Ready to start your own business? If so, you're not alone. Approximately 550,000 people in the U.S. become entrepreneurs every month. However, only a few succeed. In fact, more than half of small businesses fail during the first five years. About 30 percent survive for only two years, and 66 percent close their doors within 10 years. While it's true that starting a business venture can be exciting, make sure you know the risks involved. Set realistic goals, come up with a plan and familiarize yourself with the legal aspects.
A business venture aims to fill a gap in the market and has a goal of generating profit.
Entrepreneurship is one of the most challenging yet rewarding career paths. No matter what your skills are, you can use them to supplement your income and build new streams of revenue. Depending on your niche, you may not even need an office. A staggering 69 percent of entrepreneurs start their business at home.
From launching a creative agency to opening a medical practice, business venture ideas abound. Unfortunately, having a brilliant idea is not enough to succeed. You also need to plan every step of the process and comply with the law.
First, make sure you understand what a business venture is. This type of entity aims to fill a gap in the market. Its goal is to generate profit. The expectation of financial gain is accompanied by the risk of failure.
In general, one or more people invest in this kind of business, hoping to generate revenue as the company grows. The profit will be shared by all investors. If the business fails, they will lose money.
Traditional business ventures are not the same thing as a startup. Even though both terms refer to a new company, startups are expected to grow at a faster pace. Some experts say that this kind of entity should grow by 5 percent to 7 percent per week in its initial stages. Think of it as a growth-based project.
A traditional business venture, by comparison, tends to experience slow, gradual growth. Its goal is to provide a steady income for the founders. This type of company may take months or years to become profitable. Just like a startup, it may choose to remain private or go public after a certain period of growth.
This type of entity is often referred to as a small business. Its founders are typically considered entrepreneurs. But what is the difference between entrepreneurship and business?
An entrepreneur will follow his own path and focus on innovation. He or she will be highly adaptable and flexible, have a growth mindset and take risks. Passion and motivation are paramount in order to succeed. Think of famous entrepreneurs like Walt Disney, Steve Jobs, Bill Gates and Andrew Carnegie.
Businessmen, on the other hand, often walk on a defined path. They undertake an existing business idea and try to improve it rather than coming up with something new. They focus less on innovation and more on generating profit and growing the company. A businessman will try to mitigate risks and use growth strategies that have stood the test of time.
An entrepreneur may become a businessman in the long run. The difference between the two lies in their mindset. A businessman is a market player, while entrepreneurs are market leaders. The latter also have a higher risk tolerance and tend to use unconventional methods to ignite business growth.
One of the most important aspects of starting a business is to make sure you comply with the law. Whether you're planning to launch an online store, a marketing agency or a legal practice, it's necessary to choose the right business structure. This will determine your legal rights as well as the amount of tax to be paid. The most common business types include:
- Sole proprietorship
- Limited liability company (LLC)
- General partnership
- Limited liability partnership (LLP)
- Limited partnership
A sole proprietorship, for instance, is the easiest to form and operate. Many entrepreneurs start with this option and register an LLC or another type of business later on. The downside is that there's no legal or financial distinction between the business owner and the business itself. This means that you're personally liable for all losses and debts.
Limited Liability Companies are a blend of corporations and sole proprietorships. They involve one or more entities or individuals who sign a business venture agreement or another written agreement, depending on the type of business. This document typically includes management-related provisions, economic rights and distributions, classes of LLC interests, rules on meetings and decision making, fiduciary duties and more.
In case you're wondering, "What is your title if you own an LLC?" you should know that LLC founders are referred to as “members.” The maximum amount of money they can lose from a business venture that fails is the amount they invested. This business structure allows you to limit your personal liability in case something goes wrong.
Another popular option for business ventures is a partnership. In this case, two or more people join forces to build and grow a company. Legal and financial responsibilities fall upon each business owner. Basically, founders share in the profits and losses and are legally responsible for the company's actions.
In 2016, there were more than 28 million small businesses in the U.S. Forming a company is easier than ever before. All you need to do is follow a few steps to ensure you're compliant with the law. Growing your business is the hardest part.
