Business Insights

How to start and fund your business

Maybe you’d like to open a coffee shop down on the corner, complete with visions of saying ‘Hello’ to regulars every morning. Or perhaps you want to buy into a successful franchise. Or even build a better mousetrap, manufacture it, and sell it to the world.

When you’re ready to start a business, what you need is a plan of action to realize your dream and start your business.

“We’ve helped all kinds of different businesses succeed,” said John Anderson, head of Small Business Product and Strategy for Consumer Banking. “And all those thriving customers have one thing in common. They take care of business—literally—in the planning stages.”

The better you plan, the better your odds of successfully launching a business. Here’s a list of suggestions based on our experience of working with countless business owners. Follow these and, along with a little determination and a lot of hard work, your path will likely prove a far easier one.

Business idea

It’s basic, yes. But having a clear understanding of your proposed business is critical, especially when it comes to the specific market you intend to serve. That means carving out a unique niche, defining for your customers the need your business meets for them and avoiding the temptation to be everything to everyone.

“One critical mistake is opening a ‘Me Too’ business when facing other, entrenched competitors,” Anderson said. “If you’re opening an antique store or restaurant, how will you be different? What need in the market isn’t being filled? Those are vital questions to ask at the start.”

Once you have your answer, the real work begins.

Conduct market research

Opening a business involves far more than putting up a “Now Open” sign and waiting for the customers to arrive. Knowing your market is how to make sure you attract customers in the first place.

Market research begins with understanding the customer, not just who they are but what they truly want. Among the questions you’ll want to answer:

1. Who is my customer? Know the age, gender, location, income, and education of your core customer. That helps you understand his or her motivations to buy.
2. What problem is my customer trying to solve? You’re not just selling a product or service but solving customer problems.
3. Are customers satisfied with their current options? If not, that’s where your business comes in.
4. What is their purchase behavior? How far will they drive? How price-driven are they and are their interactions more transactional or relationship-focused?

Once you’ve defined your customers, you’re ready to begin crafting your business plan.

Write a business plan

Every good journey deserves a map— a detailed overview of what to expect and destination.

The best business plans aren’t just pro forma, gathering dust once the grand opening takes place. Instead, your business plan should be a living document, periodically reviewed and updated as your business picture changes. A well-written, comprehensive business plan can also help you build credibility when you begin seeking capital or finding investors.

“When a small business comes to us for a loan,” said Anderson. “a solid business plan communicates that our customer has clear and focused objectives.”

Wondering what to include in your business plan template? Here are the essential elements to get you started:

• Executive summary. A brief highlight of key points and goals, offering a snapshot of the business idea
• Business description. Details about the company, as well as its mission, vision, values, legal structure, location and history
• Market analysis. An overview of the target market, including competitors and ways to differentiate
• Marketing and sales strategy. Promotions to attract and keep customers, sales channels to use, pricing and other growth strategies
• Ownership. Who will operate the company and what are their qualifications? Further, what outside legal and accounting help will guide the company’s operations?
• Products and services. Details on key features, benefits, pricing and unique selling points
• Financial projections. Detail anticipated revenue and expenses—including any expectations for funding
• Operations. The operational plan for how the business will run day-to-day, from production to customer service to delivery and invoicing
• Appendix. Supporting documents such as market research data, the resumes of key personnel, or other relevant information

If all this sounds daunting, don’t be intimidated. Instead, know that there’s help readily available for the motivated would-be entrepreneur. As one example, the Small Business Administration (SBA) and its Small Business Development Centers deliver a wealth of professional advice and technical assistance to startups like yours.

At the same time, it’s a good idea to enlist the help of professionals such as a CPA and attorney experienced in small business formation. The initial investment can prove highly valuable in the long run.

Regions Bank also offers advice with Business Insights, an ever-growing library of articles that cover almost every aspect of business ownership and operations.

Further, know that establishing a good relationship with a business banker is a fundamental first step to getting your business off the ground. With a Regions banker available to offer real-world wisdom and potential solutions, as well as a customized Greenprint financial plan for your business, you will have an important ally in your success story.

Choose a business name

Your business name will speak volumes to prospective customers, telegraphing what to expect when doing business with you. So, choose a name that resonates with the desired target market and speak to your business and its value proposition. At the same time, choose a name to ensure your business has a unique personality and communicates the customer’s experience.

One other tip? If you plan to expand operations over time or create any kind of brand, make sure the name isn’t already taken. The US Patent and Trade Office (USPTO) has a free searchable database of trademarks you can use to ensure your business name isn’t already taken.

In certain situations, especially with a highly unique name or product, it may be prudent to seek trademark protection. It is recommended to engage a specialist in intellectual property law to keep this process as streamlined as possible.

Choose a business structure

Should you be a sole proprietor or LLC? Or do you need something more sophisticated?

Your choice of business structure is an incredibly important one, affecting how you pay personal taxes, your legal exposure, and the amount of time devoted to record keeping.

How do you choose the right business structure? A solid move is to discuss your business idea and needs with an attorney. Clearly share your long-term business goals—not just those in the first year or two of operations. That way, they can recommend what works for you and your business over time.

Register your business

Now that you have a business concept, a plan for growth, a name and structure, it’s time to let the government know you exist.

