I want to put all my time, effort and money into a business that fails…said no entrepreneur ever. Unless you’ve been living under a rock (in which case we recommend you wait a bit before starting a business), you’ve heard staggering statistics about how many new businesses don’t make it. You wonder what went wrong and how you can make sure the same doesn’t happen to you.
In 2018, the Small Business Administration published statistics that said twenty percent of new businesses fail in the first year. After that, only around half make it to five years and one in three survive to the ten-year mark.
That’s because having a stellar product, service, idea or talent just isn’t enough. It’s only one of the ingredients you need for success.
That doesn’t mean you should give up on your dream. At Spade Design, we believe in the power of the human spirit to conquer almost any type of adversity. Plus, we’ve walked new businesses through the steps to launch and helped get established so many times we’ve perfected our recipe for success.
Recipes are unforgettable when they’re made with premium quality ingredients mixed by someone who knows their way around the kitchen. We’ll tell you what you need to get started, where to get it and how to prepare it, then you take it from there.
You are the core. The choices you make in the early stages and the steps you take starting a business either provide a blend of incredible flavors or leave a bad taste. Here we share our complete recipe for starting a business from scratch.
Ingredients for Starting a Business:
Thoughtfully chosen location
Tools and Technology
Naming Your Business
For some small business owners, the name just comes to them. Their muse, their angel, their inner genius whispers it in the night and it’s perfect. If that happened to you, go with that perfect business name and skip to the next section. But for many people, choosing a business name is tough. It’s a critical first step because it’s hard to distill all your hopes and dreams and all you can provide into a few words.
You need a business name that’s unique, catchy and unforgettable. You want to grab attention and, if possible, convey your brand values and offerings. But you also need your name to be so simple no one gets confused. You want something that’s easy to spell so when people search for you online, they don’t have to guess.
If you don’t get it quite right, it’s hard to go back and change things later. Should you choose something abstract or straightforward?
If your widget is something new, should your business name be a made-up word or will that make you forgettable? When you’re starting a business and you need a name, nail it with the following suggestions.
Hire an Expert
A lot of people think when you’re starting a business, you have to do everything alone to stick to that shoestring budget. A bootstrap mentality is a good thing. But if you’re struggling with your business name, it makes sense to hire an expert.
We get it, budgets are important. Spade Design wasn’t handed to us, we built it from the ground up, and that meant everything we could do well ourselves, we had to find time for. But when it wasn’t in our area of expertise, we weighed the cost of hiring an expert against the cost of failure.
You’re the best at what you do. We’re the best at what we do. We can help you skip the guesswork and start your business with a memorable name that sums up everything you stand for and gives you the best chance of success.
Schedule an online consultation to talk about choosing a winning business name.
Understand Naming Basics
Your new business feels like your baby from the moment of idea conception for the rest of its lifespan. Regular parents often take the entire nine months they’re carrying a baby to come up with a name.
They pore through books, toss suggestions around and change their minds over and over. Understand uncertainty is normal. When you’re naming a business or launching a new product, you can go one of three ways.
Informative business names tell you what a business or product does and how that helps the consumer. Anytime Fitness is an example – it’s a gym and consumers can go there whenever it fits their schedule. Mike’s Hard Lemonade is made by Mike, it tastes like lemonade and it contains alcohol.
Unique names involve using a made-up word. If what you’re offering didn’t exist until now, you might want to give it a name that’s not associated with anything else. Think Windex or Google. Unique names grab attention if marketed correctly. However, if you don’t have the budget to help people understand what your name means, they won’t be able to connect the unknown word with what you offer.
Basic business names are simple, but not very creative. A name like Sinclair & Moskowitz doesn’t take a lot of imagination. If those names are well known in your community, that might be a good approach because you already have established trust and social capital. If not, no one knows if you’re running a law firm, a men’s clothing line or a funeral home.
When we work with clients to choose a business name, we start by looking at the big picture. If they have a mission statement, a business plan and market research, we take all that into account. If they’re in the very foundation stages, we help them process by asking questions like these:
- How would you explain your business to someone who has never encountered it?
- What would you want that person to feel in reaction?
- What characteristics do the people most likely to use your products and services have in common?
