For any new business owner, starting a business checklist should be a top priority.
Opportunities to launch a business, in many respects, have never been easier than today. Technology has advanced to a point where many necessary components can be addressed online, without the time-consuming and labor-intensive obligations of the past.
Nevertheless, if you want to launch a business, you may need to take certain key actions to tilt the odds of success in your favor. While great ideas for startups are unique to most individual entrepreneurs, a business checklist is often similar for everyone.
What are some must-have elements of any effective business strategy? Which processes should be initiated and completed? What other to-do action steps should be followed?
Here is a starter list of must-dos to include in your own business checklist:
Bring passion to your enterprise. A new business will probably consume most of your waking hours, so it’s important that you care deeply about your proposed product or service. This can get you through difficult times and keep you energized on a continual basis.
Do industry research. Before going further, it’s important to know that someone else hasn’t already preempted your great new idea. Fundamental market research may quickly indicate whether there’s a void in the marketplace that your new product or service idea can fill.
Address essential elements in your startup tool kit. Deborah Sweeney, CEO of MyCorporation, which provides leading online legal filing services for entrepreneurs and businesses, pinpoints crucial elements every would-be business owner should address:
Make sure your business is protected by forming a corporation or an LLC. A separate corporate entity helps to protect your personal assets from those of your business, partners, and investors. It also helps to maintain a separate corporate presence that protects you personally and limits your personal liability. This adds a level of credibility and professionalism. Finally, having a corporate structure lends itself to potential tax savings – especially with new business-friendly tax laws.
Ensure that you have bylaws or an operating agreement in place. Set forth the terms of your business, including money invested, owners, roles, and responsibilities. Having everything in writing from the outset is key. If all partners and investors know their roles and the revenue opportunities of profits and losses, it is much clearer when questions arise.
Protect your business’s intellectual property. Trademarks, copyrights, and patents can be a critical business asset. Make sure to protect your assets because they often involve a huge investment from the business owners, and therefore, should be adequately protected.
Business licenses may be a critical part of your business. Depending on the business type, different business licenses requirements may vary. Even if a business does not incorporate, most states and counties require a “DBA” or business license to designate the business is operating. It is important to be aware of these licenses and to make sure they are timely filed to avoid penalties.
“As the entrepreneur decides to move forward, it’s important to remember that a small business is a living and breathing entity,” Sweeney notes. “Things change. Businesses grow. You need to remain flexible as the business grows, but you don’t need to have all of the answers at the outset.”
How does a business plan fit in?
Your new venture requires a detailed plan that covers some of the above-mentioned components, but should also include your strategy to launch and maintain the new business. Other aspects of the plan may cover marketing and technology needs, a method for identifying your target audience, anticipated expenses, cash-flow scenarios, and hiring strategies.
Many plans include a financial forecast, where the business is likely to be within one year, three years, and five years. The Small Business Administration offers a free business plan tool, noting that a well-crafted plan “helps you to step back and think objectively about the key elements of your business venture and informs your decision-making on a regular basis.”
“The business plan is associated with how the business will be expected to run, but that will still be a moving, changing document,” Sweeney says. “A key component of a business plan is finance. Evaluate the key strategies for income and associated expenses. Make sure to continuously evaluate return on investment (ROI) because this part of the plan will change as you recognize that ROI is higher for some initiatives.”
“Things change. Businesses grow. You need to remain flexible as the business grows, but you don’t need to have all of the answers at the outset.”
Marketing strategy: How do you anticipate going to market and growing your customer base?
Sales and promotions: Will your product or service be sold online, in stores, via referrals, or storefront?
Branding: Evaluate your brand name, logos, slogans, and the associated protection of the business from an intellectual property perspective.
Key employees and roles in the company: Define their roles and your expectations of these positions.
Key investors and advisors to your business: You may want to have someone to turn to for advice and guidance, perhaps in the form of an advisory board.
A market and competitive analysis: Look at who your target market is, what the competitors in the industry are doing, and how you differentiate.
“As a new business owner, you won’t have all of the answers,” Sweeney says, “but a strong start in these key areas will give you the base from which to grow and evolve.”
Anticipate the costs of your startup
Any startup launch checklist must include an advance plan for addressing the costs involved in getting that business off the ground (and maintaining it in the future).
“It’s very difficult to anticipate expenses with any business,” Sweeney says. “I believe the number one way to grow is to associate business costs with a particular return. When you evaluate where your expenses relate to that specific return, it can be very eye-opening for an entrepreneur.”
She offers this example:
If you invest in paid search, you may learn that your ROI is 1:1. For every dollar you spend on Google, you make $1. You may grow because you offer annuity (ongoing services), so you’re fine to be “revenue-neutral” on the initial customer acquisition.
On the other hand, you may learn that by hiring a sales person, you make 2:1 ROI. In this instance, having the salesperson leads to a higher ROI, so you may decide to double down and hire a second salesperson rather than invest more of your cash flow in online advertisements.
“Each of your costs likely has a return (or lack of return), so it’s not just important to know your costs, but also to know how your costs impact your return,” Sweeney says. “If your intent is to grow organically, spend carefully. Hire as you need based upon customer demand. Do not hire in anticipation of growth. Costs may also come in the form of unexpected expenses – consider your rent, insurance, employee expenses, benefits, marketing, advisors, etc.”
