer products that in most cases, can automatically pay your employees, file taxes on your behalf and help you comply with applicable government regulations. Our payroll also seamlessly integrates with many types of accounting software so you can manage your finances from one place. A provider like ADP serves business of all sizes so whether you need payroll for a small business or something larger, we can help. Step 11: Create a web presenceSince most customers use the internet to search for goods and services, a helpful and attractive website can be an integral piece of your marketing strategy. The ideal web presence should:
Although there are some platforms that allow you to build a site with little or no development knowledge, it may be worth hiring a professional if you want to present a truly polished image of your business. Look for digital agencies who specialize in helping small businesses because they’re usually more likely to understand your needs and meet your budget requirements. Starting an online businessA website is even more critical if your business will be conducted entirely online. You have several options in this regard:
Step 12: Choose retirement and health insurance plansYou might want to review your health insurance and retirement plan options as soon as possible because they can help you attract employees. Even if you don’t or won’t have employees, you may still want to consider benefits for yourself as the business owner. How to choose a health insurance planWhen shopping for health insurance, look for a plan that:
How to choose a retirement planWhen considering retirement plans, small businesses generally have three options:
Each of these retirement plans has different contribution limits. To determine which makes sense for you, consider your savings goals, the time scale and if you anticipate needing access to the money before retirement. Consult with a small business banker or financial advisor or visit the IRS website for more help making an informed choice. How to start payroll for a small businessTo get started with payroll, whether you’ve chosen to do it yourself or work with a payroll provider, you may need to: How to pay employeesYou can compensate your employees using paper checks, direct deposit and alternative methods, like paycards. But how do you get from the first day of a pay cycle to the all-important pay day? Following these basic steps may help:
This process may sound simple, but it often becomes complex as you hire more employees. Working with a payroll provider may save you time and prevent costly mistakes. How to do payroll for self-employedIf you’re a solopreneur or independent contractor, you can usually pay yourself directly from your profits. Depending on your total earnings, however, you may have to pay income tax and self-employment tax, which is a combination of Medicare and Social Security taxes. These taxes are, in most cases, filed quarterly using IRS Form 1040-ES. Starting a small business FAQsSee what other entrepreneurs ask about starting a small business: Can you start a business with no money?As long as you’re willing to put in the effort, it may be possible to start a business with limited or no funds. Service-based businesses are sometimes a good option for cash-strapped entrepreneurs, especially if you have expertise in a specific area or already own the tools needed to perform the job. Product-based businesses usually require more capital, but you can still pursue them in some cases by starting a service business and using the profits to launch a product. Along the way, you typically need to do all the work yourself and may have to keep your existing job to avoid financial hardship. What is the easiest business to start?Businesses where you perform a service – landscaping, graphic design, consulting, etc. – are usually the easiest to start because they require the least initial investment. They also tend to be more profitable compared to product-based businesses that have overheard expenses. And if you choose a service that suits your existing skill set, you can sometimes be up and running fairly quickly. Another advantage to service-based businesses is that many of them can be done as a side job, so there may be less financial risk. How much does it cost to open a business?Startup costs generally vary greatly depending on the type of business you plan to open. Some businesses need office space, others require specialized equipment and most today need a website. As an entrepreneur, you need to carefully estimate these expenses ahead of time. This will help determine how you’ll finance your business and may reduce your chances of running out of money before you turn a profit. This article provides practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal advice or other professional services. It is recommended that you consult with a professional advisor for your particular business needs. All insurance products will be offered and sold only through Automatic Data Processing Insurance Agency, Inc., (ADPIA) its licensed agents or its licensed insurance partners; 1 ADP Blvd., Roseland, NJ 07068. CA license #0D04044. Licensed in 50 states. All services may not be available in all states. ADPIA is an affiliate of ADP, Inc. This Site may contain links that will let you access other Web sites that are not under the control of ADP. The links are only provided as a convenience and ADP does not endorse any of these sites. ADP assumes no responsibility or liability for any material that may be accessed on other Web sites reached through this Site, nor does ADP make any representation regarding the quality of any product or service contained at any such site. Which if the following is the most common way of starting a new business?Sole proprietorship: The most common and the simplest form of business is the sole proprietorship.
What is one of the most common causes for a new business failure quizlet?The most common cause of business failure is inadequate management and financing.
Which of the following are methods for becoming a business owner quizlet?Four Ways:. Starting a new business.. Buying an existing business.. Buying a franchise.. Taking over a family business.. Which of the following is an advantage of starting a business from scratch?Which of the following is an advantage of starting a business from scratch? One does not have to deal with the prior owner's bad decisions and mistakes.
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