Five steps for starting your business on solid ground
Learn the most important decisions to make before starting your business.
1. Build up your personal savings
You'll need a firm financial cushion when you're getting your business off the ground, especially if you are working on the new business full time and don't have another job to provide supplementary income. Every business has different startup costs, so research both one-time and ongoing costs, including initial inventory, equipment, permit and lease fees, and office furniture and supplies. Start paying down any personal debt, and get your personal credit score in shape.
2. Understand your equipment and software requirements
Make a detailed list of necessary supplies — that includes both items that every start-up needs and ones specific to your business. Note which items are essentials, and which ones you might be able to outsource. Budget for a reliable system to securely store company and customer data, and for a healthy stockpile of office supplies — buying in bulk can save you a substantial amount.
3. Find a location that makes financial sense
Once you've determined the area where you want to set up shop, a key decision is whether to buy or lease property. By owning a space, you can control costs and may take advantage of tax benefits. The upside of leasing a space is that it allows your business to move more easily if a location isn't the right fit. And if you want to start small, you can always look into working from home or using a co-working space.
4. Determine your employee needs
If you'll need help, employing contractors can be a good strategy for newly established businesses. The IRS has strict guidelines on who can be considered a contractor, so make sure you meet the criteria to avoid being penalized. If you choose to hire full-time employees, make sure you can afford the time and energy associated with the hiring process, as well as their wages, benefits, and taxes.
5. Decide if you will need to keep your day job
It's great if you have the funds to last a year or two before your business begins turning a profit. That way, you can dedicate 100% of your time to the start-up. But in many cases, it may be necessary to stick with your day job — the safety net of the income will help you survive the ups and downs of starting a business.
Learn more about starting your business off on the right foot.