Ecosystems: Finance & Funding
- Your business name
- Your business structure
- Products vs. Services
- Your niche and target audience
- Funding needs and options
Naming your business:
Importance of name (what’s in a name?)
Your company name has implications that reach farther than you may think. You must consider branding, marketing and the web. Your company name preceeds you and should be easily remembered and work well with SEO marketing.
- Your company name IS your first impression to others. Do you want your name to explain what you do, or be more abstract? While something like "Bodybuilding.com" is pretty obvious, “GoDaddy.com” is more abstract. Either can work depending on your marketing strategy.
- Remember also that a fun and unique name may be exciting but may also not impress investors. If you are sold on a trendy name, you may want to consider using that name online but operating under a different, more generic business name. This may also give you opportunities for expansion down the road.
- A VERY important thing to consider in this age of technology is your domain name. Consider finding a domain in advance of deciding on your company name. You will want a domain name that is as close to your company as possible. While the dot com’s are the most widely used, also consider you may find more choices looking into .us, .co, .net, etc. There are now domain extensions for specific business areas like .health or .business. There is even a new .beer for 2018…something you craft beer folks may want to consider. Check out GoDaddy.com or other domain registration sites to search for your domain name. Also consider hyphenating your name if your domain is not available – this opens up additional options for you.
Business Structure – what is right for you right now
Okay, so now we get to the part that is not so exciting…choosing your business structure. While not exciting, it is necessary. The following is a brief overview of each type. You may want to talk to your coach from the Garrett College’s Entrepreneurship Course to help you decide what makes sense for your business.
This is an unincorporated business started and owned by one person. It is free to set up through the Internal Revenue Service. You are still personally responsible for your business and there are no tax breaks.
Partnership– This is also an unincorporated business meaning is does not possess separate legal identity from its owners. Profits from a partnership get divided among owners and reported on their individual tax returns. Partnerships include general partnerships, limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs).
Corporations (C and S)
- S Corporations - An S corporation has one class of stock and no more than 100 shareholders, none of whom can be another for-profit business or a person without a green card who doesn’t meet IRS residency requirements. Profits are taxed on shareholders’ tax returns, and shareholders have limited liability.
- C Corporations - A corporation whose profit is taxed once on the business level and a second time on an individual basis when earnings are distributed to shareholders, who have limited liability for the business’s debts. C corporations can have multiple classes of stock and an unlimited number of shareholders. C Corporations, specifically a Limited Liability Corporation (LLC), are probably the most common for business startups. They allow businesses to avoid double taxation, protect the individual(s) by creating a separate entity, changes can be made easily and it requires little attention once set up.
**Again, you will want to consult with your business coach or coach through your Garrett College’s Entrepreneurship Course to decide what is right for you.
- When to transition - Switching business structures is possible, but it’s best to decide early on which one you’ll need for the next few years. It can get complicated and expensive to change structures.
Product or service business?When we talk about entrepreneurship, most people instinctively picture a product for sale. However, many great companies do not offer a tangible product, but, rather, a service. Think of cleaning services, landscaping services and consulting services. Accountants, lawyers and even doctors offer services for a fee. Determine which way (or both) your business will take you.
Defining your audience/ideal client
What is a niche? Why it is different from business model of past?
In the past, companies focused on the broad brush, meaning, offer as much as possible to gain the highest number of customers through your doors. Today, that is not necessarily the case. With the global reach of the internet you need to consider your niche. A niche is a smaller, more segmented part of the marketplace. Even brick and mortar businesses generally have an online presence where they sell their products and services in addition to their market share that comes through their actual doors.
What is your niche and your target audience?
A niche is not the same as your target audience. Your target audience is the group you are pursuing as your customers like dog owners, rock climbers, women in the city, etc. Your niche is your area or specialization like yoga for rock climbers, footwear for city women, ect. To be effective you need to identify both.
Why do I need a niche?
To be effective at marketing, a niche allows you to be focused an not try to do too many things at once. Not EVERYONE is your potential client. A niche makes it easier to identify and target potential customers and become a legitimate expert in your area. A niche makes it easier to find repeat business and provides for less competition because you are unique.
While most new businesses actually do not pursue start up investments and rather rely on personal savings, credit, family and friends; some businesses do need to pursue capital from other sources. Some things to consider if you go down this road:
How much will you need to get started?
You need to consider EVERYTHING – especially paying yourself! Make sure you are conservative here especially for the first few years of your business which can be the rockiest.
Sources of funds
Again most start ups rely on personal loans, business loans, loans from friends and/or family. These types of capital require no strings when it comes to running and growing your business -assuming you pay uncle Charlie back his investment otherwise, Thanksgiving is going to be a doozie.
Beyond that, you may want to seek out Angel Investors. These individuals or companies provide funding for early-stage startups in exchange for part ownership in your company. They may also offer mentoring for new business owners or can even expect some control over business decisions. In general, angel investors participate in less than 3% of new companies.
Less than 1% of startups find capital from venture capitalists. These funds generally have many individuals as part of the investment and invest in many companies in exchange for equity in the company. These funds are much harder to obtain and generally require some traction from the business to prove success.
Your financials are a huge decision that should not be entered into lightly. You, of course, will try to minimize costs, but don’t see yourself short.
Your GC Entrepreneurship coach can help guide you through this process so you can make the smartest financial funding decisions possible. Learn more about the course at Garrett College’s Entrepreneurship Course.