- Who are your competitors? What do you like/dislike about their business name and other marketing materials?
- Do you prefer a name that’s straightforward, unique or that incorporates specific words or names?
Then, we brainstorm as a team. We have a diverse mix of backgrounds and skills, and we find the key to finding the perfect business name is to tap into that creativity and keep working until everything clicks. Sometimes that takes multiple sessions, but that’s okay.
If you’re brainstorming on your own or with other stakeholders, try to keep things relaxed. When you put pressure on yourself to find the perfect name right away, it stifles creativity.
Instead, just start generating possibilities. Even if it sounds silly and you know it’s completely wrong, you have to start somewhere. Keep at it until you’re tired, then let it rest a while. Circle back after a break, and at some point this amazing thing will happen. Your business name will come together like a picture suddenly snapping into focus and you’ll be ready to move forward.
Before you get too attached to your name, make sure it isn’t already taken. Search the United States Patent and Trademark Office’s database to make sure someone hasn’t already trademarked the business name you have in mind.
We’ll talk in-depth about your online presence in a minute, but for now let’s start with your domain name. Make sure your business name is available as a domain so consumers can find you online.
Complete Business Paperwork
Once you’ve chosen your business name and made sure it’s available, it’s time for the paperwork. First, decide which entity type best fits your business. The choice you make now has a direct impact on the size of your business, how you pay taxes, the amount of profit you receive, your degree of ownership, legal liability and your options for funding. Small businesses choose between the following types:
- Sole Proprietorship – The simplest, most basic business structure. The owner and the business are identical for tax purposes, even though the business has its own name. You’ll file a Schedule C with your personal tax return.
- Parnership – This is a business owned by two or more taxpayers. For example, if you and your best friend start a T-shirt screen printing business in your garage that quickly takes off, that’s a partnership. All you need to start is a verbal agreement.
- C-Corporation – A corporation is owned by shareholders, with an elected board of directors that makes decisions. This type of entity reports earnings and losses on its own tax return. If you qualify for C-Corp status, you might also qualify to become an S-Corp.
- S-Corporation – This tax designation (not business entity type) is sometimes called a “Small Business Corporation.” It lets a company’s shareholders split income and losses on their personal tax returns. It helps them avoid the double taxation that occurs when they’re taxed at both corporate and individual levels.
- Limited Liability Company (LLC) – Small businesses sometimes prefer to become a limited liability corporation, a business taxed like a sole proprietorship or partnership at the state level. Having an LLC protects owners or partners from getting sued or going bankrupt. Income flows through the LLC to owners, so taxes only apply once at the personal level.
Just like it benefits your business in the long run to hire a marketing expert or consultant to start you on the right foot, it also makes sound business sense to talk to a professional about choosing your entity type. Consult a CPA or attorney so you know all the pros and cons and don’t end up needing to make a change later on.
File For Your EIN
If you’re starting out as a sole proprietorship with no employees, you don’t have to get an EIN right away. Still, even though it feels like more paperwork to keep up with and more hoops to jump through, it’s a good idea to have one from the very beginning. You can use it to open bank accounts and apply for credit, licenses and permits and keep business transactions from attaching to your social security number.
It’s easier than it sounds. Apply for your EIN online through the IRS as long as your business is in the United States or U.S. Territories and you have a taxpayer identification number.
Consider Using a DBA
DBA stands for “Doing Business As.” If you’re using a business name different from the owners’ names, check your state’s processes for filing a DBA. For example, if your name is Max Smith and you want to open a mattress store called “Sleep Express,” you will most likely need to file a DBA. Most banks require you to have a DBA on file before you can deposit checks made out to your business.
Register Your Business
Once you’ve settled on your legal business name, chosen your entity type and received your EIN, register your business with the Secretary of State (SoS) where you operate.
Writing Your Business Plan
Here’s the good news – when we work with clients who are starting a business, we don’t tell them they need an extensive business plan. If you’re very detail-oriented, you have a lot of time to plan and you know exactly how you will go about every aspect of starting your business, by all means write it down. But for many people who are just starting a business, that’s a bit like putting the cart before the horse.