First, come up with business venture ideas that match your skills and goals. Assess your budget and decide how much you're willing to invest. Create a business venture plan and analyze your financing options. Next, register your business name, get a tax ID from the IRS and apply for any licenses and permits that may be required.
Let's say you're planning to start a web design agency. Are you going to work from home or rent an office? Do you want to hire a team or handle everything on your own? What types of software and computer equipment are necessary? Are you planning to hire an accountant or do your own taxes?
Answer these questions and then try to determine the costs involved. Working remotely, for example, is less expensive than renting an office. If you do your own taxes, you could end up saving hundreds of dollars a year. However, unless you know the law and the tax system, you could make costly mistakes. In this case, it's worth hiring an accountant. Most accountants offer a free initial consultation, so you should consider meeting up with a few and getting several quotes.
Business venture ideas that require a large investment may benefit from additional funding. Connect with angel investors, apply for small business grants, take a small business loan or start a crowdfunding campaign. Figure out whether you need all the money now or just smaller amounts over several months.
Also, consider the cost of marketing materials. Once your web design business is up and running, it's important to promote it. This may involve pay-per-click marketing, search engine optimization, banner ads and offline advertising, including business cards and flyers.
Take these things into account when you write a business plan. This will give you clarity on what you can expect in terms of revenue, expenses and overall performance. Next, choose your business location, decide on a company structure and register a legal entity name. Since you'll be working online as a web designer, you need to register a domain name as well.
The next step is to obtain an employer identification number. This unique identifier is necessary for opening a bank account, hiring employees, paying taxes and applying for business licenses.
Head over to the IRS website and complete the application process. This can be found in the EIN Assistant section. Another option is to download and fill out Form SS-4. Apply for an EIN as soon as you register your business with the state government. Be aware that you must replace or change your EIN if you ever change your business name, address, tax status or management.
Depending on where you live, you may need to obtain a license to start your web design business. Each state has its own rules. Visit your state's website to find out what licenses and permits are needed. You must also get business insurance and open a bank account.
Once the above steps are completed, you can start growing your new business venture. How you'll do it depends on several factors, including your budget, industry, short- and long-term goals, legal requirements and more.
For example, if you're selling dietary supplements, you may not claim that your products treat or cure diseases. The label can say that a product supports cardiovascular health but not that it prevents heart disease. In some states, you may need special permits to display advertising signs along street roads and other places.
Make sure you understand the risks and rewards associated with your new business. About 20 percent of new companies fail during the year. Common mistakes, such as not researching the market and setting unrealistic goals, can hold you back.
Statistics show that 23 percent of small businesses fail because they don't have the right team. Another 42 percent are unable to generate revenue because their products and services are not in demand. Approximately 82 percent experience cash flow problems and eventually close their doors.
Set realistic goals for your business venture. No matter how great your idea is, it's unlikely that you'll have success overnight. Trust yourself, but take calculated risks. If necessary, continue your education to expand your skills and deliver better services.
Take the time to analyze the market. The more you know your customers, the better. Check your competitors and see who they are targeting. Also, study their marketing campaigns and product offerings. To be successful, you must stand out from the crowd and do things better or come up with something different. Consider purchasing a product from your competitors and then try to figure out how you could improve it.
Focus on building your brand and reputation. Promote your business venture locally and online. Attend networking events in your city and connect with other entrepreneurs. Team up with industry professionals and find a way to help each other succeed. For example, if you have a small fitness center, join forces with nutritionists, wellness centers or local stores that specialize in gym clothing.
Engage with potential clients on social networks, forums and other online platforms. An HR agency, for instance, has more chances of finding customers on LinkedIn than on Facebook or Instagram.
No matter your niche, work on building your online presence. Encourage customers to leave feedback and rate your products on social media. Set up a website, start a blog and share your knowledge. If you're short on time, outsource these tasks to freelancers or marketing agencies. As your business grows, consider hiring an in-house marketing team to identify prospects and grow your brand.