Question

Assume that you are planning on opening your own new business. Now, consider the structure of a corporation and the financial implications of incorporation. If you were to start this new business venture, what factors would you need to take into consideration to determine if you want to incorporate or not? Explain your rationale, detailing the specific effects or ramifications for your particular business.

Answer 1

1. Conduct a personal evaluation

“Know yourself, and work in a job that caters to your strengths. This knowledge will make you happier.”

– Sabrina Parsons

Begin by taking stock of yourself and your situation:

• Why do you want to start a business? Is it money, freedom and flexibility, to solve a problem, or some other reason?
• What are your skills?
• What industries do you know about?
• Do you want to provide a service or a product?
• What do you like to do?
• How much capital do you have to risk?
• Will it be a full-time or a part-time venture?

Your answers to these types of questions will help you narrow your focus.

This step is not supposed to dissuade you from starting your own business. Rather, it’s here to get you thinking and planning. In order to start a successful business, passion alone isn’t enough.

You need to plan, set goals, and above all, know yourself. What are your strengths? What are your weaknesses? How will these affect day-to-day operations? You could conduct a SWOT analysis on yourself to figure this out.

As you get started, your business will likely dominate your life so make sure that what you’re doing is stimulating and challenging, but not completely outside of your expertise. You’re going to be in it for the long-haul. Use what you learn from the SWOT analysis to think through what you want your life to be like, not just what you want from your business.

Some good questions to ask yourself include:

• What would you do if money wasn’t an issue?

• Is money really important? Or rather, is making a lot of it really important? If it is, you’re probably going to be cutting out a number of options.

• What really matters to you?

• Do you have the support of your family, especially your immediate family? They may have to make sacrifices at the beginning, so it’s important to have them behind you.

• Who do you admire in business? Maybe there’s even someone in the industry you’d like to go into. Why do you admire them? What are their likable traits? What can you learn from them?

Answering these questions (and many more) about yourself and your abilities isn’t necessarily going to ensure you’re successful, but it will get you thinking about your goals and about what motivates and inspires you. Use this time to make sure that you are matching the business you want to start to your personal aspirations.

2. Analyze your industry

“The more you know about your industry, the more advantage and protection you will have.”

– Tim Berry

Once you decide on a business that fits your goals and lifestyle, evaluate your idea. Who will buy your product or service? Who will your competitors be? At this stage, you also need to figure out how much money you will need to get started.

Your “personal evaluation” was as much a reality check as a prompt to get you thinking. The same thing applies when it comes to researching your business and the industry you’d like to go into.

There are a number of ways you can do this, including performing general Google searches, speaking to people already working in your target industry, reading books by people from your industry, researching key people, reading relevant news sites and industry magazines and taking a class or two (if this is possible).

If you don’t have time to perform the research or would like a second opinion, there are people you can go to for help, like government departments and your local SBDC

3. Evaluate your target audience

Validate your business idea by creating a pitch page.

To determine how attractive your prospective market really is (your own desires aside for the moment), we suggest doing a market analysis.

It will guide your research as you think about:

• How urgently do people need the thing you’re selling or offering right now?
• What’s the market size? Are there already a lot of people paying for products or services similar to yours? Have you honed in on who exactly your target market is? Being specific will help you focus your marketing message and investment.
• How easy is it (and how much will it cost you) to acquire a customer? If you’re selling enterprise software, this may require a significantly larger investment than a coffee shop.
• How much money and effort will it cost to deliver the value you would like to be offering?
• How long will it take to get to market? A month? A year? Three years?
• How much up-front investment will you need before you can begin?
• Will your business continue to be relevant as time passes? A business that repairs iPhone X screens will only remain relevant so long as the iPhone X sticks around. If your business is only relevant for a specific period of time, you will also want to consider your future plans.

If you like, you can even take things a step further and consider the consumer needs currently not being met by businesses in the industry. This is a good time to take a look at potential competitors. And remember, the presence of competitors is oftentimes a good sign! It means that the market for your product or service already exists, so you know that you have potential customers who are willing to spend money on your product or service.

While you’ve got the time, learn as much as you can about your competitors, about what they provide to their customers, how they attract attention, and whether or not their customers are happy. If you can figure out what’s missing before you even get started, your job will be made that much easier when you do finally set up shop.

4. Set up your business

Realistically, registering your business is the first step toward making it real. However, as with the personal evaluation step, take your time to get to know the pros and cons of different business entities.

If at all possible, work with an attorney to iron out the details. This is not an area you want to get wrong. You will also need to get the proper business licenses and permits. Depending upon the business, there may be city, county, or state regulations as well. This is also the time to check into insurance and to find a good accountant.

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