How to Start a Business in Southern California
Small Business Assistance Tool
Use this helpful online tool to find assistance for starting, growing and accelerating your business.
Are You Considering Starting a Business in Southern California?
So, you have a business idea and your friends and family are encouraging you to make it a reality. If you are ready to start a business in California, you should know running a business is a great way to create your own job and control your income. A business is also an asset like a home and has value that can be leveraged. But often the first things we think we ought to do first, like getting a business license or selecting a location, should come later after you have done research and planning. You will be investing time and money in starting a business and this preparation is well worth it. Let’s take you through how to start a business and the steps that it it will take
Things To Consider Before Getting Started
1. Is there a Market for what you want to sell?
If you see there are a lot of businesses doing the same thing you want to do, it could mean there is a high demand for this product or service. It could also mean the market is saturated. If that’s the case, you will have to demonstrate what you offer is unique or you could target a segment of the market that is not being served. Your town or chamber of commerce should have information about other similar businesses. You will have to decide if it is a good thing to be located near competitors or detrimental to your effort to snag market share. For example, some restaurants do not mind being near others because the area is designated as a restaurant district and customers will park and stroll downtown to find a place to dine.
If you have a service or a product that is similar to others, you will have to think of a way to distinguish what you offer. This means researching your competition by understanding all they do, how they market themselves, and what they charge. Most of this information can be obtained with research on the web, but it’s also okay to check them out personally or have someone pose as a customer for you. Business owners should always know their competition. Don’t forget, there may be a competing situation, like Do-It-Yourself. If your potential customers are struggling with doing something on their own, they may need your service to help them.
2. Can you make a living at this?
You know how much money you need to make a living. Running a business means covering all the costs of the business, then paying yourself. It will be important to keep your business income and expenses separate from your personal bank account, so you have a clear idea of what your business costs and whether you’re making a profit. In the startup stage, a business will not likely cover all its costs at first and you’ll need another source of income until you begin to breakeven and then show a profit. The costs to consider are:
- One- time startup costs, like equipment such as a computer or a vehicle
- Direct costs or costs of goods sold, such as inventory or other hard costs that go with every sale
- Operating costs that accumulate even though no sales are coming in, like rent and advertising.
It is difficult to figure out all the costs involved with running a startup business, but a business counselor can help you crunch the numbers. You may be disappointed to discover if you price your product or service competitively, you will not make enough to make the living you desire. At that point, you will have some decisions to make. Will you charge more, but offer something added to justify the higher cost? Can you reduce your expenses in the beginning? Many businesses start small with no employees and launch from home until increased sales cover the cost of an office or retail space. Above all, don’t commit to contracts, leases or loans before you’ve tested out your business, refined your business offering and settled on a plan that you know will build a business that gives you the income you need.
3. What makes your idea unique?
Have you come up with an idea for a product or service that you think has potential to become a business? Have others encouraged you to make your hobby into a moneymaker? It’s tempting to run with an idea, get a business license, print up some business cards and get out there before anyone else steals your idea. Entrepreneurs are go-getters. That’s why it’s important to balance that enthusiasm with hard, cold research.
Is there anyone else out there doing something similar? How much do they charge? How successful are they? It’s important to understand all the costs associated with creating your product or service so you can determine if you’ll actually make money with your business idea. It’s important to separate your ego from the idea and evaluate it critically. Put yourself in your customer’s shoes. Your idea should be a contribution to the marketplace; a way to improve the lives of your customers. Once you’ve figured out how that happens, you’re on your way.
4. Do you have the stamina and personality to be self-employed?
Starting Your Journey
1. Create a Business Plan
A business plan may feel like a luxury for busy business owners, anxious to get started. Business planning may seem like an academic exercise or an overwhelming undertaking. But thinking through all aspects of your business helps you identify where you have strengths and where you need advice. It helps you avoid unpleasant surprises that come from mistakes like learning you’ve priced your product too low, or you’ve signed a lease before you have enough funds to breakeven, or spent so much on inventory, you won’t make any money for months. The good news is there are a number of books, software platforms, workshops, and business counselors available to help you pull together a motivating and viable business plan. Check out the resources provided here and get started with the exciting task of creating a business plan.
2. Find the Right Legal Structure for Your Business
Choosing a legal structure is one of the first considerations when starting a business. This decision needs to be completed before filing for licenses and permits, hiring employees, or paying taxes. Almost everyone needs guidance in selecting the right business structure. This process defines the ownership of the business, how much liability the owners have, and how taxes are paid. Whether you’re choosing to be a sole proprietor, work with a partner, start a nonprofit, or choose one of the various types of corporate structures, get help from an accountant, a lawyer, or a business counselor for this important step of your business.
3. Required Registrations, Licenses, and Permits
If you’ve been operating your business informally, selling to family and friends to get an idea whether your business idea has possibilities, it may be somewhat intimidating to make your business real by filing a business license or getting the permits needed for your particular business. It’s always advisable to first have a business plan sketched out and make sure your business name is something you can live with for the long term. Sometimes new business owners fall in love with a clever business name, get a business license, then after preparing a business plan, find the name won’t work. One step at a time. Before going legal with a business name on licenses and permits, make sure that name will stick. Once you file a business license with your city office, for example, this process may trigger notices from other government agencies that need you to register. A business counselor can help you determine what business licenses, permits, and registrations are necessary for your particular business at this start-up stage.
4. Marketing Your Business
How will you get customers? Don’t be fooled into thinking everyone will flock to your business once you hang your “open” sign. You can’t afford to advertise to everyone, but you can afford to target your marketing to a specific customer type who will buy from you repeatedly and refer you to others. Understand how they choose a business like yours. Do they search on the internet? Then a web presence is critical. Do they find your store or restaurant while shopping downtown? Location and signage would be key. Study your competition to see how they get customers. Experiment with different marketing methods then select the method that brings in the best customers. Check to see if there is a business association of your industry that has information on how to build your business. The first year of business usually involves experimenting with different marketing methods. Create a plan, put it into action, then invest in what drives customers to your door.
5. Business Financials
Financial Statements are the checks and balances you need to see if you’re making money. If you’re reluctant to look at the numbers, you’re not alone. Most business owners are interested in producing and promoting their products or services. Taking the time to examine whether the business is on the right track is often put aside till later, sometimes much later, until it’s too late.
Financial statements can be a gold mine of information. An analysis of a cash flow statement can tell you when you need to tap into the line of credit. A comparison of budgeted items with actual expenditures can show where you need to adjust your spending. The balance sheet and the profit and loss statement are the key documents needed to apply for business credit. You don’t have to know everything about bookkeeping, but you do have to have an appreciation for how important it is for decision-making. Hire a bookkeeper, buy a good bookkeeping software, or take a workshop in business finances, do what it takes to become knowledgeable about this important aspect of running a business.