Sure, it’s important to set priorities, align day-to-day processes with your overall strategy, set milestones and timelines and identify key metrics. If there are more people involved than just you, you’ll need to specify each contributor’s role. We also stress spelling out how your business stands out from the competition.
However, we’ve found most business owners can accomplish that in about a page. Unless you need a lengthy business plan to apply for financing, it doesn’t take legal jargon or loads of fine print. That type of formal, intimidating document takes time to create, and that’s time you could better spend on actually getting your business off the ground.
Many entrepreneurs that do pour their heart and soul into a comprehensive plan then put it in the filing cabinet where it gets buried. When they dust it off again down the road, they find their business evolved in a way they couldn’t have predicted.
You can post a brief, succinct plan on your refrigerator and in the breakroom. You don’t have to put on your reading glasses to tell if you’re on track. It’s easier to keep your goals at the forefront so you stay pointed in the right direction.
One Page Business Plan Outline
Feel free to cut and paste the following into a document and just fill in the blanks:
People will benefit from doing business with my company because they have this problem: _________
Your Product or Service:
My business will solve this problem by _________________
Our target market is ________ (what types of consumer will pay for your products and services?)
Our Competition is ________.
My company provides more value than the competition because _________.
These are the people involved _________________________.
Their roles or titles are _________________________.
Each person’s responsibilities include __________________.
Customers will discover our products and services through _____________.
We’ll measure the effectiveness of our marketing strategy _____________ (weekly, monthly, quarterly etc.) using ________ (key performance indicators and measuring tools).
In the first year, we plan to make $________. Our expenses will be $________.
Financial projections for year 2 are $ _________. We anticipate the following expenses: $_________
To start our business we need $_______ we will obtain from $______.
After opening we will require $________ for additional expenses.
We currently have $________
Keep things simple. If you get hung up on one of the blanks, leave it and come back later.
Choose Business Location
There are very few businesses where location doesn’t matter. If you’re selling completely online, you may be able to skip this step, but if you rely at all on local traffic, your starting location can make or break your business success. Even if you go to the customer (plumber, builder or traveling circus) your starting point matters.
Every industry has different needs. We’ll address choosing a business location in detail in a later article, but for now, here are a few considerations:
- Where your suppliers and distributors work from
- Whether you have existing partners or employees who will need to regularly travel to that location
- The cost of buying or leasing an appropriate facility
- The concentration of your target audience around that location
- Area competitors
- Complimentary businesses nearby (ones that will bring you traffic)
Take your time researching your options. Learn everything there is to know about area demographics, because you’ll need to start reaching your target audience even before your business opens its doors.
Creating a Strong Brand – Your Marketing Plan
You want to grab attention from the first moment consumers interact with your brand. You need a logo that catches the eye and encompasses everything you stand for. Then when people want to know more, all your other branding materials should effectively communicate what you offer and stand for.
At Spade Design, we launch and grow businesses that challenge the status quo, and define what’s next. Brands that other brands want to be. No matter your business size, industry, or location, a strong, effective, and cohesive brand strategy and design help to convey your company’s quality, credibility, value, and experience. When it comes to marketing and advertising your products and services, those that have strong cross-channel brand consistency hold an enormous competitive advantage.
Travel anywhere around the globe and you’ll be able to instantly identify McDonalds, Starbucks and Nike locations by their logo. Your brand logo is a single, powerful image consumers should automatically link with everything you stand for. That’s why it’s no good to use a cheap online logo generator. You’ll get even less than what you pay for because the right logo is priceless.
Every company needs a website. And not just any website will do. In fact, a poorly designed, flawed website can actually hurt your brand identity and seriously decrease your chances of business success.
The right website design will increase your ranking with search engines, get website visitors to take the action you want them to (convert) and grow your business around the clock. Poor website design will cause your business to drop farther and farther behind on search engine results pages (or never appear in the first place for related terms.)
Confusing navigation and slow load speeds make people frustrated. Cluttered or unattractive layouts make people think your business is hard to understand or cheap.
Don’t Let This Happen
That’s not what you need when you start a business. So often, startups think DIY web design saves money, so they spend hours learning new technology on “free” web builders. They bang their head against the wall with clunky technology that doesn’t do what they want it to.
