Half of all businesses fail after the first 5 years according to Forbes.
This may sound like a depressing fact, one that may lead you to drop your entrepreneurial dreams for good. But don’t lose all hope yet.
There are many successful businesses that have lived to tell the tale. Below are some of their common traits.
You see, the answers lie within the business infrastructure. We’ve broken it down below. Read on business builders!
The first step in building your company infrastructure are all of the legal aspects. Ignoring any of these steps could be very costly for your business in the long run. Stay safe, stay legal.
1. Decide on a Business Entity
How you structure your business will impact many things. Your control, how much you save on taxes or how you do them, your liability and more. It’s important to research all options before deciding how to incorporate. Will it be an LLC, Sole Proprietorship, Partnership, Corporation or Cooperative?
“Doing Business As”, or DBA for short, is how you tell the state where your business operates from. It also covers what your legal name will be for your business.
This DBA can be different from the name you use for your business on a daily basis, or it can be the same (if it is available).
The only important part to know is that you need to register a DBA with the secretary of state where you live. This allows you to then do certain things like opening a business checking account.
3. EIN/TIN/Business Tax ID
When you start a business as a sole proprietor, you can use your personal social security number. However, even as a sole prop – or if you are starting a larger business – if you want to protect yourself and your personal assets, you will want to obtain an EIN, TIN or Business Tax ID number.
These are all names for the same thing and what this does is basically provide your business with its own social security number for tax purposes, credit and more.
Think of it like your business becomes a new entity, or “a new person”. You can obtain this tax number in minutes for free on the IRS’s website.
4. Bank accounts
Now that you have a DBA and your tax ID number, you can officially apply for a business checking account.
These are the 2 things they will require when setting up a business checking account, and opening such an account will provide you with options and tools that normal checking accounts do not provide, such as payroll tools, wire transfers (including international) and more.
With evidence of incoming deposits, you also have the ability to apply for business lines of credit and business credit cards.
5. Partnership agreements
If you have a partner(s) in business, it is best to put the terms of the partnership on paper.
Hiring a lawyer for this type of agreement can cost anywhere from $1,000-$3,000, whereas you can also find resources for free online. Just remember, you get what you pay for and this type of agreement probably won’t seem that important to you until you find yourself in court, in a dispute with your partner.
Business Infrastructure and Processes
These are the foundational elements upon which your business is built. Without a clear roadmap, you will not reach your destination successfully.
1. Business Plan
Probably the most important item on this list, your business plan should be the first thing you flesh out.
- Why do you want to start a business?
- What do you want to offer?
- Who do you want to serve?
- What is the business’s mission and vision?
When you identify the key elements of your business up front, everything from how much you charge to what specific services you want to offer can be easily and effectively rolled out from that point of view.
Many business owners who have been in business for 5 to 10 or even more years never took the time to flesh out a business plan and suffer for it.
It may seem like these are obvious questions that you “already have figured out”, but until you sit down to do your research, question it, challenge it and then finally settle on the best approach, you may not know what you are missing out on.
You can find professionals who can help you to strategize and create a business plan or find many free business plan templates online.
2. Mission/Vision Statement
As mentioned above, one of the most important aspects of your business is your mission and vision statement. Studies have shown that purpose driven employees are 50% more likely to stay at a company.
So not only is a mission statement great for retention, but it is great for business.
A Mission Statement encompasses what goals and accomplishments you want your business to achieve.
This goes deeper than “make money” or “be the best”. This taps into the “why” you do what you do.
For example, if you were starting a web development business, you could have a mission to make the process of developing a website for a client a step above the rest since you know that many clients suffer to understand what is happening when a website is being built for them and as a consequence many people (both provider and client) end up very unhappy by the end.
A Vision Statement is equally important.
Your vision is where you see the company in the future.
You could shoot for shorter time-frames, but typically a company vision statement would be at least 5 to 10 years out.
Creating your vision statement should be done with everyone involved in the company to support a sense of ownership and comradery among all the players.
It can be short, it can be long, but the most important part is that it is done in the first place. Use your imagination and really dig deep to get to the truth of where you would like to see the company and either review it monthly with your team or hang it somewhere for everyone to see as a constant reminder as to where you are headed.
Parking Boxx does a great job of outlining their vision statement on their about page.
3. SOP’s (standard operating procedures)
Ahh SOP’s. The thing that will keep you and your clients happy, but are so very rarely given the time and attention they deserve.
