How do I get started, what initial contacts do I need to make, who should I get to advise me and what preliminary steps do I need to take financially, legally and governmentally including permits, licenses and tax forms in order to start a business?
As with any successful undertaking, the best way to get started in business is to identify all of the actions that must be performed and prepare a task list with target dates for accomplishing the tasks. We cannot identify all of the tasks here because each case varies but some of the activities common to all business startups are:
- Determine if business ownership is for you. While self-employment has a number of benefits including the potential for greater income, greater independence and more satisfying work, it has its drawbacks such as, risk of failure—70% of all new businesses fail within a five year period, long hours, 60-70 hours per week is not uncommon and high pressure. You will need to have self-confidence and the ability to direct others as well as derive enjoyment from taking on new problems and identifying solutions and making decisions and sticking with them. These qualities along with emotional stability and good health are requisites for business owners.
- Assess your skills. A prospective business owner should have skills in as many of these areas as possible, depending on the nature of the business: management, sales, marketing, retailing, public relations, advertising, accounting/finance. Although these skills can be hired, the more you know, the greater the likelihood of success. At least obtain a knowledge of accounting. If you can’t read your financial reports, you can’t tell whether your business is succeeding or failing.
- If you don’t already have experience in the business you are considering, develop a plan to get it! Work in a similar business for three to six months full or part time. Short of this, get a mentor who is experienced in your specific type of business or contract the former owner for six months or so.
- Evaluate whether you want to start a business from scratch or buy an existing business. Advantages for “from scratch” include: you don’t have to buy any “goodwill” or “blue-sky” from previous owner and you can select location, etc. The main disadvantages are that previously owned businesses have a higher success rate and it takes time to build sales and profits with “from scratch” businesses.
- Identify your advisors. You will need an attorney, accountant, insurance agent, a business counselor, such as a SCORE counselor, a mentor or SCORE counselor and a banker (if bank funds will be required). The attorney should prepare or review all legal documents such as purchase or sales agreements, articles of incorporation or LLC articles, partnership agreements, leases, etc. The accountant will audit any purchase records, help establish purchase price if any and audit the books of the on-going company and prepare or audit the tax forms before submission. Insurance is a complicated field and businesses may need many types of insurance such as: worker’s compensation, general liability, fire and theft and automobile or some specialized form depending on the business. SCORE counselors have a vast array of resources to bring to bear on most any aspect of business—see the FAQ “About SCORE”. As soon as you know the funds you will need to borrow, the collateral you can apply to securing the loan and the amount of “down payment”(20-25% at least) you should select and contact your banker to determine the feasibility of the loan before you even apply.
- Set up a separate bank account for your business before you spend the first dime on it. You must capture all of the revenues and expenditures related to the business and it is much easier to do if it all runs through a dedicated bank account. Even if you have to write a check out of your personal account to fund expenditures out of the business account, do it. Do not comingle business and personal funds.
- Begin the preparation of a business plan. It will provide a detailed roadmap for the operation of the business but, perhaps more importantly, determine the viability (Is it profitable?) of the business before you get into it. See FAQ “Business Plan”.
- Determine the licenses, registrations, and other governmental requirements to start a business. The Secretary of State’s Office includes an “Office of the Ombudsman” who is responsible for communicating about licenses and permits. That Office can be reached at www.in.gov/business.htm. Another tool for determining the license requirements is at a site, www.businesslicenses.com . When this site comes up on your screen, go to the bottom of the screen and select, “Browse Business Licenses” (in small print), then select the state, e.g., Indiana, then the county, e.g., Vanderburgh and then the city, e.g., Evansville. This will produce a list of license requirements for different types of businesses sorted by federal, state, county and local. This is a commercial site and going beyond this point can cost money and you still may want to use it to secure your licenses but, just be careful.
- Locally, the requirements for licenses and permits varies by jurisdiction. In Evansville, for example, there is no general business license requirement but businesses must register with the County Recorder even if the business is headquartered outside of Evansville but does business in Evansville so a landscape maintenance business operated out of Newburgh must still register with the Vanderburgh County Recorder. Each locality has its own contacts but, initial contacts can be made with the city or county clerk’s offices. They will direct you from there. Some of the phone numbers for these offices are:
Boonville Zoning Administrator 897-1230
Evansville—Vanderburgh County Recorder 435-5215
Mt. Vernon Clerk/Treasurer 838-3317
Newburgh Clerk/Treasurer 853-7111
Posey County Clerk 838-1306
Vanderburgh County Recorder 435-5215
Warrick County Recorder 897-6165
- Select the location of your new business and a name. In order to avoid copyright or trademark infringement, Google, “trade name search free” or “trade name search Indiana”.
- Select a business structure, sole proprietorship, partnership, corporation (c or s) or LLC. Refer to the FAQ “Business Structure” for more on this important step.
The business reference section of your library is a good source of information on starting a business. In particular the Evansville Vanderburgh Public Library has a rich selection of business references in their “Business Central” collection. You may browse this selection on your computer at www.evpl.org. Here are other web sites with valuable startup information:
www.score.org (Rich in content with links to other sites)
www.sba.gov. (The Small Business Administration site- about loans and guarantees)
www.bplans.com (Sample business plans)
www.sba.gov/sbdc (Small Business Development Center site)
www.sba.gov/Bl/bics/index.html (Business Information Centers site)
www.business.gov (Link to all Fed. Info. Svcs. for business)
www.onlinewbc.gov (The Online Women’s Business Center)
www.payroll-taxes.com (Answers to payroll tax questions)
www.smalltownmarketing.com (Marketing help)
www.melissadata.com (Demographics, tax stats)
www.smallbizu.org (Free courses in major business subjects)
www.about.com (A vast array of business and other information)