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What You Need to Know to Start a New Business

What You Need to Know to Start a New Business

Did you know that there were 1.1 million new business openings in the U.S. from March 2020 to March 2021 alone? Interestingly, 1 million of those new establishments were small businesses. That brings the total count of small businesses in the U.S. to 33.2 million, or 99.9% of all U.S. establishments.

All that should tell you the United States is undoubtedly the Land of Opportunity. So if you’ve always wanted to start a business, there’s no better time than now to proceed.

This guide on the most crucial facts about opening and operating a business can help you get started, so read on.

Ensure Your Business Idea Is Marketable

Marketable refers to a product, service, or skill wanted or needed by purchasers. If something or someone lacks that quality, then even people with the money to pay for it won’t.

So regardless of how brilliant you think your business idea is, it’s moot if there’s no demand for it. Thus, you must investigate the market to ensure it needs your product, service, or skill.

Comprehensive market research can tell you if people will welcome your business idea. It can also tell you which specific market (e.g., generation, gender, etc.) has the most demand for your offer. It’s also an excellent way to learn more about your potential competitors and how to beat them.

Develop a Business Plan

A business plan documents a company’s structure, core activities, goals, and finances. It also describes the products or services it wants to market and how it plans to sell its offers. It’s a business guide outlining what you need to start and keep your firm running.

Every startup business needs such a plan because it’s one of the first things investors look for. Likewise, most lenders require it to determine if a company is worth lending to.

Secure Funding for Your New Business

A recent study found that the number one reason startups fail is lack of or running out of cash. Of the 100+ startup failures it reviewed, 38% cited that as the culprit behind their closure.

That’s why you should carefully review your finances, which your business plan outlines. Start by determining how much money you need to start and operate your small business. Then, compare that with the amount you have on hand.

If what you currently have isn’t enough, consider applying for a business loan. The Small Business Administration (SBA) should be your first option. It offers a wide array of funding programs, with the smallest, called microloan, providing up to $50,000.

Other financial institutions, such as banks and private lenders, also offer business loans. If you decide to apply with them, ensure their interest rates are reasonable and aren’t over 5% of the loan value.

Prepare for Business Registration

If you’ve already decided on a business name, the next step is to register it. Doing so turns your business into a legal entity and protects your brand. It may even be a federal and state requirement, such as if your business isn’t under your legal name.

Apply for Your Business Tax IDs

A tax or taxpayer identification number (TIN) is a 9-digit number used to track tax obligations. It also determines and monitors tax dues a taxpayer must pay to the Internal Revenue Service (IRS).

A TIN is a federal business requirement, so you must also get it from the federal government. Also, check your state tax requirements, as some states have specific tax IDs.

You also need an employer identification number (EIN) to employ workers.

A TIN and EIN are also necessary to open financial accounts. Likewise, most credit card processing services require these numbers.

Get the Proper Business Permits

A business permit is a legal document issued by the federal, state, or city government. It lets you operate your business in compliance with federal, state, or municipal laws.

An example is a fire department permit, which lets you open a commercial space to consumers. To get this permit, your local FD must inspect your building to ensure it’s fire-safe.

Another is a health permit issued by your local health department. It’s a requirement for businesses serving customers food and beverages.

Some permits also allow you to conduct specific regulated activities.

Let’s say you plan to serve alcohol in your new restaurant or make it available in your new store. If so, you must apply for an alcohol permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB). You must obtain this to make, sell, or import alcoholic beverages at a retail location.

Obtain All Necessary Business Licenses

A business license, like a permit, also allows your business to operate in your state and city.

A chief difference is that some licenses require an applicant to undergo a test. An example is a state licensing exam for doctors, lawyers, plumbers, electricians, etc.

Some states also require both licenses and permits for alcoholic beverages. Many also mandate sales tax licenses to sell taxable goods legally.

Never Go Without Business Insurance

Business insurance helps protect business owners from financial losses arising from unforeseen incidents. These may include accidents, property damage, theft, errors, and lawsuits.

Most standard business insurance policies provide coverage for those events. However, others are more specific, such as covering equipment breakdowns or cybercrime.

You also need flood insurance, even if your business building is in a low-risk zone. About 730,000 commercial real estate properties are at risk of flood damage in the U.S.

Your state may also require you to buy worker’s compensation for your employees. Usually, states mandate coverage based on the number of employees.

Time to Open Up Shop

Remember: A new business can only succeed if it offers something in demand or needed by people. That’s why the first step to starting a new enterprise is to conduct market research.

If your research says your idea is marketable, don’t delay putting it into a written plan. From there, get funded, registered, licensed, permitted, banked, and insured. All that’s left after that is to open up shop.

For more business tips and informative guides like this, check out our latest news and blog posts!

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