From the November 2002 issue of Startups

It's extremely difficult to come up with a great business idea and then gather the gumption to actually start the business. But now you have to deal with all the tiny details that make up a real, legitimate business. Legal red tape, marketing, planning, money management--your new and overwhelming to-do list spans pages. That's why we've decided to help you by putting it all on one simple checklist. Below, we go into detail on the different areas of the checklist, as well as guide you to other resources to help you out. After you've checked out all this information, download our free Homebased Startup Checklist to get started. You'll be up and running in no time.

Planning Your Business

  • Business Plan. One of the most important stacks of paper you'll ever come across in your business is your business plan. Even if you're just a one-person operation who wants to make a living rather than millions of dollars, you still need to create a business plan. You'll have your market, competition, plan for making dough, financials--all in one tidy spot to show investors, suppliers, employees, your proud grandma and, most important, yourself. It'll keep your eyes on that prize, whatever it may be.
  • Marketing Plan. You thought you'd planned it all out with your business plan? Not quite. Marketing is such an important part of your business, it gets a plan all its own. Your marketing plan focuses on your customers--how you'll find them and how you'll make them your own. It thoroughly and completely outlines your product, target market, competition, objectives and budget, as well as how you'll track the effectiveness of your campaigns.
  • Financial Plan. This isn't a plan per se, like the ones above, but more an assessment of your financial wherewithal. First, make an inventory of your present assets--savings accounts, real estate equity, retirement accounts, etc. This helps you determine: a) if you want to sell anything or use the accounts for funding; or b) what you can use as collateral for a loan. Next, determine your startup costs--all the money you need to get your business off the ground and floating for at least six months while you gather customers and start bringing in cash. This includes paying yourself a salary, because, unfortunately, you can't live on air during the startup phase.

The Legal Details

  • Business name. When you've decided on your business name, you'll want to make it legal by filing a DBA ("doing business as"). Most areas require you to register with the county and run a notice in your local newspaper. Protecting your new name with a trademark is also a great idea to ensure both that no one filches your golden name and that you're not unknowingly using someone else's. Your trademark search helps you determine the latter--your local Yellow Pages and chamber of commerce are easy places to start looking. Visit the U.S. Patent and Trademark Office's website to read their trademark FAQ.
  • Zoning. Want to start a homebased business? You'd better make sure it's actually legal in your neck of the woods. Check with your city or county, but as many homebased experts suggest, call anonymously, because if it isn't legal, you may find an official coming around for a peek at your office. If it is legal, you still need to find out about any restrictions--like signage or parking--before you make enemies of your neighbors.
  • Licensing. You may need to get several different types of licensing. The typical city permit is the first most people think of. But your county may also require a business license; the fire department may need to inspect your office; you may need a sign permit if you're advertising your at-home business. Depending on your type of business--say, a hair salon or insurance agency--you may also need to be professionally licensed by the state. Cover your bases by checking with all your local agencies: city, county and state.
  • Tax ID/sales tax. Sales tax laws vary depending on locale, but one thing is certain: If you don't apply for a "seller's permit," you'll be in hot water. Check with your city, county and state offices to ensure you're collecting the right amount of sales tax from your customers--and that you're paying the right amount to Uncle Sam. You also need to obtain a tax ID for your own business from the IRS. Check with your accountant to iron out the details.
  • Insurance. You've built it, and they will definitely come. No, we're not talking about customers. We're talking disasters, from employee theft to a plane crashing into your home office. The best way to protect yourself is to insure yourself to the hilt--and your homeowner's policy more likely doesn't give you the protection you think it does. Check out the resources in our "Legal Resources" box below, then schedule a visit with an insurance agent, so you can protect your valuable business from top to bottom.
  • Business structure. This is where you decide which acronym or abbreviation you're going to paste onto the back of your business name. Really, it's much more involved than that, which is why you should go over any decisions with an attorney. Whether you incorporate or stay a sole proprietor, go for an LLP or LLC, this decision affects your personal liability and many tax issues.
  • Get an attorney. According to Startup Basics Expert Keith Lowe, an attorney is one-third of the professional triptych that'll help your business become a success. (A banker and accountant are the other two-thirds, by the way.) Don't be intimidated when you go on your business-attorney hunt; even if they have 10 degrees framed on the wall, they're still working for you. Ask lot of question and don't settle for less than the best. Like your insurance agent, a good attorney will be worth the cash outlay, because he or she protects your business.

Taking Care of Your Finances

  • Business bank account. Yes, it's time to go beyond free banking. You need to immediately get a business bank account to keep your finances in check. "A separate bank account facilitates record keeping, and, for some really small homebased businesses, it may be virtually all the bookkeeping records they need," says E. James Burton, dean of the Jennings A. Jones College of Business at Middle Tennessee State University, and co-author of Accounting and Finance for Your Small Business. "It also simplifies tax reporting and permits an easier, faster look at the health of the business--that is, problems in the cash flow of the business aren't hidden by other things going on in the personal finances."

Burton looks at three things when choosing a business bank--convenience, services and cost--and says you may find online banking is more convenient than brick-and-mortar bank locations.

