1. Open a checking account. The moment you make the decision to go in business for yourself, open a new checking account. Decide how much you are willing to invest (lose) giving this business idea a shot. Fund the account with that amount. By the way, your accountant is going to love you because you will not be commingling personal and business funds. Also, until you setup an accounting system you have a basic way to keep track of expenses and income.
2. Decide upon legal structure. There is no right answer for this step. I’ve been a sole proprietor, a member of an LLC and probably will have S and C corps before my career is over. This is the time to call on the professionals in your circle. Discuss the advantages and disadvantages of each with your accountant and attorney. Then, you can make an informed choice; a choice, by the way, that is not etched in stone.
3. Decide on an accounting system. If I was doing it over again I’d probably use something like FreshBooks.com and OutRight.com. Again you’ll want to consult with your professional support to decide on issues like; calendar year versus fiscal year; cash basis versus accrual accounting methods and other details that matter but can be worked out quickly with professional assistance.
4. Sell something. I’d actually be totally okay with this being your step number 1. There is really nothing wrong with selling first. I’ve read enough business success stories to know that getting out there and selling is the key to success. In the early days, when the founder of Sam Adams brewery wasn’t quite sure what he should be doing, he took a six pack of beer and walked into six pubs and let the bartender try the beer. It always resulted in increased distribution.
5. Spend about 10 seconds putting together basic marketing materials. I am talking about the very basics like a web-site and some business cards. It might take more than 10 seconds but honestly if you spend more than a day on this at this point in your business’ life, I think you are making a mistake. Later, when business is booming, you can hire a designer to clean up and improve upon what you’ve started.
6. Sell something else. The life blood of any business is revenue. Unless you’ve had past business successes and lots of capital (venture or otherwise) behind you, selling will be your #1 job. Early on, you will very likely sell the wrong things at the wrong prices. It’s okay as long as you protect the downside and don’t let any one transaction put you in a position that could put you out of business.
7. Decide what you should be selling. Now that you have sold a few things, decide if what you are selling is actually what you should be selling. I realize this may sound silly on the surface, but I learned early on what I could sell profitably and what I could not. Whatever your business is, you need to analyze your products and services mix often. Products that are profitable and awesome for your business today could be putting you in the red a year from now.
Once you have an ongoing concern, make sure to look at your books a minimum of once a month. I’m not talking about a glance at the financials. I’m talking about a solid hour or two of uninterrupted time figuring out what is working and what is not. Once a year, I look at all our monthly expenses and commit to cutting them by 20% no matter what. It’s never been difficult to do so.
Obviously, every startup will be different but I suspect the steps that work for you will be approximately the same. Did I miss any important ones?