Here are some critical elements to factor into your planning:
Put together a realistic budget. It’s impossible to determine down to the last penny what your operating costs will be. But putting together an estimate helps you create a working budget and get a better grasp of where funds should be allocated and in what order. Nearly everything about a startup costs money. Your job is to establish a realistic budget that accounts for all these outgoing expenses. Typically, this involves planning your startup’s “burn rate” – the amount of money you’ll likely spend per month before making a profit becomes necessary. As a general rule of thumb, it’s a good idea to add 15-20 percent to your estimated burn rate in order to cover all the expenses you don’t foresee at this time. Additional potential expenses include renting retail space, interior or exterior renovations, funds to hire employees, and branding and marketing materials.
Start the search for funding. You’ll need financial resources to get your business off the ground. If you have funds in reserve, be sure to place them in an account that’s separate from your personal savings or checking account. Establishing a free business account at a bank or credit union generally requires no more than an initial deposit, filing paperwork, and proprietor licensing data.
It’s impossible to determine down to the last penny what your operating costs will be. But putting together an estimate helps you create a working budget and get a better grasp of where funds should be allocated and in what order.
Sweeney offers insights into other potential funding sources:
Family and friends: “Funds from these sources are often easiest to come by, but can lead to personal and family conflict if the parties don’t get out of it what they hope for. It’s important to have everything in writing and to make sure that all parties have a strong understanding of the investment and risk of return.”
Venture capitalists: “Venture capitalists may take an ownership interest in a successful, thriving startup (or one that presents unique revenue opportunities). Often, the money is significant, but there is also traditionally significant involvement of the investors. You may have to give up a big portion of your business to have VC funding.”
Bank or online business loan: “A bank or online business loan could be a great resource for funds, especially if you have strong credit. Your hope is to get a loan with low interest and strong terms of repayment. The better your credit, the stronger the loan potential is. You may also have to have a strong business plan to present to the bank so they can evaluate your potential for repayment.”
Organic funding: “Start selling your product or service with just you and one or two employees, and then grow the space, number of employees, and products as the revenue starts to flow in. Online funding sites like GoFundMe can be a great way to get initial capital. Some of the amount donated goes to the funding source (i.e., the site that is collecting the money), but the rest of the funds get your business going.”
Determine your startup’s legal status and tax structure
As noted above, you must be prepared to attend to all city, county, municipality, or state licensing requirements for your new business. Designating yourself as “sole proprietor” has both advantages and disadvantages, so consult a local attorney or tax professional for the best guidance on how to proceed.
Adhering to certain legalities (which can differ from state to state) is mandatory. Remember, everything in business from trademarks and intellectual property protection to contracts with vendors is legal in nature. This also includes obtaining the appropriate permits and licenses, as well as formally registering the name of your new business.
As for taxes, it’s important to interact with the Internal Revenue Service (IRS) in the proper manner. Here are some valuable tips:
Learn about tax responsibilities. As a new business owner, you have many tax responsibilities, including:
Filing your business’s annual income tax return;
Paying estimated taxes if you own a pass-through entity or for your C corporation;
Payroll tax responsibilities (figuring withholding, depositing payments, and filing employer tax returns); and
Submitting information returns. This may be necessary if you have independent contractors, maintain a qualified retirement plan, or have certain other benefit programs for your staff.
The IRS provides more information about filing and paying your business taxes.
Get a tax ID number. When you start a business, even if you have no employees, you usually need to obtain an employer identification number (EIN), which you can get online. You don’t need an accountant or attorney to do this. If you’re a sole proprietor or independent contractor, you can use your Social Security number and don’t need an EIN in most situations. However, it may be wise to obtain an EIN for identity theft protection purposes, and use it whenever your tax ID number is requested.
“If you are leveraging payroll to pay employees, it is critical to make sure you have your state ID accounts established,” Sweeney notes. “These may include state withholding IDs and state unemployment insurance IDs. Make sure you have established the appropriate accounts and ensured you are paying into the right holding accounts pursuant to your state laws.”
Depositing taxes. If you have a payroll or make estimated tax payments, you can do this electronically. There is no cost for using this service, and you can schedule your tax deposits in advance. Using EFTPS.gov doesn’t give the government access to your bank account; instead you authorize the bank to make withdrawals from your account to cover the tax deposits or payments you specify.
Transmitting W-2s to the Social Security Administration. You can submit copies of employees’ W-2s, along with an IRS transmittal form (Form W-3) to the Social Security Administration through its Business Services Online. You can even register by telephone to create a password.
Remitting information returns to the IRS. If you engage independent contractors, you may have to file annual information returns to inform the IRS about your payments to them. This can be done through the Filing Information Returns Electronically (FIRE) system.
Filing annual retirement plan returns. If you want or need to file electronically a form in the 5500 series (e.g., you maintain a 401(k) plan for you and your staff), it is done through the Department of Labor’s EFAST2. This is the portal to use even though you’re filing an IRS form.
Interacting with the IRS may seem intimidating to some new business owners, but as long as you’re in business, interaction is required. You can call upon valuable experts, as well as IRS guides, such as the Small Business Self-Employed Tax Center and an A-Z Index for Business.
Importance of business insurance
Some of the most common varieties of business insurance are commercial property, home-based business insurance, and general and/or product liability. Selecting the most appropriate insurance coverage depends on the type of product or service you intend to sell, as well as any planned need to bring on employees. You may also need to have workers’ compensation coverage.
“It’s important to consider insurance for your employees, for business interruption, and if you’re a professional, for your professional services,” Sweeney says. “Business insurance protects your personal assets and ensures that you’re protected in the event of business interruption, theft, or lawsuits. You may think you’re too small to get insurance, but often insurance is not as expensive when you are smaller. Insurance is often based on revenue and risk and the lower your revenue, often, the risk is less.”