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Start-up Advice

A Simple 6-Step Process to Starting a Small Business

It can be easier than you think if you break it down in small moves forward.

Matthew Toren

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A great small business always starts out as an idea, but you have to transform that idea into action. That’s where many individuals can start to feel overwhelmed. It’s understandable to freeze up at the deluge of things that are required to get a business started, but getting going is actually easier than you might think.

Like any big goal, if you start by breaking it down into smaller tasks, you’ll be able to tackle enough of the actions necessary to get started.

Related: Keep it Simple: How to Write a One Page Business Plan

Here are six ways to break down the process and simplify getting started with your own small business.

1. Write a one-page business plan

The key to a successful small business, especially in the startup phase, is to keep things simple and costs low. Costs don’t just mean your monetary costs, but also your time.

Many would-be small-business owners fall into the trap of trying to create the world’s biggest and most robust business plan. You’re only going to need that if you’re seeking investment or financing, and even if you will be seeking either of those things down the road, I always recommend small-business owners start out with by testing their ideas first before investing lots of time and money.

So to get started, create your own simple, one-page business plan that is a high-level overview of the small business you’re about to start.

  1. Define your vision. What will be the end result of your business?
  2. Define your mission. Different to a vision, your mission should explain the reason your company exists.
  3. Define your objectives. What are you going to do – what are your goals – that will lead to the accomplishment of your mission and your vision?
  4. Outline your basic strategies. How are you going to achieve the objectives you just bulleted?
  5. Write a simple action plan. Bullet out the smaller task-oriented actions required to achieve the stated objectives.

That’s it. It might be longer than one page, but it will surely be more organized and shorter than a full business plan, which could take weeks to write. If you need more information on the one-page business plan, or want to write out a full-blown finance-centered business plan, you can check out the book I co-wrote with my brother that has a robust explanation of both, Small Business, Big Vision: Lessons on How to Dominate Your Market From Self-Made Entrepreneurs Who did it Right.

2. Decide on a budget

While I highly recommend you keep your costs as low as possible, you’ll still need to determine a budget to get started and how much you’ll be able to spend.

If you’re self funding, be realistic about numbers and whatever you anticipate your budget to be. I’ve found that an additional 20% tacked on for incidentals is a realistic overage amount that helps you plan your burn rate.

Your burn rate is how much cash you’re spending month over month. It’s an important number for you to figure out to determine how long you can stay in business before you need to turn a profit.

You should set up your business with profitability in mind the first 30 to 90 days. It’s possible. But have a budget reserve so you can survive if things go leaner than expected.

3. Decide on a legal entity

Filing paperwork to start a business costs money. Often, depending on your state, it can be a lot of money. You’ll need to account for city or municipality licensing, state incorporation or business entity fees and more. Do a thorough search ahead of time to determine what the filing fees are for your city, county and state before starting any business.

Often in the initial “test” phase for your small business, it can be wise to start as a sole proprietor, as it means less paperwork and up-front expenses. That can save you some big-time cash while you determine the viability of your business.

Do be aware though that acting as a sole proprietor can put you at personal risk, so you’ll want to weigh the benefits vs. risks and then speak with a local attorney or tax professional to decide which is smarter for your short-term vs. long-term goals.

You can always file for a business entity once you’ve proven in the first three to six months of business that you’ve got a viable, sustainable model.

Related: Free Sample Business Plans

4. Take care of the money

Whatever business entity you decide on, keep the funds separate from your personal accounts. This is a big mistake that makes tax time and financials so confusing. It’s really easy to set up a free business checking account with your local credit union or bank.

All you’ll need is your filing paperwork, sole proprietor licensing information and an initial deposit to get set up from most financial institutions.

Don’t pay for an account or get any kind of credit lines yet, just get a holding place you can keep your money separated from your personal accounts. This should take you no more than hour at the financial institution of your choice.

5. Get your website

Regardless of whether your business will be brick or mortar or online, you’ll need a website and that means securing a URL. Popular domain sites such as HostGator and Go Daddy will allow you to search for the website domain address of your choice and purchase it for as little as R100.

If you’re starting an online business, you can tie your domain to an online shopping cart and store front such as Shopify for a low monthly fee, or you can build a basic website yourself on top of your URL with do-it-yourself drag-and-drop site builders such as Weebly for a low fee. Both are less than R1 000 a month.

6. Test sales

You have enough of a foundation now that you can start testing some sales. Try to spread the word in inexpensive and creative ways.

If you have a service-based business, get involved with your local chamber of commerce or small-business chapter immediately and ask what resources are available for you to speak, present or share information about your business.

If you have a product-based business, test the viability of your product at local swap meets, farmers markets or other community events to test what the public really thinks (and if they’ll purchase) from you.

