5 Things You Need to Know Before Starting a Business
Sep. 9, 2019
Starting a business doesn't happen overnight. It’s a process that takes time, money and hard work. If you’re thinking about starting a business, or have recently started a business, my hope is that this article serves as a resource to you.
The Importance of a Business Plan
A business plan is a blueprint for your business and will ultimately help you determine the feasibility of your idea. Writing a business plan requires in-depth research to understand who and where your customers are, the financials and how to market and sell your product or service.
One of the most important parts of the plan is identifying your competition, weaknesses and potential problems – these are things that every business has, but the purpose of a business plan is not to discourage you, but rather to help problem-solve and anticipate issues.
A complete business plan will be able to answer the question: “Will my business be successful?” Additionally, if you are looking for funding, most banks and investors will require a business plan. If you’re looking for a great resource for writing a business plan, try the Small Business Administration’s tool.
The Legal Forms of Business in Tennessee
There are four basic types: Sole Proprietorship, Partnership, LLC and Corporation. The TSBDC recommends professional legal and financial advice from a lawyer or CPA on which you should choose. A counselor at our Center can also help with this process, but ultimately the decision is yours and you should have all of the information before deciding. Do your due diligence and research every option. As your business evolves and grows, it’s not uncommon to change to another formation, although the process can sometimes be lengthy or costly.
Additionally, depending on your gross sales, there are different levels of business licenses and exceptions for different industries.
You Will Have Business Taxes
With just a few exceptions, all businesses that sell goods or services must pay the state business tax. The TN Dept. of Revenue outlines in full detail the different types of taxes, classifications and tax rates.
You will also have self-employment tax and will need to file Schedule SE (Form 1040) if your net earnings from self-employment are $400 or more. The IRS explains what self-employment tax is, who must pay and how to pay.
Who Should Be On Your Team?
Your team should be made up of five people: an attorney, an accountant, an insurance agent, a banker and a business counselor. These should be people you trust and respect. Not every business needs all five from day one, but when the times comes, it’s best to have already cultivated a relationship and not scramble for who’s available. At the TSBDC, we live by the quote:
“If you think hiring professionals is expensive, try hiring amateurs.”
It’s common for entrepreneurs to want to be in control of every aspect of their business. The truth is, no one is an expert at everything. It’s important to know when you should outsource a job function. For example, should you be spending hours upon hours each week building your own website, or is that time better spent managing the operations of your business? A cost-benefit analysis is crucial in this situation, and decisions like these are imperative throughout the life of the business.
Resources Available to You
Locally, there are a handful of resources that are available to small businesses and startups. Each of the four organizations listed below offers business counseling at no cost. Some of their programs do have nominal fees. For more information, please reach out to each organization directly.
- SCORE is a national organization with a local chapter in Chattanooga. They assist for-profit small businesses as well as nonprofits by providing access to mentors and training seminars. They assist through the life of the business (startups and mature businesses).
- The INCubator at the Hamilton County Business Development Center offers a three year business development program and has graduated more than 500 businesses into the local economy. Inside its walls today, companies are innovating in hot industries including futuristic medical uniforms and irresistible hot sauce.
- LAUNCH Chattanooga offers a Business Entrepreneurship Academy, a 10-week course aimed at adults interested in starting a business. LAUNCH offers business training, support (counseling) and affordable resources to underserved entrepreneurs.
- The Company Lab (CO.LAB) is a startup accelerator that supports entrepreneurial growth. They offer wayfinding meetings, Co.Starters programs, pitch competitions and accelerators for a variety of industries (health tech, consumer goods, food and beverage, veterans and more). They also offer office hours where you can meet with lawyers, accountants, designers and more.
- The Tennessee Small Business Development Center (TSBDC) offers assistance to for-profit businesses by providing counseling, training seminars and market research. Businesses can receive assistance at any point (startup or mature), and the business seminars are open to the public; topics for seminars include: e-commerce, social media marketing, bookkeeping, government contracting, human resources and much more. Counseling is confidential and can cover a variety of topics, such as: finances, marketing, operations, expansion, exporting and anything in-between.
This article was written by Madison McCann, an employee of the Tennessee Small Business Development Center. For questions regarding topics covered in this article, or other business-related topics, please contact Madison at email@example.com or 423.756.8668.