When Should You Set Up Your New Business?
You want to do things right, but you don’t want to do too good of a job. That may sound silly, but you don’t want to spend so much time perfecting everything that you never ship a product or never bill a client.
The top factors that you can control for a successful startup are execution and timing. If you’ve identified a problem, validated the need, and established a solution, then the time to execute is now.
Have your product ready to sell before you worry about making it official. Put off registering the business, opening a new bank account, setting up billing, worrying about patents etc. until you have something that is worth paying for.
Once you’re confident you have a product/service ready to sell, you’ll need to research and setup up the systems to support your business. This includes accounting, small business administration, and other technical aspects critical to managing and servicing clients.
Register the Domain
These days, setting up your small business website is probably the most important way to attract potential customers. It’s worth spending some time to establish a domain name (http://example.com) that you like, and that represents your business well. Do some research, make a list of domain names you like and why, avoid dashes, numbers, etc. Try to register a .com if possible – it looks more professional.
Choosing the right registrar is a topic of debate. Here at Intellitonic we prefer Amazon Route 53. It’s a robust, professional option, cost competitive, and they don’t try to upsell or advertise loads of less-than-useful services and add-ons.
Pro Tip: You may want to do this before you decide on a business name or product name – you don’t want to establish your business before doing research on other organizations who may have a similar name.
Register the Business
You should register your business. In general, this does things like protect your personal assets and keep them legally separate from your business.
Consider registering your business in a state other than the one you reside in (Nevada and Delaware are popular options). There may be legal/tax benefits to registering elsewhere (e.g. no state income tax on wages), but there disadvantages to registering in a foreign state as well.
Places to register your business:
- With the state – each state requires roughly the same information. You can register a Washington State business online at http://bls.dor.wa.gov/file.aspx
- As an LLC, unless you plan on taking on investors. Here’s more information on business structures
- With the Secretary of State
- With the IRS (you’ll receive a Federal Employer’s Identification Number – FEIN)
- With your local city/county
Small Business Banking
You’ll want to open a new bank account to keep your business assets, accounting, and budgeting separate from your personal affairs. Explore your options; I would recommend choosing a local credit union over a bank.
Make sure whatever financial organization you choose has robust online/mobile banking options. Some features you may want to look for:
- An app to deposit checks with your mobile device
- The ability to transfer money electronically
- The ability to issue a paper check from the bank
When registering for the bank account, keep in mind who should have access to the account, who gets a card, whether you want to open a line of credit, etc. In the early stages, it’s simple to have a single person controlling finances, paying for services, reconciling expenses, etc. It is very helpful for that person to keep the routing number, account number, and card handy for pay taxes or other accounting tasks.
Finance and Accounting
Even if you have deep knowledge of small business accounting, it’s worth signing up with an accounting service in the early phases. It will help you track and reconcile transactions with the business bank account, give you a quick picture of the current state of the business, provide infrastructure for billing, and ideally will integrate with an invoicing service.
We have been using Xero and so far have been quite happy with it. When we establish services with a client, we create an invoice in Xero, which syncs to separate invoicing services. This sends out branded invoice notifications and reminders and provides simple payment options (online with card or bank account, or printable invoice to mail in with a check).
Depending on the volume of transactions you handle, it’s worth reviewing the accounting system at least once a week. Spend this time:
- Reviewing and reconciling transactions
- Reviewing and approving any draft/recurring invoices
- Scheduling meetings with accounts that have recurring contracts that are ending
- Reviewing and running payroll
- Handling payroll liabilities (state/federal taxes, B&O, L&I)
Seriously consider bringing on the services of a bookkeeper. In the early stages, you probably won’t be contracting them more than 2 hours/month, and their expertise and feedback will be worth it. Keep in mind the amount of time it takes them to assist you will depend directly on the complexity of your accounting system, volume of transactions, etc. It may be worth setting up some consulting time with them during the initial setup of your accounting system and chart of accounts. Overall, keep it simple!