That means having all the correct permits and licensing on local, state and federal levels. While this is by no means a comprehensive list, some of your registration requirements may include:

Federal level

• Employer Identification Number (Or EIN). The business equivalent of your Social Security number, your EIN is required for use on all government filings.
• SAM.gov registration. For those looking to contract with the federal government, a SAM number is a requirement. The SBA may prove an especially valuable source of guidance in this area.
• BOI reporting. The Corporate Transparency Act requires most businesses to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

State and local level:

• State registration. Most states require registration with the Secretary of State or a similar agency. Learn what is required in your state.
• State tax ID. Some states require that businesses register to pay sales taxes, which may require a state-level tax ID.
• Business licenses and permits. Depending on where you open shop (and the nature of your business), you may need licenses and permits at the state, county or local level. In addition to business licenses, there may be trade-specific licenses or health and safety permits.
• Professional licenses. If you’re in a regulated profession such as healthcare or law, professional licenses will likely be required.
• Zoning and building permits. These depend on your proposed location and the kind of business activity you’ll undertake. Again, check with your local government for more information.
• Tax-exempt status. Depending on the nature of your business, you may qualify for tax-exempt status. Doing so requires registration with the IRS. A qualified accounting professional should be able to aid you in this process.

Get business insurance

Whether you’re opening a manufacturing facility or working at your kitchen table, chances are you’ll need business insurance. From liability to worker’s compensation to errors and omissions and cyber security, there are a host of potential needs.

One note of caution: Not every business needs every kind of insurance coverage. Instead, talk to insurance professionals and discuss the requirements for your specific business.

Fund your business

You might have a rock-solid concept and the best business plan ever. Yet the less capitalized you are at the outset, the lower your odds are for success.

Entrepreneurs are optimists at heart. But that doesn’t mean ignoring reality. Bills need to be paid. Employees expect a salary. That makes it crucial to have as clear-eyed a view as possible of your potential expenses—while downplaying best-case scenarios of income.

“It’s an old rule of thumb,” Anderson added, “But it still holds true. When mapping out your business’ potential revenue, double expected expenses and halve your predicted revenue. It’s not fun to think that conservatively, but you’ll thank yourself later for going through that exercise. Businesses that don’t plan for every contingency are in for a much tougher time.”

Can I start a business with no money?

Sure, it is possible. However, lacking the financial cushion or safety net that a reserve of funds provides means being smart, working harder and being even more attuned to changing business conditions. So how to increase your likelihood of bootstrapping success?

• Choose a low-cost business model. Choose one that leverages your existing skills without renting office space or buying equipment. Service-based businesses such as writing, design, tutoring, consulting or even pet sitting are among the possibilities.
• Get free advice. As mentioned earlier, a Small Business Development Center can navigate you through the intricacies of setting up a business and getting it off the ground. With its in-person counseling, seminars and online courses, you’ll find a wealth of information.
• Market before you open. You don’t want to launch your business and not have customers. The more sales leads you can garner before starting out, the more likely you can hit the ground running on Day One.
• Use social media and other free platforms. Finding business is a numbers game. The greater your exposure to likely prospects, the more customers you’ll have. So be sure to tout your business to potential customers with frequent messages.
• Be determined. Ask any successful business owner and you’ll get the same answer: Success is a matter of persistence more than anything. Don’t count on instant success but rather see it as the ultimate destination at the end of a long and winding path.

How much money do you usually need to start a business?

The startup capital required varies widely, depending on any number of factors. These include the type of business you want to start, the equipment you’ll need to operate, and where you’ll do business.

There’s no easy formula, but our calculator is a pretty good start when determining your expected costs. The SBA, once again, will also prove a terrific resource for those in the planning stage.

At the same time, don’t neglect good old-fashioned conversations with those in similar businesses, either. From message boards to trade organizations in your industry, there are plenty of resources to consult to get the most precise ideas on what your startup will cost. And the kind of capital you’ll need to start your entrepreneurial journey on the right foot.

SBA loans

Speaking of capital, the SBA’s loan programs have proved an essential element of many a small business’ success story. SBA loans take many different shapes and are used in many different ways, including:

• Startup expenses
• Cash flow
• Working capital
• Business real estate purchase and improvement
• Export funding
• Acquisition and partner buyout
• And many others

Regions Bank is a preferred lender for SBA loans. Read this article about SBA loan options to learn more about the ins and outs of SBA funding and what to expect.

Open a business bank account

How you manage your business’ revenue and expenses will be vital to your operations. That means having a business checking account to serve as your financial foundation.

Regions Bank is happy to help you get started with a variety of different checking account options to fit any financial need. However, know that banking regulations require documentation about your business, with requirements varying based on the business structure you choose.

Determine how you’ll take payments

If you’re a retailer or a restaurant, how you take customer payments could prove an important building block for growth. The right choice of merchant services with Regions Bank can make a big difference when it comes to managing payments, cash flow and creating convenience and confidence to customers.

At the same time, depending on the size and sophistication of your business, it can also provide tools to analyze transactions, manage inventory and aid effective marketing.

So, there you are. Your first steps are your most important ones when it comes to establishing and growing a healthy business.

The rewards are many, but so are the challenges. With that in mind, the more you prepare to start your own business, the more likely you’ll be to succeed.