  • Accounting software. There are a few different accounting software programs available, so explore your options before you invest your time and money. This investment will be worth it down the road when you show up at your paid-by-the-hour accountant or tax person's office with all your records neatly in hand, or when you need to instantly figure out where your finances are at this month. If you're looking into online banking, says Burton, you'll want to match your accounting system with that.
  • Hiring an accountant. As with finding an attorney, you'll want to get some word-of-mouth recommendations and ask many questions when you look for an accountant. "Work with an accountant as early as possible," Burton recommends. "Then you may choose the set of services you need to supplement what you can do yourself." Burton also warns there's a difference between CPAs and accountants--the former can "provide pretty much anything you may need." Accountants may be more limited in the services they provide.
  • Determining your startup financing needs. This is where your financial planning comes into play. You've already inventoried your assets. Now, are you short the money you need to start your business? If so, what are your financing options? Homebased businesses have a cheaper entry fee than traditional office and retail spaces, so you can probably borrow money from friends and family or (carefully!) use a credit card to fund your new business. You can also try to shorten the gap between what you have and what you need by cutting expenses. Doesn't your aunt have a desk she's not using? Can you barter your services to a designer for your new brochure? Get creative in your approach to saving money.
  • Create a budget. Starting out with a budget is a powerful way to immediately take control of your finances. After all, would you rather control your cash flow or have your cash flow control you? A good measure for your first budget is at least one year. "This budget should be detailed and based upon sound data, not just wishful thinking," says Burton. "Most new businesses are overly optimistic about their revenue projections--both from the point of view of how quickly the revenue will start and the level of it. And they tend to underestimate expenses. Many new businesses start with much less capital than they'll need to make the business self-supporting."

Setting Up Your Office

  • Analyze your home to find the best space for your office. Take a long, hard look at your home to determine all the places you could put your home office: walk-in closet, extra den or guestroom, space in the garage, enclosed porch. After finding potential places, spend time in each at different times of the day to determine if the noise factor and lighting is OK. Also, do these areas have access to the type of outlets you need, and is there enough space for your furniture and other equipment? "When you decide where you want to set up your home office, give yourself a month to try the space," says home office expert Lisa Kanarek and author of Home Office Life. "If it's not working for you, find another place."
  • Go ergonomic. There are a number of factors to consider here, but one of the most important is giving up the dining room table and kitchen chair and investing in a computer workstation and office chair. "The money you save on furniture may wind up being spent on visits to the doctor to cure back pain," says Kanarek. Also invest in good lighting, a wrist pad, a headset if you spend a lot of time on the phone, and other items that will make working easier on your body.
  • Determine your technology needs. You probably already have a home computer, and despite your assumptions, you really don't need the newest, shiniest PC to run a business. (Unless, perhaps, you are involved in graphics-intensive business.) A computer, printer, file backup system, high-speed internet access, an office suite of software and voice-mail system are all crucial investments. A multifunction unit (scanner/fax machine/printer/copier) may also prove its worth. Be sure not to skimp on your phone and voice-mail system. Your phone will be your primary point of contact for your clients, and you need a professional system to handle the call volume. Above all, get a separate office line that won't be answered by your family or held up by dial-up internet access.
  • Prepare for visitors, if necessary. "Make sure that any part of your home a client may encounter is clean and organized," advises Kanarek. "First impressions are important, especially when you work from home. Ideally, your home office should be as far away from family gathering places as possible to avoid interruptions." Kanarek adds that if you have the space, a small conference table is a good addition to a home office that has visitors.
  • Make your home office safe and secure. Now that your business is a part of your home, safety and security are doubly important. If you live alone, it may be a good idea not to have visitors or to let people know you work at home alone. Invest in an alarm system, and try to keep your office (and expensive equipment) under wraps by not having an open office window at the front of your home. As we mentioned previously, talk to your insurance agent about the type of insurance you need. And always back up your data--Kanarek suggests having two copies--and store it offsite. Finally, check your office for safety hazards like loose cords, precarious stacks of books and papers, and too many plugs in one outlet.

Gear Up for Marketing

  • Create marketing materials. Your marketing materials include any print material you'll use to contact customers, including your business card, brochure, direct-marketing materials, signs (if you're allowed to have them), press kit and labels, if you have your own products. Fully commit to your business name and logo before you begin printing and distributing any materials--you don't want to waste money or confuse any potential customers by changing your image midstream. Creating a solid image in print solidifies your legitimacy as a new business.
  • Build an online calling card. If you're starting an online business, this is a big job. But if you have a regular business--say, business support services--you still should create a website. It's an inexpensive brochure people can access anywhere. People can find you online, and contact you through the real-world information you include. Also get used to marketing online. Find newsgroups that pertain to your profession and begin posting information (not ads). Those interested in your services will find you through your signature, which should include your website and e-mail address. Look for online directories that suit your business, and consider creating an e-mail newsletter to keep prospects abreast of your services.
  • Join networking organizations. Word-of-mouth marketing is the cheapest and one of the most effective ways to get your business in front of people. And the way you'll do that is through networking. You can approach your friends, family, neighbors and people you do business with. (Always have business cards ready.) But some people find it easier to start with networking organizations, like your local chamber of commerce, trade associations and the organization our Networking columnist Ivan Misner founded, Business Networking International.