Eventually, they produce something that’s “not that bad” and reason no one is really looking at their website this early in the game. When they start getting more traffic, they reason, then it will be worth investing in professional web design.
But they never get that traffic. They get busy in the day to day running of their business. Maybe things go fairly well, but their website doesn’t seem to generate any leads or income. They figure it’s not worth it to invest time and money in updating since it’s not doing them any good. Instead, they work harder drumming up business, making sales calls and chasing more success.
They never know the revenue-generating machine their website could be. They exhaust themselves chasing leads that could come in automatically if their website had been built correctly in the first place. A bad website will always cost you.
Choose This Instead
Businesses operate in a digital landscape, and that’s not going to change. Business owners who understand that harness the internet’s powerful ability to connect with their target audience like no sales team on the planet could do in person. They also understand traditional web design is dead and opt for growth-driven design instead.
They hire a pro from the beginning. Spade Design tailors every aspect of your web design to connect with the people looking for you, then to take them by the hand and walk them toward conversion. After, we continue to nurture those relationships so you become their favorite brand and they become lifetime advocates.
You don’t waste time and money on marketing to everyone on the planet. There’s no more chasing leads or knocking on doors. Instead, your business is perfectly positioned to be there at the exact moment consumers search for you.
Then, you offer resources that engage them at their point of need. Your website offers the information they’re looking for. The whole time you’re able to focus on growing your business.
Time and time again, clients say what they paid for web design was a drop in the bucket compared to the traffic and revenue their website generated. We’re available for a consultation if you’re starting a business and you’d like to experience the same.
Another reason businesses fail to see online results is they don’t realize things are constantly changing. They want to pay someone for web design, then be done with it. After launch they think once their website looks good, functions properly and displays their correct business information, they should be able to just leave it alone for a few years.
Usually, they have similar misconceptions about search engine optimization. They hire someone to “do SEO” to their website. That person or firm tinkers behind the scenes a bit and their search engine ranking improves. They pay a big bill, then again hope their website will continue to show up at the top. The problem is, the online landscape is constantly changing.
Consumers, too have changed. They don’t want to be sold to. If you use the pushy, spammy sales tactics that worked in the past, you’re not just wasting time and money, you’re alienating the people who might otherwise become your best customers.
They’ll block you, delete your messages without opening them, unfollow and unsubscribe. And they’ll tell their friends and family members about their unpleasant experience, poisoning their point of view before they’ve even given you a chance.
So when you’re starting a business, how do you engage your target audience and stay relevant in a constantly changing online landscape? We help startups succeed through content marketing.
What is Content Marketing?
Anything you create that’s useful to your audience and related to your business is content marketing. Here are some examples:
- Blog articles
- How-to guides
- Social media posts
When you optimize your business blog with articles your audience can relate to, it helps you come up for more related keywords when consumers search. They are more likely to find you, and they see you as helpful and an authority. In the same way, when you offer events, you give them experiences. Social media posts help them interact with you and better understand how your values align with their own.
Why Businesses Fail at Content Marketing
Creating all that content takes an enormous amount of effort. Either you pour your personal time into it, or you hire someone to do it. Business owners often come to me and say, “I wrote blog posts and nobody read them,” or “I have a Facebook for my business, but I never get any likes.” Unfortunately, business isn’t Field of Dreams. Just because you build it doesn’t mean they will come.
There’s just too much of it out there. For your article, YouTube video, Instagram feed or any other content marketing to be effective, you have to offer something no one else does. It has to be better and more meaningful than what the competition provides. And it needs to be fresh, relevant and personal.
Businesses that fail just throw it out there. For better success, you need a content marketing strategy.
We help business owners stop wasting time and money creating the wrong types of content. When you schedule your online consultation, ask about how we can help your content marketing generate traffic and increase conversions.
Social Media Marketing
From the beginning, you can start growing your audience through social media marketing. Pull out the research you’ve completed on demographics. Review what you know about the people most likely to use your products and services. Identify which social media channels they use most. Then create thoughtful posts that are of value to those people.
Don’t just post sales. A good rule of thumb is to offer content that is 80 percent useful, engaging and helpful and only 20 percent directly related to peddling your products and services.
