If you are thinking about setting up a small business, be rest assured that you are not alone. Many aspiring entrepreneurs are looking to start a new small business. Some of them even become successful in their endeavor as their ideas take shape and soar. For these entrepreneurs, their companies also act as a primary source of income.
If you are one among them, then be sure to consider these six checklists that can get your small business ideas to unfold.
Six checklists that can get your small business ideas to unfold
The Size of your Business
Your business’s size refers to the scale of its operations or the volume of production and sales. Some entrepreneurs also measure business sizes in terms of their net worth, assets, employees, and even the machinery or plants.
Three significant factors affect your business’s size: personal factors, commercial factors, and technical factors.
When it comes to personal factors, your business size depends on your capacity to raise capital.
Similarly, the commercial factors that influence your business size include your sales estimate and the possibility of expanding your services.
Likewise, the technical factors that account for your business size may include the nature and variety of production, availability of inputs for production, ROIs, and transportation costs.
Also Read: Need money fast? 4 options for small business owners
Your Credit Score
Although your business credit score doesn’t affect your business, lenders still check your credit score when you take out a loan to fund the start-up. They use the information to determine the type of business loan they can offer and the interest rates and terms associated.
When offering a small business loan, lenders may also look at your overall financial statements, debt-to-credit ratio, and the amount of loan you will need. The cash flowing into your business is also one aspect that most lenders consider, as they may choose to check your daily balances and other transaction details of your business.
Your Funding Sources
To start a small business, you will need funding and investments. So, it is imperative to know from where you are going to get the funds that cover the organization’s operational costs. However, before you think about raising the capital required for the business’s smooth functioning, you may need to assess how much it will cost you to found the company.
Many start-up organizations fail even before they become profitable as they would be out of money to keep them going.
You have several ways in which you can fund your small business, including taking out business loans or grants, having other people or organizations invest in yours, and crowdfunding.
Similarly, there are other ways to raise the capital required. Some such ways include getting loans from financial institutions, having venture capitalists invest into your firm, having a partner help with the financing, angel investors, invoice factoring, peer-to-peer lending, and convertible debts.
Also Read: 5 Tips to improve your odds of getting a small business loan
When founding a business or start-up, you should also consider the services you will offer and their prices. Pricing a service may require you to estimate the revenue you want to generate in a year and the sales volume that you will need to be profitable.
The other thing you should consider when it comes to offering services is your target audience and their buying habits and preferences. For this, you must evaluate what most consumers think about the pricing of different services and how your competitors are pricing them.
You also need to think about the products and services that you want to offer to your customers and the profitability it can bring to the business.
If you have taken out business loans to fund your start-up organization, you will need to repay them. For this, you must evaluate how your business is doing and whether it is generating enough revenue and profits. Both your business and personal credit scores play prominent roles in taking out and repaying business loans.
So, maintain a good credit score as it helps you to avail of a business loan and repays it.
Also Read: Tips to safeguard your small business smartly
Most lenders will ask you for collateral when you take out business loans. You can pledge any of your business assets for the same. Many lenders would also be willing to offer business loans without security or collateral. So, do your research about the different business loans and lenders before you decide to take out one. That way, you can find lenders who would be ready to offer you loans for setting up your small business without asking for security or collateral.
Many prominent factors come into play when it comes to setting up a small business. Several of these factors are even related to repaying the loan and your eligibility for getting it.
Lenders may also consider other factors when they process your small business loans. For instance, they may ask for your business or start-up organization documents for verification purposes.
You should also know about the different ways in which you can finance your business. More importantly, it would help if you estimated how much revenue and profits your business will make and whether it will be enough to repay your loans while keeping the company or organization afloat.
Also Read: What are the best accounting practices for small businesses?