Related: Hate Being Stuck Behind a Desk? 7 Business Ideas for You

Drive traffic to your website through simple Facebook Ads with capped budgets, or set up a simple Google AdWords account with a budget cap to test if traffic is going to your site.

You can follow these six steps by yourself for not a lot of money. It’s a fantastic way to test the viability of your small business before throwing all your time and money into an unproven idea.

This article was originally posted here on Entrepreneur.com.

Matthew Toren is a serial entrepreneur, mentor, investor and co-founder of YoungEntrepreneur.com. He is co-author, with his brother Adam, of Kidpreneurs and Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right (Wiley). He's based in Vancouver, B.C.

Company Posts

Register A Company In South Africa

With over 120 Start-up Services, Company Partners is the perfect Partner for Company, Tender and Contract compliance.

Company Partners

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Company Partners is the leading Company Registration Service Provider in South Africa, offering a One-Stop-Shop for all the Company Registration and Tender Compliance Documents.

With over 120 Start-up Services, Company Partners is the perfect Partner for Company, Tender and Contract compliance.

Established in 2006, Company Partners guarantees that the services they offer meet the standards of the best in the industry. Over 30 full-time Consultants offer services and standards of the highest quality.

Company Registration Benefits

Your Company Structure is the first consideration you need to make when you want to register a new Company at the CIPC. The preferred choice of a legal entity for most Businesses is a Pty Company.

Related: Business Model Design – Picking The Business Model That Works For You

Here’s why:

  1. You protect your personal life and assets from your business when you register a company. If one runs a business, it is necessary to operate in a safe legal structure where your business assets and risks are separated from your personal ones.
  2. You look more professional when you operate under a registered company name. If you want to obtain a large contract or a tender, it appears more professional to trade in a Pty Company capacity than in your own name.
  3. Most Suppliers and Government Departments require businesses to be registered as a Company to apply for their Tenders and Contracts.

How to Register a Company

Step 1: Complete and submit the easy online sign-up form here.

Step 2: Your dedicated Consultant will call you to assist you with any questions you may have.

Step 3: Email your ID and easy supported documents – which your Consultant will explain.

Step 4: Within a few days you will receive your brand new Company ready to use for Tenders and Contracts, via email. You can contact your Consultant at any time on a toll-free number.

Related: New Fund For Small Businesses To Be Developed

Need a Company fast? Perhaps consider a Shelf Company

Company Partners offer a variety of Shelf Company Options to suit your needs, including 2016- year Registration Number Shelf Companies. Within 24 hours after purchase, you will receive the registered Shelf Company.

You can start using your Company Registration Number and Bank Account (for income) immediately.

Each Shelf Company includes a 2016 Year Registration Number, Free Share Certificates, a Free ‘Tax Number’ and a Free ‘Official BEE Affidavit’.

You can also make use of a Nedbank Business Bank Account that’s active for your Shelf Company.

Luckily, getting your own Shelf Company is easy in terms of compliance. All that’s required is that you are at least 18 years of age, an ID document / Passport and a South African Business Address.

Why use Company Partners to Register a Company?

Fast timeframes: Your Company will be registered fast and effectively online. Your documentation is set-up in less than 24 hours, after which CIPC will process it.

Simple requirements: The only requirement for Company Registration is an ID / Passport. Everything gets done online, so you can be based anywhere in South Africa or the World.

Dedicated Consultant: Your own dedicated professional Consultant takes care of the entire process – he or she is available on his / her email and also on a toll-free number.

Professional Service: With years of experience of representing our Clients in Government, the entire process runs smoothly over the Internet. No lost documents and no frustration.

Company Partners completes all necessary applications correctly and reviews all the paperwork for you. You simply have to wait for your company documents via e-mail, confirming when you may start trading using your registration detail.

Related: Beauty Of Failure: The Art Of Embracing Rejection

After Company Registration

Any new Business needs guidance to prepare for Tenders and Contracts. After Company Partners gets you registered for your Company, Company Partners can assist you through the entire Company start-up process (optional).

That means they will ensure you have everything you need for a Tender or Contract application like a new PTY Company, BEE, Tax Clearance, VAT Registration, Logo Design, Website, Business Plan, COID, Letter of Good Standing, NHBRC, Accounting, Payroll and more.

Get Started

To start, just complete and submit the easy application form here and a friendly Consultant will contact you. Alternatively contact Company Partners toll-free on 0800 007 269 (toll-free from landlines and cell phones).

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Start-up Advice

Alan Knott-Craig Answers Your Questions On Money And Partners

From starting the right business, to managing business partners and finding your magic number, there is a secret to happiness.

