From freelancer to small business owner

(Note: This article was originally published on Startup Southerner.)

The 3 key foundational things you need to transform your side-hustle into a small business

By Alex Hubenthal, owner of Bookscaping

Are you ready to take your side-hustle and turn it into a viable business but don’t know how or where to start? So many budding entrepreneurs have been in your shoes at one point in time or another—including myself. When I started my first business, I had no idea what a DBA was or what the difference between a C Corp and an S Corp was. But rest assured, I am here to give you all the information you need to get started so you can run the business of your dreams. Start with these 3 key steps:

  1. Select a business entity type.

The very first thing that you should be considering when turning your side-hustle into a small business is selecting your business entity type. In business, you have the option to file official documents with the state where you reside to provide yourself legal and financial protection. These documents have a fee associated with them that range between $100-$400 depending on the state and entity type. These documents are filed with your state’s Secretary of State Division of Corporations. Some states allow you to file digitally so you can get your documents immediately, while others are still on the paper system where you have to mail in your documents and then wait 1–2 weeks to hear back from the state. When you are paying, make sure that you request official copies of your documents and a certificate of status. You will need this later. Also, it’s important to note there is an annual filing fee (also known as an “Annual Report”) that is in most cases cheaper than the initial filing with the state but you must pay this annually to keep your records current.

For information on different business entity types, you can check out my blog post here.

  1. Apply for an EIN

After you receive confirmation from the state that your business entity is approved and in an “active status,” you will now need to apply for an EIN (Employer Identification Number) with the IRS. You need this regardless if you have employees or not. This is free to obtain and only takes a few minutes. This number is the equivalent of your personal Social Security Number and you will need this number when filing your business taxes at the end of the year or paying taxes throughout the year as required by your state/business type. To obtain your EIN, go here and follow the prompts. You will have an option to receive a digital copy or a paper copy by mail to the address you provided the IRS when filling out the form.

  1. Open a business banking account

The third thing that you want to have set up is a bank account for your business. You must have a bank account set up for your business that is separate from your personal bank accounts. I cannot stress how important this is. If you start conducting business transactions in a personal bank account, you are going to have a very big financial mess on your hands. When budding entrepreneurs are getting started, I recommend that they go to a large national bank. The reasoning behind this is that when you go to set up your accounting platforms, we can guarantee that the accounting software will link up to your bank account so you can make reconciliations a breeze. My three favorite banks are Wells Fargo (Simple Business Checking), Chase Bank (Chase Total Business Checking) and Bank of America (Business Fundamentals Checking). These all require minimum balances and may have a nominal monthly service fee. In most cases, you can avoid the service fee by using a debit card associated with the account or agree to receive digital statements. Note, you will need your business filing documents provided from the state when opening a bank account.

You probably overlooked these 10 steps to supercharge your startup success

(Note: This article was originally published on Startup Southerner.)

by Alex Lavidge

Prior to raising capital, there are a lot of steps a startup needs to take to set you up for success. Here’s what they are:

  1. Be honest and assess where you’re at.

Before you get ready to create the next billion-dollar unicorn startup, or open another coffee shop down the street, how much cash do you have tucked away in the bank? What’s your debt-to-limit ratio on your credit cards? Still carrying around your share of over $1.3 trillion student debt in the U.S?

One of the biggest mistakes aspiring entrepreneurs make is thinking that launching a new business could be instant relief from their money woes or that it is a shortcut from going back to joining 70% of Americans who hate their jobs.

Regardless of the outliers you have probably heard of, the majority of successful entrepreneurs focus on building “runway” and stabilizing their finances in their lives before launching a business. From there, creating a minimalist lifestyle that allows you to maximize your free time for personal development (and the checkboxes to follow in this article) is the first step.

  1. Develop skill sets on your natural strengths.

Trying to be good at everything won’t make you even average at anything.

But don’t feel guilty if there’s a side of you that’s a generalist. The good news is you’re most likely destined to be a successful entrepreneurJust balance that passion to understand everything with becoming a specialist in something. It will make your entrepreneurial path easier.

If you’re unsure what that specialty should be, invest time in getting tested for your natural strengths and aptitudes. Discover your “flow.” This will help you identify a speciality you’re passionate about for when the day comes that you build your team.

  1. Launch your personal brand.

In advertising it is well known that a brand is a personality — so make your personality a brand that people want to get to know.

