Starting 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.
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.