Alan Knott-Craig

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If I get rich will I be happy? — JC Lately

Does money equal happiness? Mostly, yes. Research in the US shows that your happiness is proportionate to your earnings up until you earn $80 000 per annum. Thereafter, incremental income gains have a negligible effect on your happiness.

In other words: More money will make you happy as long as you’re poor. Once you break out of poverty and enter a comfortable middle-class existence, more money will not make you happier.

These are the top three for old folks:

  • I wish I’d spent more time with family.
  • I wish I’d taken more risks.
  • I wish I’d travelled more.

Therein lies the secret to happiness. Spend time with your family. Take risks. Travel.

But first, make money. Don’t do any of the above until you’re making enough money not be stressed about money.

Related: Your Questions Answered With Alan Knott-Craig

What is the magic number? — Mushti

The magic number is the amount of money you need to not worry about money ever again. If you don’t need toys like Ferraris, yachts and jets, the magic number is R130 million. Here’s the math: R130 million will earn R9,1 million in interest annually (assuming 7% interest). After tax that is R5,46 million.

Assuming you need 50% to maintain a good lifestyle, that leaves approximately R2,7 million for reinvestment, which is enough to keep your capital amount in touch with inflation for 50 years. The balance of R2,7 million (after tax) is for your living costs. In South Africa, R2,7 million will afford you a lifestyle that allows you to send your kids to a great school and university, to travel overseas a couple of times a year, and to live in a comfortable house.

Over time your living costs (and inflation) will eat into your capital amount. After 50 years you should be down to nil, assuming you earn zero other income in that time.

In 50 years, you will probably be dead. If you’re not dead, your kids will be able to support you (because they love you and they have a great university education).

I am the sole director of a company (the others still have full-time jobs and don’t want to be conflicted) and there is pro-rata shareholding based on our initial shareholder loans. However, I am putting in most of the hard work, together with one of the other actuaries. How best do I manage the director/shareholder dynamic? I obviously want to make as much progress as possible but there are times when I need the input from the others (and their responses aren’t always as quick as I would like). — Mike

If you have any perception of unfairness regarding effort/risk vs reward, deal with it NOW! You can’t do so later. The best approach is honesty. Call your partners together. Explain your thinking. Perhaps argue for 25% ‘sweat equity’ for yourself. Everyone dilutes accordingly. Ideally cut a deal whereby you have an option to pay back all their loans, plus interest, within six months, and you get 100% of equity (unless they quit their jobs and join full-time).

Equity dissent must be resolved long before the business makes money, otherwise it will never be resolved.

Related: Alan Knott-Craig’s Answers On Selling Internationally And Researching Your Idea

What do you think of WiFi in taxis?— Ntembeko

It’s a good idea, but not original. Before embarking on a start-up, you should survey the landscape for competitors. Just because there are none doesn’t mean no one has tried your idea.

It just means that everyone that tried has failed. You need to be 100% sure that you have some ‘edge’ that makes you different from everyone who came before you (and failed). Otherwise you will fail. What is your advantage that is different to everyone who came before?


Read ‘Be A Hero’ today

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Start-up Advice

What You Need To Know About The Lean Start-up Model

The Lean Start-up philosophy was developed by Eric Ries, a Silicon Valley-based entrepreneur who also sat on venture capital advisory boards. He published The Lean Startup in 2011, igniting a movement around a new way of doing business.

Entrepreneur

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The model follows key precepts that include:

Taking untested products to market

The fact that too many start-ups begin with an idea for a product that they think people want, spending months (or even years) perfecting that product without ever testing it in the market with prospective customers.

When they fail to reach broad uptake from customers, it’s often because they never spoke to prospective customers and determined whether or not the product was interesting. The earlier you can determine customer feedback, the quicker you can adjust your model to suit market needs.

The ‘build-measure-learn’ feedback loop is a core component of lean start-up methodology

The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a start-up can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect.

Utilising an investigative development method called the ‘Five Whys’

This involves asking simple questions to study and solve problems across the business journey. When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not. If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

Lean isn’t only about spending less money

It’s also not only about failing fast and as cheaply as possible. It’s about putting a process in place, and following a methodology around product development that allows the business to course correct.

Progress in manufacturing is measured by the production of high quality goods

The unit of progress for lean start-ups is validated learning. This is a rigorous method for demonstrating progress when an entrepreneur is embedded in the soil of extreme uncertainty. Once entrepreneurs embrace validated learning, the development process can shrink substantially. When you focus on figuring the right thing to build — the thing customers want and will pay for, rather than an idea you think is good — you need not spend months waiting for a product beta launch to change the company’s direction. Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute.

Source: theleanstartup.com

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