Small businesses have an advantage over big corporations in that they can offer personalized one-to-one services and are flexible about shifting forces in the market. Yet their success can dwindle if they don’t have a business organization outline to ensure maximum productivity. The best time to create an outline is during the business’s initial stages.
Creating an organization outline may seem complex, especially without a business-related degree. However, you can create an outline that organizes your small business with the right mindset and resources. In this article, we’ll go through the two most critical components of a business organization outline. Creating a business plan and choosing the right small business structure.
Why is Business Organization Outlining Essential?
Before hoping to create a business organization outline, let’s look at why organization outlining is essential, especially for small businesses. The main reason behind creating an organization outline is to establish a robust organizational structure that grounds a business from day one. An organization plan keeps your small business productive and efficient. Here are four additional reasons to create a business outline for your small business.
- Gain Tax Benefits: Your business structure will determine tax benefits such as exemptions. In addition, organizing your business will make filing taxes easier and keep up with your tax obligations.
- Improve Legitimacy: One of the outlining steps is creating a business identity. Customers trust businesses that have gone through the lengthy but essential business setup process; for example, they have a registered name and pay their taxes.
- Protect Personal Assets: Some business outlining processes, such as setting up a business identity and accounts, will protect your assets from different types of asset loss, including illegal forfeiture. For example, buying and registering a property under your name protects your property legally.
- Make Raising Funds Easier: Investors want to know that you have everything under control and know what you are doing and where you want your business to head. How can you achieve that without a solid organizational structure in place?
There are two essential components of creating a business outline. Both are essential, and you should start early on the right foot. Let’s start with creating a business plan.
Creating a Business Plan
Part of building a business organization outline is creating a business plan. But is the business plan dead? It depends on what goes into creating the plan and what you plan to do with it. If you create a lengthy 40-page document for your heavy equipment rental and dump it in your pile of files, it’ll offer no benefit. All Business, a contributor group at Forbes, advises against the traditional lengthy business plan because it wastes time and quickly becomes obsolete.
A business plan is not just a document; it’s an informed plan. If you plan to use it to raise funds, some of the essential information a potential needs is a definition of the problem you intend to solve, the solution, and the market opportunities. Let’s examine the three most critical aspects you should remember when creating a business plan.
1. Goal Identification
The ultimate goal of any business is to make a profit. Yet that’s an oversimplification. There’s a reason you set up your current business. Something triggered your idea. For example, you may have noticed a business opportunity and a market need for forklift rentals. So, you have an overarching vision, but there are also specific goals.
Part of creating a business organization outline is identifying your immediate and long-term goals. For example, if you started a bike servicing business, your goal might be to earn $90,000 in year one or increase customer engagement online. It’s best to be clear about what you envision for your business soon.
Apart from financial goals, small businesses have other goals. The next most common goal is growth. For example, a business may want to cover a wider market share or increase its customer base. Most small businesses also want to improve employee engagement, for example, by organizing training and seminars.
As your business grows, your goals will change too. Back to our example, if you service bikes, your social goals may also grow as your business grows. You could start servicing a few bikes for free each week for underprivileged kids as part of giving back to your community.
2. Market Research
Goal identification guides operations on your side of the business. However, it would be best to consider the customer’s side through market research. The research will guide your marketing efforts. According to the Small & Medium Business Trends Report by Sale Force, 60% of consumers expect businesses to understand their unique business needs and expectations.
Since your resources aren’t similar to a big corporation’s, your small business marketing should be strategic. You can leverage your ability to connect with your audience directly. For example, if you start a chiropractor practice, you can use referral bonuses to increase your loyal customer base.
Remain aware of what your competitors are doing. For example, if you’re in the events industry, learn how other event rental companies market their services. Use oral surveys to understand what your potential clients need. Draft a strong value proposition through your marketing research that’s hard to resist.
Another best place to start is digital marketing. Setting up a website and email marketing will give you a platform to showcase your products and services. Leverage the power of social media to keep potential consumers engaged with your product. If you have a website, offer valuable and helpful information using the blogging platform.
3. Financial Plan Preparation
Business and personal financial planning are other critical aspects of creating a business plan. Small businesses that include financial planning when creating a business organization outline are poised for success and effectiveness. Everyone needs a financial plan, but you need it more as a small business owner.