There are a few things you should understand and consider before hiring your first employee:
- The US Small Business Administration has a good list outlining how to hire your first employee
- Understand the tax liabilities associated with hiring
- Familiarize yourself with Federal Income Tax Withholding
- Familiarize yourself with federal wage and tax statement
- Familiarize yourself with your state tax obligations
- Look into your local “Business and Occupation” tax
- Look into your local “Labor and industries” obligations
- You’ll have other payroll liabilities (Federal 941, Form 5208, Unemployment, etc) – again, Xero does a nice job of summarizing these and providing online payment options
Do not start with a generic free gmail account – set up email under your business domain immediately. Additionally, even if you, or someone on staff is comfortable with managing email systems, opt to use a paid service to support your organization’s email needs. The amount of overhead you’ll save not maintaining your own email system is worth it.
I highly recommend G Suite (the recently renamed Google Apps for Business). It’s a suite of services provided by Google that you associate with your business/domain name that provides email under your domain (email@example.com), online calendaring, office suite (docs, spreadsheets, slides), shared online storage, etc. with a powerful permissions system. The pricing is $5 per user, per month (ex: 5 users = $25/mo), and is well worth it.
Email is very powerful, but here at Intellitonic, we are fans of Slack. It’s free to sign up, and you probably won’t need to think about paying for it until an archive of your conversations becomes important (the free version caps the archive at 10k messages). Paid plans start around $7 per user, per month.
If you decided to go with G Suite, this is essentially covered by Google Drive, an online file storage system. In my experience, people either love or hate Google Drive, but that is always associated with how well the drive is organized.
For your business drive, establish a rough folder structure that drives organization and enforce it. Start with a simple folder structure like:
Share the top folder (“YourCompany/”) with everyone in the company, and as you create subfolders, they will inherit those permissions. Defining this organization early on will prevent a lot of headaches down the road (hundreds of top level folders, multiple versions of files in different folders, “misc” folders full of poorly named files).
Before your first customer, or after making changes to your on-boarding process, practice the process to get a feel for the customer experience. Invoice yourself for $1 to a personal email account, pay it with your credit card, review all of the communications and receipts that are a part of this process.
Pay close attention for any typos, issues with branding, steps that are too complicated or could be cut out. Think about situations where the customer has a question or requires additional information – who should they contact and how will they find that contact information? Do you support recurring payments? Think about the information you want to collect early from the customer to support this process (billing contact information, your main contact for the client, emails, phone numbers).
It’s important to keep this process professional and simple. Anything to improve and simplify the interaction with your client has with you is usually worth the cost several times over.
It’s tempting to look at shiny new services to address all the needs of your organization, but I am a proponent for the least number of solutions/technologies to serve the needs of the business as possible. In the early stages, you probably won’t need a CRM to track your clients and customers – it will probably add cost and complexity without much benefit.
Instead, I recommend starting with a spreadsheet to track potential customers, current customers, and your responsibilities associated with them. When that starts to become too much to manage, then evaluate your CRM options and be objective about the benefits they will provide you and your team.
Small Business Marketing
Marketing solutions aren’t universal and will depend on your target audience, the nature of your product and how you prefer to do business. This should play into your development of a marketing strategy: where will you market, and how? Who is your audience? Where is your audience (reddit, social media, blogs)? Will your business rely more on inbound or outbound sales?
Another vector to consider is networking in your local community. Look into events happening at the Chamber of Commerce or other business and community groups. Here in Bellingham, we have Sustainable Connections, an independent group of businesses focused on an economy of sustainable practices. Look for similar groups in your area and attend their events.
As we mentioned before, you should stick to your core business. If digital marketing is outside of your scope, consider outsourcing. We are happy to talk business and provide free proposals.
The steps to starting a business can seem daunting. However, doing it right from the start can not only help your business be more successful more quickly but prevent you from having to back-track or pay additional fees.
From one small business owner to another, best of luck!
Jared Keller is a founding member and previous VP of Engineering for Conversica, an organization focused on sales automation software powered by machine learning.