There’s a lot being written these days about how to be more likable. (However, don’t try to force it. In short, be authentic when you tell your story and focus on making other people feel good.)

Launch a blog, write articles for publications that already have audiences, and get your name out there so that when people search for you online the results accelerate the rate at which you’re trustworthy. Trust and credibility builds a solid foundation for any successful entrepreneurial path.

  1. Assess your area and find your tribe.

Don’t just go around posting in forums or show up at every business networking event where you pass out a bunch of business cards. What will quickly feel like tiring work probably won’t work out for you.

Instead, build meaningful relationships. Ask questions. Identify what motivates others. Developing your empathy will get your farther than mindless hustle.

From there, help solve problems and add value for other successful business owners and entrepreneurs you encounter without expecting anything in return. When you focus on solving problems facing prevalent industries or adding value to consumers in your region, you’re more likely to be successful. Eventually, you’ll develop a reputation and you’ll have a community of friends who feel as though your success is their success.

  1. Get paid to learn and pay to keep learning.

Whether you’re working full-time for another startup in an industry you’re passionate about or you’re consulting on the side, never stop discovering creative ways you can gets paid to learn.

From there, you’ll learn a lot about what works (and probably more on what doesn’t work) before launching a company. Take notes and pay particular attention toward what you can do to create a work culture that attracts the brightest talent.

From there, keep saving money that allows you to take time off to learn for free as well as pay to take courses online. Consider, for instance, enrolling inone of the top growth hacking bootcamps to help you stand apart from failing entrepreneurs who focus too much on building a product rather than focusing more on sales and marketing.

  1. Work on launching projects first.

Rather than falling into the trap of failing a bunch of times when launching a new company, consider launching short-term projects (ideally those that can make money) with as few moving parts as possible.

For instance, this could be as simple as putting an ebook online with a landing page, or launching an online course. (There are more ways you can make money that can be a part of the “getting paid to learn” lifestyle so important to every aspiring entrepreneur that only require an investment of time.)

These types of projects are a great way to turn acquaintances and friendships into trusted working relationships that over time keep pushing you to be at your best. (Start by signing up for events like 48 Hour LaunchStartup Weekend, or host your own.)

  1. Self-finance before thinking investors care.

Want to know how to get your business financed with instant approval, zero interest, and never having to worry about managing expectations with investors? Just make a withdrawal from your savings account.

It takes even less than $5,000 today to get a tech startup off the ground today compared to $5 million over 15 years ago.

But that’s money not necessarily going toward product development. Invest in a website, a CRM database, prototyping software (or 3-D printing to demonstrate a concept design), business cards and establish relationships that become commitments to buy your product or service before you launch. The biggest expenses should be measured in time, not money, in the early phases of your startup.

  1. Invest in market research until it hurts.

Fred Smith, CEO and founder of FedEx, most recently at 36|86 got on stage and told the story of how he funded three separate independent market research studies on the future of logistics, despite being tight on cash.

Most entrepreneurs don’t even fund one study before they start and will go through months, even years, blowing through raised capital (usually raised from friends and family) until they conduct tedious A/B tests and eventually determine the best product-market fit.

  1. Study checklists and systems of other successful companies.

There’s a saying in startup culture: “goals are for losers — systems are for winners.”

Don’t just study “business plans” and “pitchdecks” of other companies that have done well over the years. Analyze job descriptionsGANNT charts, workflow charts, audits and narratives (even if you have to put them together yourself) of how other companies went through a logical sequence of tasks to complete projects and reach key milestones.

In other words, don’t just visualize the outcome — visualize the process and habits that will take your company from good to great. This will help you avoid the trap of feeling like you’re “building the ship as it’s leaving the harbor,” another saying well-known by many veteran startup founders who have learned over the years that most of those ships end up sinking.

  1. Sell the outcome to customers before talking to investors.

Once you’re ready to scale, investors are going to place more value on a validated CRM database full of qualified sales leads than a vision with an unvalidated product-market fit.

When a pain point is prevalent, you’ll have no trouble finding people who want to talk to you about it and verify that if you had a solution that really solved the problem, they’d be likely to try it out.

You may even find that your customers end up being the best types of investors you can have.

These are just 10 checkboxes, but for additional reasons why (tech) startups fail check out the classic 18 Startup Mistakes That Lead To Failure created by Paul Graham, co-founder and partner at Y Combinator.