Start building your email contact list from day one. One of the benefits of compelling web design and user-centered blog content is that you can use both to encourage consumers to choose to receive email from you regularly. Once they give permission to email, don’t abuse that privilege.
Email marketing done right brings a huge return on investment. One study said for every dollar business spend on email campaigns, they get back an average of $44. But in order to work, email marketing has to be just as timely, relevant, personalized and helpful as all your other material. And like everything else, it takes time. When you’re starting a business, look into email marketing automation to simplify growth.
Business Cards and Other Materials
Even though it’s a digital landscape, you’ll be surprised how many people will still ask for your business card. What you hand them might be the first (possibly only) physical interaction they’ve had with your brand. You still need a business card because it’s a direct marketing tool that makes a big impression.
Stay consistent across all assets of marketing and advertising. Your letterhead, website, social media page and typography should all communicate the same message.
You’re starting a business to hopefully make a profit, but first you’ll have to invest. In the beginning stages it feels like money is everything. You have to obtain it, you’ll need to spend far more than you’re comfortable with, you have to document everything about it and if you lose it, there’s no getting it back. Let’s talk about a powerful philosophy we’ve discovered, then we’ll touch on bank accounts, bookkeeping and taxes.
As a startup, you want an income-generating machine. But what you start with seems like a money-hungry monster that never gets full. We tame the monster by putting profit first.
Entrepreneur, author and speaker Mike Michalowicz made and spent millions, riding a wave of rising and falling success until one day he committed to discovering a formula that would lead to success every time. His resulting book Profit First shares his insights and methods, and has been the go-to for university business course professors and companies of all levels around the world.
Before I ran across his book I budgeted like most business owners do. I made as much money as I could for the week, month or quarter. I paid all my expenses. Anything that was left I counted as profit. Sometimes I even got a little bit of a paycheck for myself.
After I read Profit First I’ll admit I was a little skeptical. I love positive outlooks and innovative ideas. I’ll pay attention any time someone offers a unique point of view or better way to reach goals. But usually when it sounds too good to be true…
But the reviews and results surrounding Michalowicz’s work were compelling. Businesses of all sizes reported a cash flow revolution, so we gave it a try at Spade Design. That was years ago, now we pass the knowledge forward to our clients. Here are the basics, but we highly encourage getting a copy of the book for yourself.
Get Out of The Survival Trap
If you’re starting a business just hoping to tread water long enough to get out of the hole, it’s time to adjust your mindset. The problem is, life tends to fill up whatever size container you have available.
When you’re just starting with a limited budget, you’ll do everything you can to keep expenses within your budget. As your business grows, expenses increase too.
You start with the hope if you invest enough of your time and money, you’ll make more and the workload will ease up. New accounts and opportunities come along, but so do new bills. Somehow you get stuck forever treading water.
The GAAP (Generally Accepted Accounting Principles) offers the following formula for calculating profit:
Sales – Expenses = Profit
The problem with that is, if you’re always juggling expenses in the hope of one day seeing a return, you don’t make good business decisions. You take on or put up with bad clients because you feel like you can’t afford to do otherwise.
Maybe you cut corners because you worry if you don’t, you might not have enough left over at the end of the month. You might even make decisions that get you in serious trouble like not paying taxes or filing for permits.
When you do, you get stuck in the survival trap.
Flipping the Formula
The Profit First system flips the formula so it reads like this:
Sales – Profit = Expenses
The numbers are the same, but your mindset shifts drastically. And it’s more than just a mind trick. With the first formula, your goal is to earn as much as possible and spend the bare minimum.
I don’t know about you, but I didn’t get into business ownership to live paycheck to paycheck. I love what I do, but I also intend to get paid, and paid well.
When we work with startups, we offer advice on setting up bank accounts according to the Profit First System. Then we help them determine Target Allocation Percentages based on their business. After that, they allocate funds from accounts they’ve set up for income, owner’s pay, operating expenses, profit (savings) and taxes (also savings.) It’s revolutionary, and it will work for businesses of any size, in any industry.
We can help you stop juggling and start enjoying a profit when you schedule an online consultation today.
A Note on Bank Accounts
Whether you choose the Profit First system or go with something else, there should be a clear line between your personal finances and that of your business. Too many business owners start without that line, and somehow it never gets drawn.
