Lesson 7: Getting Your Ducks in a Row
Getting Your Ducks in a Row
When you’re in the planning stages of a new business or startup, sometimes the process can be overwhelming. But don’t get discouraged! Many new entrepreneurs have felt this way and still managed to succeed.
You should start off by getting your ducks in a row, or in other words, getting everything in order before your company opens its doors.
Here are some basic pointers for setting up shop and sorting out the legal side of things. This lesson also includes an easy-to-use planning tool called a “SWOT Analysis” to help your company plan its future goals.
Setting Up Shop
When you start physically setting up your business, try to keep everything separate from your personal life. Not only will your company appear more professional, but it will also make life simpler, too—especially when tax season rolls around! Here are two ways to start:
- Select a location. Before registering your business, you need to choose a physical address. This is where your tax paperwork will be sent. Provide other ways for the government and customers to get in contact with you, too. This could include setting up a company phone line and an email address. This would also be a good time to register the domain name for your website.
- Decide how to handle money. Not only do you need to keep track of your company’s finances, but you should also think about taxes and payroll. Consider hiring a bookkeeper or buying accounting software. You can open a business bank account once your company is registered. (We’ll talk more about basic finances in a later lesson).
The Legal Side of Things
While a business might start out as something informal, making it “official” will help you to maximize profit and minimize risk. A lawyer or an accountant can assist you with this process. Here are two key steps:
- Choose a business structure. You need to choose an official structure for two reasons: (1) each structure comes with its own set of legal risks and protections, and (2) each one comes with its own tax classification. The structure you choose should reflect the nature and purpose of your business. There are a variety of factors to consider, such as the size of your company, whether you have partners, and if it’s for profit/not-for-profit, among other things.
- Register your business. You will need to make your company known at the local, state, and federal levels. Each city has its own regulations for getting licenses and permits, which you can look up online. Visit your Secretary of State’s website to get a state tax ID number, and then the IRS’s website to get an EIN, or employer identification number. You can watch a guide of how to register your business online here.
Let’s Talk Strategy
To make sure your business is headed in the right direction, you need to come up with a plan. It’s important to reflect on the internal workings of your company—like which resources you have and those you need—as well as the external environment, or the market your business is entering.
A SWOT Analysis can help in assessing your business from these two angles. The aim is to think about your company’s future goals. SWOT stands for strengths, weaknesses, opportunities, and threats.
This exercise doesn’t have to be complicated! Divide a piece of paper into four rectangles, labeling each section with one of the four key words. What do they mean?
- Strengths refer to what you’re good at, and which resources you already have. For example, maybe you’re creative and don’t need help designing a logo or website.
- Weaknesses refer to areas that need improvement, or key resources which are missing. Maybe you’re not a math whiz, so you should probably hire a bookkeeper. Or you might still need to find a manufacturer to make your products in bulk.
- Opportunities refer to trends or gaps in the market. For example, you notice that more people are going to the local farmers’ market, so you could sell your freshly picked berries there. Or there isn’t an app that helps to plan parent-teacher conferences, so this is something your startup could create.
- Threats refer to things that could negatively impact your business. Is there a similar store which is opening up just a few blocks away? Maybe you’re worried about the lumber shortage and how it will affect your construction company.
As you jot down items in your SWOT Analysis, be honest with yourself. Every business has its strengths and weaknesses! And the more aware you are of what’s going on around you, the more likely it is that your company will thrive.