More than half a million businesses launch every year in the United States. Of those, many close their doors again within a few years. Others, of course, survive to become the thriving local, national and global businesses we all frequent today. In an ideal world, you want to be among the surviving and thriving.
There’s a reason so many businesses close, though. From the challenges of maintaining a profit margin and being unable to pay yourself in the first several years, to hiring and firing, to staying aboveboard and compliant with the law, there exist any number of reasons a business might fail.
The good news is, by starting off your Texas business right, you can substantially minimize the chances that this will happen to you. If you’re starting a business, here are seven steps to follow that will keep you in good standing, ready to cheerfully serve customers for years to come.
- Explore Business Ideas
So you had a good business idea in the shower this morning. That’s great, but it doesn’t necessarily mean you will have success with it out in the real world. No matter how fun your idea is, you’ve got to make sure it’s viable. Rather than looking for a spark of excitement, look for what will actually sell.
For instance, think of donut shops. How many donut shops can a town realistically have? The answer is: never enough, assuming those donuts are of the highest quality, made fresh daily, and customers trust the atmosphere and staff. On the other hand, your best and brightest goal for a cat-grooming studio will likely fail in a small rural town where there simply aren’t enough cats to groom – and they’re all out chasing mice anyway.
- Choose a Relatively Narrow Niche
We’ve all had that killer idea for a bookshop/teahouse/pottery studio/garden store. It would be called “The Stepping Stone” and there would be live butterflies and slam poetry and … and … pump the brakes. Not only are you going to fail to get permits for any teahouse that has live insects in it, everyone hates slam poetry.
Instead, pick a niche. Do you want to be a garden store, in which case you can raise all the butterflies you want? Do you want a teahouse where you can feel free to chase off your customers with slam poetry? Or do you want a pottery studio with classes and supplies and a clear business direction?
Choosing a relatively narrow niche is important for many reasons, including:
- If you need a loan, the bank will want to see a carefully curated business idea
- If you want to rank on Yelp or other local sites, it’s good to have a specific category
- If you want customers to think of you first when they feel like doing X, same deal
- Pick Your Business Name
This is a fun prospect for many, but don’t be too cavalier. You want a name that is distinct enough to make you stand out in your area, that isn’t trademarked or copyrighted by someone else, and that roughly tells customers what you do. On the other hand, you can always opt for a name that doesn’t express your purpose but that rolls off the tongue nicely and lends itself to branding. Think:
- Noom for weight loss
- Apple for personal computing
- Nike for sporting goods
We don’t have intuitive associations with these name words, but we do know exactly what the company does when we hear them.
- Register Your Business with the State of Texas
It’s very tempting when starting a business to avoid registering. Instead, many people choose the sole proprietorship route because it is the easiest. Why? Because when you form any kind of entity, you have to follow certain steps, such as:
- Register with the Secretary of State and pay an annual fee
- Get a business name and a tax EIN (Employer Identification Number)
- Get a registered agent who can accept documents on behalf of your business
As a sole proprietor, you don’t have to do any of that. And sure, we all dislike extra steps when we could instead sit down at the computer, pick a cute name and start an Etsy shop. But if you do not register your business entity, you may end up being personally liable for medical bills, damages, legal fees and so on if you get sued.
What forming an entity like an LLC does is separate you from your business. It means that any lawsuit can only have consequences for the business, not your personal assets. No matter how devastating the lawsuit, and no matter how much of your business you lose (up to all of it), the plaintiff can’t come after your personal bank accounts, property or other businesses. That’s why registering a business entity is such a good idea.
If you decide to form an LLC there are a lot of steps involved, you can learn more about the process here of exactly what’s involved in forming an LLC in Texas.
- Get Licenses and Permits for Texas
Depending on what you do, you may need licenses and permits. That could include:
- Sales tax permit
- Health and safety permits
- Building and construction permits
- Liquor licenses
- Other permits and licenses related to your industry
- Select Your Location (or Operate Online)
If you’re going to open a brick-and-mortar shop, choose wisely. You want a location that gets a lot of foot traffic, that is zoned for your purposes, and that balances desirability with your ability to pay rent. Make sure you don’t confuse running a business from home with not having to follow Texas business law, BTW. Almost all regulations still apply, and you can still get in a lot of trouble for breaking the law even if you are working out of your back bedroom.
- Open a Bank Account
You should never run your business out of your personal bank account. Not only is that a tax professional’s worst nightmare, it makes it much harder for you to prove your innocence if the IRS sees a problem and comes knocking.
Instead, always have a separate bank account for your business credits and debits. Pay employees, purchase materials, buy continuing education courses and so on from the same account. When you take transactions, have the money flow into that account as well. That way, those expenses are all neatly tracked in one place, with one set of login details, and you always know just where to find it.
- Get Insurance
No one thinks they need insurance until after they need insurance. Keep that in mind if your instinct is to avoid getting it – which you can freely do, given that business insurance is not required in Texas. Unfortunately, if something happens and you don’t have the means to pay for it, you can say goodbye to your business. (If you have failed to form the correct entity, you can often say goodbye to much of your personal assets as well. Time to revisit Step 4!)
Instead of gambling, take the smart approach. Get business insurance to protect you from outcomes such as:
- Property damage
- Bodily injury
- Malpractice
- Equipment breakdown
- Cyber insurance
- Workers compensation
… and anything else you might need, depending on your business sector, whether you have employees, and whom you serve.
- Compile Reports and File Taxes
Reporting and tax filing are critical aspects of staying in business compliance. Remember that Texas has an Internal Revenue Service just like the federal government, and both want their cut. You will need to file the appropriate forms each year, as well as include the right reports pertaining to your business. Check these publications available on the IRS website:
- IRS Publication 334, Tax Guide for Small Business
- IRS Publication 583, Taxpayers Starting a Business
- Have a Resource to Consult with Questions
Unless you’re a professional entrepreneur (and even then), you’ll face all sorts of legal and professional questions along your journey to business success. It helps to have a good source of advice. Whether that’s a knowledgeable friend, a lawyer or a consultant on entity formation, ask them for help at the beginning and keep them in your corner all along the way. That way, if something truly alarming does happen, you’ll know just where to turn in a crisis.
Conclusion
Seem like a lot? Well, there are a bunch of steps to follow if you want your business not only to survive but to thrive. But the happy truth is that these steps are all highly standardized and easy to follow, as long as you take a methodical approach and have the right help. Make sure to get yourself a good business resource, and don’t forget to register your business as an LLC, which protects your company from almost anything the world can throw at it.
Above all, and at risk of sounding cliché, don’t forget to have fun. Starting a business is a choice, and you wouldn’t be here if you didn’t want to do it, so take a deep breath and jump on in!