They start using their personal checking account for expenses. Then they ask customers and clients to make checks to them in their name, not the business name so they can deposit in a personal account. Later, whether they’re making a mortgage payment or paying vendors, everything comes from the same source. Bookkeeping becomes almost impossible and calculating taxes is a nightmare.
Don’t Make This Tax Filing Mistake
Speaking of taxes, we have a builder client that sells literally hundreds of new homes a year. They have some really great programs for helping people in their region get their finances in order and qualify for a home mortgage.
One of their buyer personas is a young entrepreneur who has been running his or her business for a while and now wants to buy a new home. Their business is booming, they have plenty of money and they want to buy a large house for their family. But they can’t get a loan.
The problem is, they’ve been writing off every expense they can come up with for years to reduce their taxable income. When they apply for a loan they can’t show the bank evidence of what they make. It looks like they earn very little.
It’s a common practice – nobody wants to pay any more taxes than absolutely necessary. But it could come back to bite you if you need a loan for your business or personal expenses.
Don’t claim personal expenses on your business account. Set up a separate bank account for taxes and make regular deposits you don’t touch until that amount comes due.
Tax Planning When Starting a Business
There’s nothing we’d rather not talk about. But since the title promises a complete recipe for starting a business, we’d better at least touch on tax planning. Just like no one ever starts a business planning to fail, we’ve not run across anyone who starts a business because they look forward to tax planning. We’d rather do just about anything else, which is why we turn things over to a tax professional.
A good accountant does more than just keep you out of hot water with the IRS. He or she can offer insights on investing and cash flow that pay off many times over. If you’re starting a business, that might seem like one more service you can’t afford. It’s worth the investment, because if you start with the right professional, he or she can offer advice that helps you grow.
Depending on what type of entity you choose for your business and where on the planet you call home, you might have to pay the following types of taxes:
- Gross receipts
It’s a lot to sort out on your own, and if you mess up the consequences could be devastating. It’s better to start with an advisor you can trust.
Payroll Made Easy
When you’re starting a business, you’re constantly changing hats. You need superhuman abilities to keep up. Since most people don’t have those, the next best thing is to use automation to do some of the work for you.
If you’re starting a business that has employees, they expect you to pay them, and payroll can be a headache. Online tools make life so much simpler. We use Gusto, because frankly, they’re awesome. And on a side note, they’re the perfect example of good content marketing because they offer a huge array of resources helpful to business owners.
Gusto is a cloud-based company that simplifies payroll, benefits and other paperwork related to managing employees. We dig them because they are an all-in-one solution for tasks like these:
- Sending offer letters for new hires
- Walking employees through new hire paperwork and getting them set up on payroll
- Calculating and filing payroll taxes
- Tracking time
- Auto-deducting benefits
- Offering team surveys for a workplace that’s constantly improving
- Providing expert human resources support for all your new business questions
For us, one of the biggest benefits is how Gusto keeps up with regulation and compliance issues. We have locations in multiple states, and we serve clients all over the globe. I don’t have time to stay on top of constantly changing regulations at the local, state and national levels. Gusto does it for me.
Other Tools and Technology You Shouldn’t Start a Business Without
Starting a business is as complicated as this article is long. When you notice a pain point, look for technology that makes it easier.
Note taking apps – Take notes for your blog and social media content. Create a swipe file you can pull up during your next brainstorming session. Note what you see your competitors doing. We like Evernote for this. The free version will probably work to begin with, and even the Plus Plan is affordable.
Real-Time Messaging – Organize your conversations with all team members in one place with an office messaging app. We use Slack. It’s a great choice because it syncs to multiple devices and allows users to integrate with other productivity apps like Google Calendar and Evernote.
Watch Your Business Grow
You’re starting a business because you love what you do, and you can do it better than anyone out there. When you have all the key ingredients, you set yourself up for success. It’s expensive, stressful and exhausting, but starting a business is also one of the most thrilling experiences out there.
When you need advice or assistance along the way, we’re here to help. Save this article by bookmarking it now so you can refer to it later. Then schedule your consultation to talk about how we can help provide some of the quality ingredients you need to see your business growth exceed even your wildest expectations.
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