I'm Starting a Business

There are several steps to be completed before starting your business.  The first and most important step is to determine if the business is financially feasible and if it can provide you with the income you (and your family) require. Once that determination is made, there are many other steps that need to be taken in the correct order, among them: choosing a name and location for the business; registering your business with the VT Secretary of State and other appropriate agencies, obtaining the necessary licenses and permits, and developing marketing, operations plans and other action items to move forward with your business.

You will also need to solidify the initial financial plan you completed to determine feasibility by assessing your start-up costs and identifying who will provide funding for them. Do not rush the process or skip any of these important steps/tasks because the decisions you make now will affect your business activities and results in the future.

You are the only person who can decide what business is best for you.  Begin by assessing your skills, abilities, talents and how they fit into your life and satisfy your financial needs. Next, explore ways to advantageously use your skills and interests in a business that has potential markets available for your product(s) and/or service(s).

Your best opportunity is to build a business that allows you to apply your expertise, fuels your passion, and fulfills a need for your customers. That is a great place to begin.

In reviewing available options, we suggest you consult with local experts and other business owners in other regions that offer the product/service you are proposing.  Determine what value you are offering potential customers – what the need in the marketplace is and how it compares with other possible solutions out there.  Also, check with potential customers to see if (and how much) they are willing to pay for that product/service.  Your chance of success increases when you successfully match a product/service with available or potential markets.

No experience is required to start a business, but your chances of success are going to be much greater if you engage in a business opportunity that you thoroughly researched in an industry in which you have expertise.

There are significant challenges to successfully starting and successfully operating a business on an ongoing basis.  Among them: shortage of capital and cash flow; coming up with a great product or service; developing a strong plan and then executing it; working more than you expected; getting through the frustrations of being rejected by customers; finding and hiring good employees; knowing when to let employees who are not working out go; having to wear many hats (and change them frequently); managing your time; paying close attention to the financial aspects of the business; maintaining some kind of work/life balance; and not having sound business skills.

The major issue with start-up owners is that they may have some industry expertise, but they may not have the business or management skills to navigate the many challenges we identified in the question above.  Being competent in marketing, operations, and finance will give you a distinct advantage.  There are a number of ways to obtain that type of knowledge prior to taking the plunge:  1) Formal schooling or education; 2) taking a job in the particular business or industry where you would like to start learning as much as you possibly can before starting up; 3) networking with others who have deep experience working in the industry, i.e. retired executives; and 4) take advantage of advisory services and specific training that’s available and appropriate for your business.  All four will certainly help and never stop learning.  Remember, the only thing that’s constant is change.

How you register your business depends on what type of business entity you choose and what activity you are going to be engaged in. Business organization/entities (the legal structure) in Vermont include sole proprietorship, general and limited partnerships, S- Corporations, limited liability companies (LLC’s) as well as others. Each type has its advantages and disadvantages.  

For information on ways to organize a business in Vermont and the actions required for each organizational type, visit the Vermont Secretary of State’s webpage at: https://sos.vermont.gov/corporations/registration/ . In addition, we highly recommend you obtain expert legal and accounting help to determine the best legal structure for your business. This is not the first decision to be made about your business – financial viability is. And the state of Vermont is extremely efficient when it comes to registration so this step can be completed at the appropriate time (before you sign any legal or financial documents is a must).

There are commercial banks, credit unions, and non-traditional lenders that provide financing for small businesses.  Private sources of funds, for example investors and families, are also possibilities.  However, your commitment of personal funds is often the first financing step.  It is an indicator of how serious you are about the business.  Personal investment sources of capital include savings, additional job income, or equity in personal assets.  For startups, be prepared to provide 10% to 30% of your own unencumbered personal funds or assets.  

Important Note: If you are looking for a grant(s) – they are nearly impossible to obtain for a start up, especially a for-profit start-up.  Do not start your business with the idea that you will be getting free monies! And do not fall for the scam of a company that offers to find you grant money.

Licenses and Permits vary with the type of business and the town or city where the business is located.  Some businesses face minimal licensing requirements while others may need several permits/licenses.  Start with your town or city clerk and the local planning and zoning offices to begin the process.   If businesses cannot be started or operated legally, learn if there is a waiver provision or if the ordinance can be changed or given a conditional use.  Do not just start the business without the necessary permits or waivers, as local authorities can close your business immediately.  As the owner, you can face civil and/or criminal penalties. 

