7 Things to Consider on the First Year of Running Your Business in NJ
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You’ve decided to launch your own New Jersey business. You’re thrilled by the idea of being the captain of your own ship, making key decisions and selling products or services to customers.
As you think about starting your own company, there are many factors to consider. Over the course of your first year there are multiple important decisions to make. Here’s a closer look at what decisions you’ll need to make in that first, crucial year in business.
- Determine Your Legal Business Structure
Selecting a business type is one of the most important decisions you can make as a business owner. You need to select the business type that best fits the way your business is structured and how you plan to operate it.
For new small businesses, there are two common business types – a sole proprietorship and a limited liability company (LLC).
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- Sole Proprietorship
A sole proprietorship is the simplest business structure. It does not require any formal paperwork to file as this type.
In a sole proprietorship, you are the lone owner of the business. You make all the decisions related to your company.
From a tax perspective, sole proprietorships are called “pass through” entities. That’s because any taxable income, deductions and losses are passed through from the business to the owner’s individual tax returns.
Owners will file a Schedule C to capture all their business finances as part of their federal return.
From a liability standpoint, a sole proprietorship carries some risk. If there is a court judgment against the company, creditors can come after the owner’s personal assets, including homes, cars and savings.
- LLC
An LLC is the most popular form of business structure among small business owners and with good reason.
With an LLC, an owner or owners can choose how they want to manage their business, either with an owner making the decisions or by hiring a manager to do so.
Taxation is handled the same way as in a sole proprietorship as the LLC is also considered a pass-through entity.
Liability protection is one of the main reasons owners choose an LLC. Except in cases of gross negligence, owners are protected from court rulings against them, meaning their personal assets are protected.
Starting an LLC in NJ can be complicated. That’s why so many business owners choose a trusted partner to help them with the paperwork and filing necessary to be an official LLC.
- Develop a Business Plan
A business plan is crucial for any new business. Creating a business plan helps you answer important information and conduct research about your new company.
Business plans can seem like heady, difficult pieces to complete. However, once done, they will give you a roadmap to follow for your company going forward.
Here are the main elements of a business plan:
- Executive Summary: High-level details about your company’s name, mission, description, structure, products and services and finances
- Company Description: Detailed information about your company’s purpose, how it benefits customers, information about your customer base, including demographics, and how your products and services are different
- Market Analysis: Details about the competitive landscape you’ll be in. What is the market like where you are planning to sell? Includes demographics profiles and analysis of your desired customer base. Also includes insights about your competitors – who they are, what their market share is, their customer profiles and how you will differentiate from them
- Product and Service Descriptions: Detailed information about what you will be selling, your history of selling each and what each one’s purpose is
- Sales and Marketing: Your strategy for marketing and selling your products and services, including which channels you intend to use and the anticipated outcomes
- Funding: If you are seeking outside funding, either as a loan from a financial institution or an investment, this section details how much money you’re looking for over five years, your intended uses for those funds and your desired terms
- Financial Analysis: Maps out your financial situation using charts and graphs to detail your balance sheet, revenue and cost projections, cash flow analysis and monthly or quarterly sales forecasts
- Understand Your Customers
In addition to the components of your business plan that touch on your customers, you want to continuously understand who they are and what they need from you.
Part of this can come from sales analysis during your first year. Part of it can also come from in-depth discussions or insights provided by your customers.
Focus groups and surveys are a good way to understand your customers and why they choose or do not choose to buy from you. So, too, can product and brand reviews be left on social media sites.
Other insights are available from monitoring web traffic, which can indicate from which devices, browsers and regions your customers visit your site. Page views and time spent on pages are also good indicators of what’s working and where customers are gathering.
- Find Community
Networking is crucially important no matter what your profession. Having a group of peers who are either in the same industry or similar work can be an invaluable resource.
Networks can help answer key questions for you, especially in the first year in business, when everything can seem new.
Like Minded colleagues are often sympathetic to the challenges a new business owner faces.
There are many ways to find networks. Online, social networks like LinkedIn and Facebook are good places to find owners in similar spaces as you.
In addition, there are likely local networks of business professionals in NJ. Chambers of commerce, Rotary Clubs and other business-centric community organizations are available to help business owners support each other.
You may also find potential business partners by networking. And in turn, you will be able to impart your knowledge on other, newer business owners.
- Identify Trusted Business Advisors
Any new business owner will need counsel to succeed. For most small-business owners, there are three core advisors to identify in the first year.
An attorney can help advise with important legal decisions and ensure that your company is compliant with all the necessary federal, state and local mandates required for running a company.
An attorney can also help create and review contracts used with clients, customers, partners, vendors and others you’re doing business with your company. You want to be sure that you are protected legally and treated fairly in these relationships with legally binding materials.
An accountant is also an important advisor. Accountants can help create the financial systems and structures needed to operate your business. An accountant can also help you know what to track and record.
Your accountant will also assist with tax filings and analyzing your financial results, helping you make smart decisions about your company’s finances.
Finally, a financial advisor can help with your personal finances. A financial advisor can help counsel you on the best tax strategies and retirement planning to ensure you have resources in the future.
A financial advisor can also help you plan your personal finances during the startup phase of your business. You need to be prepared to cover your personal expenses while you are launching your company.
You’ll likely need months of cash available to pay your mortgage, car payments, other debt and day-to-day living costs while your business is securing customers.
The financial advisor will also help you with succession planning and, if you choose, selling your company in the future.
- Determine a Location
Are you going to have a brick-and-mortar New Jersey location for your business? Knowing where to locate your business is important.
Do you want to be in a small downtown location or a mall? These decisions will shape how much you pay to lease space. Whenever possible, gauge foot traffic in the area to see if there will be enough customers coming to your store.
Will you also have an online presence? Most businesses today have a website, either to sell their products or services and/or drive business to a physical location.
- Get in the Right Mindset
When you launch your own business, you need to be in the right mindset to ensure you can remain steady and focused. There will be ups and downs for your business, with challenges and opportunities that are unforeseen at the outset.
You will need resolve and, at times, a thick skin to weather the uncertainties of starting a new business. It can be a wild ride and preparing yourself physically and emotionally for the journey is important.
Conclusion:
Launching your own NJ business is a thrill. It can be a tremendously rewarding journey, both personally and professionally.
By planning carefully in your first year in business, you’ll be positioned for long-term success.