Are you ready to start up your business idea and become an entrepreneur? Before you can call yourself a small business owner, you’ll want to make sure your business solves a real problem, has a plan and can get funding. To get you prepared, follow these six steps to turn your startup idea into a thriving small business in Connecticut or Rhode Island. When you’re ready, Savings Institutes Bank & Trust’s business team can help advise you on how to jump start your small business ownership dreams.
1. Develop a Business Plan
Before kicking off any startup business, you’ll need a realistic and balanced business plan. Start your plan by performing market research. Begin exploring the industry of your prospective business with a competitive eye by pinpointing your potential customers and already established competitors in the industry. The goal of your market research should be to find the unique advantage you’ll leverage.
Once you’ve formed the goals for your business, start putting together your business plan. The Small Business Administration (SBA) offers helpful advice on what to include in your business plan. Then, you’ll want to connect with a qualified small business advisor who can review and help you refine your small business plan. A solid business plan is crucial to the initial setup of your business as well as the growth phase.
2. Estimate Your Business Expenses
As the saying goes, it takes money to make money. There are several paths you can choose to reach your goals. However, some come at a higher risk than others. Before calculating your start-up costs, the SBA suggests you identify your small business as one of the three following types:
- Brick and mortar
- Online business
There are a variety of factors to consider across the three types of businesses. These factors include, but are not limited to: office space, equipment, communication tools, salaries, marketing strategy, and printed and digital material.
Capital expenditures and one-time payments will also play a role in financing a small business. For example, you may need financing for inventory or commercial property or vehicles, depending on the nature of the company you're pursuing.
3. Financing Options for Your Small Business
Most small businesses don’t have access to venture capital or angel investors and choose between self-funding their business or applying for a business loan. Here are the key things to keep in mind when deciding between self-funding or borrowing to launch your business:
Self-Funding Your Business
The SBA defines self-funding as taking on all financial risk yourself. If you’re looking to bootstrap your own business, you’ll need to tap into your own money from a checking account, savings account or 401k. Some entrepreneurs also choose to fill in gaps in funding by borrowing money from family or friends.
Keep in mind that when you self-fund, you take on all of the risks personally. If this is something you're considering for your business, it's important to add the costs of fees and damages that could come unexpectedly in the early years of your business into your budget. Consider opening a business credit card
for these expenses.
Borrowing Money to Start Your Business
Another option to launch your startup is to get a small business loan. Small business loans give new entrepreneurs the opportunity to start a business that they might otherwise not be able to self-fund. Just like your business plan, it’s smart to meet with a qualified small business advisor to discuss funding options. There are multiple resources available, including the Community Economic Development Fund
in Connecticut as well as Small Business Development Centers in Rhode Island
. Prepare for this meeting by knowing your current credit score, business plan, list of expenses and financial projections for at least the next five years.
4. Determine Your Legal Business Structure
Before you register your business in Connecticut or Rhode Island you'll need to determine the most appropriate legal business structure: LTD, PC, Corp. or LLC. How you structure your business will affect how much you pay in taxes, the paperwork you will need to file and your liability.
Common business structures are sole proprietorships, partnerships, limited liability companies (LLC), Corporation C, Corporation S, Corporation B and Corporation – nonprofit. You’ll need to do thorough research and compare the general traits of these business structures for CT and RI. Talk to a financial or business advisor before you make your decision. It’s important to know that it’s possible to switch to a different legal business structure in the future, although this differs by location.
5. Choose a Location for Your Business
Whether you’re a physical business, a service or an online business, a physical location is needed for necessary licensing and permits. Choose wisely, because your business location determines how much you’ll pay in taxes, what federal and state licenses you’ll need, as well as permits and regulations that will apply to your business. Associated fees will vary based on the nature of your business, location and governments. The SBA provides a list of general federal licenses and permits
. Begin checking if any aspect of your business activity is listed here, then check with the federal agency to see how you should apply. Use the CT.gov License Lookup
tool to search for related licenses for Connecticut and the Rhode Island Business License
page for Rhode Island. Business activities commonly regulated at a state level include auctions, construction, dry cleaning, farming, plumbing, restaurants, retail and vending machines.
6. Open Your Business Bank Accounts
Before you begin spending or accepting money on behalf of your small business, you’ll want to open a checking account for your business. There are many benefits to business bank accounts, including separating your personal and business finances and business-specific Online Banking
tools to help manage cash flow and record keeping.
To open an account for your new business, you'll need to provide proof of your business identity and address, as well as proof of identity for all responsible individuals of your business. You'll also need your Employer Identification Number (EIN)
(if you're a sole proprietor then this is your social security number).
Starting a business can be exciting and scary, but if you have solid plans in place, you can achieve your dreams. If you have questions, business professionals at Savings Institute are here to help. Contact us
today to set up an appointment.