According to Nerd Wallet, a financial plan gives you a detailed picture of your current financial status, financial goals, and any strategies you have to meet these goals. A financial plan doesn’t necessarily mean a document like a business plan. It’s more of a process. For your small business, financial planning begins by asking the question. Where do I want to see my business in the next two, five, or 10 years?
If you have already launched a small business, you have a growing sense of your financial status. One of the best strategies you can use for financial planning is tracking your money. A financial specialist can help you with this, so you can focus on other elements of your business. With a proper understanding of your financial status, you can make a plan to tackle high-interest debts and invest in your business’s growth. For example, you can create a plan to save towards opening a new branch and increase your presence near clients.
Selecting a Business Structure
Selecting a business structure is another critical aspect of building a business organization outline. According to the U.S Small Business Administration (SBA), your business structure determines every aspect of your business, such as how you operate daily, pay taxes, and how much of your assets are at risk. Therefore, you must choose a business structure that matches your needs.
For example, if you want to provide an air duct cleaning service, should you go solo or enter into a partnership? In this article, you’ll learn the different aspects of a business structure, including tips on choosing the best match for your small business needs.
1. Choosing the Perfect Structure Match for Your Business
Hopefully, you now appreciate the importance of choosing the right business structure for your business organization outline. Changing a structure in the future is possible, but it can be an intense process, so it’s best to choose the right first time. But how do you choose?
We’ll use guidelines from the government-led Small Business Administration. It’s also best to consult with a financial consultant or attorney to know the limitations and benefits of each business structure.
- Sole Proprietorship: It’s a recommendable choice for low-risk businesses and entrepreneurs testing an idea in the market. According to the U.S. Chamber of Commerce, 14.4% of all small businesses are sole proprietorships. A sole proprietorship is a good choice for small businesses in the service industry, such as commercial plumbing, consultancy, and personal coaching.
- Partnerships: It’s a good choice if you have more than one professional looking to test an idea before forming something more formal. Attorneys, dentists, and contractors can start small businesses using partnerships.
- Limited Liability Company (LLC): LLCs are recommended for medium to large businesses with owners with significant personal assets they want to be protected.
2. Setting up Your Business Identity
Once you have chosen a business structure, the next step is registering your business. You’ll need a tax ID number and file for licenses and permits in the registration process. The most basic aspect of your business is the name and domain of your website. It’s what goes to business signs and any marketing outlets. The best part? Your business is legally protected.
Registering your business is a legal process, but the process can be quite simple for small businesses, depending on your location. For some businesses, as far as you have registered a name and gotten a tax ID, that’s all you need. However, it’s best to consult with local agencies to know what your state requires.
Apart from a name and tax ID, you’ll need other items to establish your business identity and brand. Most small businesses typically start with setting up a website and creating a business logo. You can easily find such services from a local marketing agency. If you have physical premises, you might need to refurbish them to reflect your business identity, for example, by painting your brand color and installing high security door frames to protect your assets.
3. Setting up Your Accounts
You may also need to set up business accounts to separate your personal and business income streams. Remember, the whole point of a business organization outline is to keep your business organized, effective and productive. In addition, according to SBA, having a business account will help you keep compliant and legally protected.
You probably already own a personal account, and using the same bank may make sense. However, you can shop around to ensure you get the best deal—low rates, transaction fees, and benefits. Choosing a professional and helpful bank will save you from problems such as exorbitant fees and poor accessibility. Always ensure that your bank is FDIC-insured.
4. Understanding Your Tax Obligations
Depending on your business structure, your tax obligations will differ. You’ll pay personal employment and personal taxes for all the business structures we evaluated. For limited partnerships, you may not pay personal employment taxes. Having a tax attorney guide you through your tax obligations is best.
Another professional you could consider hiring is a tax accountant. Once your business picks up, keeping up with the many documents and income streams may be hard. An accountant’s sole job is to keep your finances in check. After paying your taxes, have a plan to file tax returns. The IRS has made it easier for small businesses to keep tax compliant, so you can always check their website to access their helpful resources.
Creating an effective business organization outline is a winning strategy. Your small business will be more organized, efficient in service provision, and easier to build legitimacy for potential clients and investors. If you can be clear about the business structure that works for your needs and have a business plan that captures all the essential information you and your investors need, you’re poised for success as a small business.