Every business should have some level of SOP’s created. How do you answer the phone? How do you respond to emails? How do you process payments? How do you provide that service or build that product?
When you take the time to articulate and document every single process and system of your business, you end up with an extremely well oiled and effective company.
One of the best ways to create SOP’s is to wait until you have a problem. After all, it may be difficult to know exactly how an internal process should flow until you have been through the ups and downs of it.
Once you have a problem or an upset client due to some issue that came up, stop everything and document exactly how, step by step, this could have been done better. Once you have created SOP’s for just about every part of your business, it will run on autopilot and you will almost never need to put out fires.
Heck, just think about the amount of manual training you will avoid if you can have new hires simply approach their tasks with the tutorials you have already made for everything.
Obviously, in today’s world, you simply must have a website if you are going to operate any kind of business. Some business types need one more complex solutions. Take smart parking systems for example. A website of their size might run you in the $25k or more range.
Many businesses, however, need much less. But, everyone needs one. If even just to “prove you exist”.
Obtaining a website can be daunting and expensive at times.
With so many options, it can leave you wondering what is the best website development platform?
Many people have to go through multiple websites and multiple website designers before they finally land on something that they like.
The reason for this is because, although we all take for granted today that the internet exists, websites and using the internet has really only been around for about 20 years for most people.
This means the service of building websites for people is relatively new! As a result, many providers are still learning how to provide the best service possible.
Having said that, it has become more commonplace nowadays and things have improved. The following isn’t every approach to getting yourself a website, but it is a good start:
- Use Squarespace, WIX or any other DIY website builder.
These options are typically very inexpensive but lack the robust options and control you will want when your business becomes larger or gets more serious.
- Ask a friend for a referral
A referral to the website designer/developer that made a trusted friends website is always a great option. As mentioned, it can be difficult to find a good provider, so this approach can help you avoid “testing the waters”.
- Avoid Craigslist.
Use a service like Yelp to find web developers who have good ratings. These developers can range in price, but a typical small service-based business website will be built on the WordPress platform and will cost between $3,000-$7,000 and a small eCommerce shop will range between $5,000 and $15,000.
Behind every successful company infrastructure is a sound financial plan. Whether you’re managing $5 or $5,000,000, the importance of monitoring your money will make or break your company.
Below are four steps for how you can create a budget for your business:
- Income: Create a list of all your income sources. To the best of your ability, tally how much you expect to earn each month.
- Overhead: Create a list of all your fixed expenses. Office space, recurring monthly bills, internet, etc.
- Variable Expenses: Create a list of variable or one-time expenses that you can foresee coming up in your business. Do you know you’ll need a new computer soon? Will it be time to upgrade your software soon?
- P&L Statement: Now that you are clear on your financial outlook, you can create your first profit and loss statement and adjust your next steps as necessary.
Work smarter, not harder. With these business automation tools, you’ll be able to spend less time running your business and more time bringing in clients.
1. Project Management Tools
- Basecamp – great for managing many projects across large teams.
- Wrike – custom reporting, file sharing and more.
- Podio – highly customizable and flexible.
- Trello – a visual, drag-and-drop project management experience.
2. Customer Relationship Management (CRM)
- SalesForce – A customizable platform that grows with you as a company.
- Zoho – Great for any size organization. It covers the complete lifecycle of a client relationship.
- Infustionsoft – Insights, reports, automation, growth tools and more.
- Freshsales – Great for high volume sales.
2. Bookkeeping Tools
- QuickBooks – One of the most popular bookkeeping platforms on the market. Freshbooks – Known for its intuitive interface and ease of use.
- Xero – A mac focused and full-featured platform.
- Zoho – Known for its simplicity and expansion ability.
3. Internal Communication Tools
- Slack – Easy to use and easy to integrate with other apps you may use in your business.
- Basecamp – Great for bridging the gap between your team members and the clientele.
- HipChat – Build chat teams, chat rooms and automate tasks via the API.
- Communifire – Modern and full-featured, it boasts over 5 Million users.
Succeed or Fail
So, as you can see, there is much to creating an ideal business infrastructure. If you leave out any of these core items, your chances of failing within the first 5 years increase dramatically.
On the flip side, by simply taking a little extra time to address these business standards, you will create a foundation for success that is strong and long-lasting.
Have you had a business for a while? What was the single most important thing you did to make a difference in your business?
Let us know in the comments below!