Again, depending on your business, other permits may be required by the Fire Marshall, VT Health Department, and others.  Even with the proper permits, maintaining positive relationships within your community is a good business practice.  Depending on your business type you should check with the VT Department of Taxes – Business Taxes to see which taxes you may be responsible for. Examples include sales and use, rooms and meals, and others. https://tax.vermont.gov/business. 

Sales do not just happen.  Sales are created by sound marketing practices.  Businesses use market research to identify their customers and figure out what they want to buy. Marketing encompasses several issues, which are briefly defined as:

• • Product or Service: what are you producing and what benefits/values does it offer? Customers do not always know what they want. They do, however, often have an idea of what they lack or a problem they are trying to solve.
  • Promotion: how will potential customers know about the product or service? Communication. 
  • Place: where is the business located and how your customers will buy your product/service – how it is distributed/delivered.
  • Price: at what price can the product or service be sold? How much can you charge; it will determine the profit that you can make on your product/service. 
  • People: selling – your customers are unlikely to separate the product/service from those who provide it.  Make sure all involved are well trained, knowledgeable about what they are selling
  • Perception (or brand image): how the customer sees the business and the product or service provided or It’s perceived value. Consider sustainability.

The records needed to manage the business and the records required by the IRS may differ. While the business owner is interested in where and how income is generated and where expenses are incurred, the IRS requires records that will allow for the preparation and documentation of a completed tax return. There are, however, basic financial records all businesses should keep: journals and ledgers (such as a checkbook register), accounts receivable, accounts payable, records of sales, inventory, cash receipts, and cash disbursements.

Records must also document mileage, meal expenses, and entertainment.  If the business hires employees, additional records are required.  Remember that all financial records are historical documents. This includes tax returns and supporting documentation.  Business documents such as filing of the business name, incorporation/partnership papers, sales tax permit, federal employer identification number, and insurance records must be retained indefinitely.

We highly recommend getting together with an accountant and/or bookkeeper to help you set up your accounting and recordkeeping systems properly.  You may choose to have a bookkeeper continue to work with you on a contract basis to process your payroll, invoicing, income/expenses, etc. 

The types of insurance required will depend on your business.  You should consult with an insurance agent who handles business insurances.  At a minimum you will need general liability insurance. Here are other types of coverage that may apply to your business: product liability insurance, professional liability, property & casualty, worker’s compensation unemployment, directors & officers, errors and omissions, business interruption; commercial auto; data breach insurance, and health insurance coverage for you and / or your employees.

Hiring your first employee is a major step that should be considered carefully, as should every employee hire after that. The first step is to craft a job description so you know exactly what the job is and what skills will be required. A job description not only gives the employee the needed roadmap to being a success, but it helps you make sure you have correctly identified your needs. A thorough job description makes hiring and managing much more successful. When you have made the decision that yes, you are ready to hire, here are two helpful sources for the next steps that need to be taken:

https://www.uvm.edu/consumer/hiring-your-first-employee

https://www.sba.gov/business-guide/manage-your-business/hire-manage-employees

While you may have an idea for a business, the best place to start your planning process is to determine whether it makes sense for you to start and operate a business. You also want to clarify what you expect the business to do for you. It is a good idea to first take an honest and objective appraisal of your personal skills, abilities, and talents, as well as an overall assessment of your strengths, weaknesses, and personal situation – your personal needs and goals. Here are some of the questions you should ask yourself in advance:

• Am I a self-starter?
• Am I willing to take risks?
• Can I work alone? And can I work with others?
• Do I have the physical and emotional stamina to run a business?
• How well do I plan and organize, and do I make good decisions?
• Can I maintain my motivation?
• Can I blend the business with my family?
• Does the business fit my lifestyle? Would I enjoy operating this business?
• Will the net profit of the business (revenues-expenses) provide the money I (or my family) need to live on?
• And how will I live until the business begins making a profit (which in most businesses is NOT in the first year)?
• What are my short and long range personal and business goals?

One of your first investments should be the time necessary to complete an honest evaluation of your own talents, skills, experience and what you want the business to do for you. 

VtSBDC’s advising team is here for you even at the earliest stages. Want to explore these self-evaluation questions together? Would it help to have a listening ear to express your thinking? We recommend that you begin by attending our next digital, no-cost Starting Your Own Business Workshop (link here) and then requesting an advisor to take the next steps.