In this phase of the startup process, you’re going to learn about all the little things you need to do to make your startup official. It’s time to ignore all those perfectly valid reasons for not chasing your dream and push that start button!
In this phase, you’re going to form you legal entity (to protect your personal assets). You’re going to start the process of creating your business identity, which is how you want people to see your company. You’re going to learn about tracking your finances, taxes, and much more.
If you want all the nitty-gritty details or you need more guidance, consider getting my book. It’s full of useful information and helpful examples.
Find Your Focus
Staying focused is critical to the success of your online business. There will always be more things on your list of “to-do’s” than there will be time to do them. That means you need to protect your time and use it effectively. The best way to do this is to use lists and check things off.
Create a project list for all the big ticket items, like forming your legal entity, building your website, creating marketing campaigns, etc. This list is your roadmap and luckily, I’ve done it for you. That’s what you’re working on right now.
Since each of your big ticket project tasks have a bunch of little ticket items, create a daily task list to help you stay focused and moving toward your larger goals. I put my daily tasks on my whiteboard and cross them out when I’m done. Or you can use the task list in Outlook, create one in Excel or Evernote, or use whatever works for you. Just keep this list small and only include the things you can finish in the next day or two.
Choose a Company Headquarters
Unless you have a compelling reason not to, you company HQ should be in your house. Don’t waste money on office space because you think it looks cool or makes your business seem more official. Save that money for development and marketing. Most successful web startups were launched from a dorm room (Facebook), a garage (Apple, Amazon) or a guest bedroom (my company).
Form Your Legal Entity
You have a bunch of choices for your legal entity, but you’ll probably end up with either an LLC or an Inc. If you’re unsure which one to choose, speak to a business attorney because I can’t give legal advice.
With that disclaimer out of the way, I’ve always used an LLC and it’s worked well for me. It’s easy to setup and it’s cheap to maintain. However, if you’re going to seek investors, you’ll need an Inc. Whatever you choose, you need to file the proper paperwork with your state (of choice) once you have your….
Forming your legal entity and choosing a business name go hand-in-hand because your name has to be available in order to register it. My recommendation is to use a different legal business name than your domain name for a variety of reasons that I discuss in my book. Choose something that’s a little broad so if you decide to expand in the future, your company name will make sense and apply to your expansion.
Get a Tax ID
Also called an EIN, it’s free an easy to get on the IRS.gov website.
Open a Business Checking Account
Personally, I don’t think the bank matters that much when you’re starting. You’ll probably be fine using the same bank that you use for your personal accounts. The most important thing is to have a separate bank account and don’t commingle your business finances with your personal finances.
Dedicate a Credit Card to the Cause
Since your brand new business may not be able to get a credit card, you may need to dedicate a personal credit card for business use. That’s ok. Just don’t use it for personal purchases anymore. Again, keep your personal and business finances separate.
Prepare an NDA
If your idea is unique or new and you feel the need to protect it, now’s the time to get an NDA or Nondisclosure Agreement. This will protect your idea from the people you tell about it (more accurately, it gives you the right to sue them if they steal it). I’ve included a sample in my Web Startup Toolbox that you can tailor to fit your needs.
Write a Partnership Agreement
If you have a business partner, you need a partnership agreement. Period. End of story. It’s there to protect you, to protect your business partner, and to set expectations. I’ve included an agreement that I’ve used before in the Web Startup Toolbox download.
Discuss Your Partner Equity Split
If you have a business partner, don’t assume a 50/50 split is the correct division of ownership. It may seem easier and you might want to avoid the uncomfortable conversation if you think you deserve more, but if there is truly an imbalance in terms of contribution, an equal partnership could be a recipe for resentment, animosity and disintegration.
To help take some of the emotion out of this uncomfortable conversation, I’ve created an Equity Spit Calculator that you can use to more objectively decide on a fair balance. I bet you know where you can get that by now. Yep. It’s in my Web Startup Toolbox.
Choose a Domain Name
If you followed my advice from before and chose a different name for your business, you may still need to choose a domain name. There are a lot of things that go into a good domain name (which I cover in detail in my book), but the most important is length; shorter is better.
80% of the top 500 websites (by traffic volume) have 8 or fewer characters and 2 or fewer words. That’s one of the reasons I chose JPStonestreet.com for my domain name. I’m hoping you’ll be able to remember it better and type it more easily.
However, registering your perfect domain isn’t enough. You also need to register its misspellings so your users will find your website regardless of how they type or spell it.
Your domain name is quite possibly your most important decision to this point in your startup process. Spend some time on it. Do your research (and log it in your Domain Research Log). Ask your friends their opinion to catch things you might have missed (e.g. TherapistFinder aka TheRapistFinder). But don’t let your startup come to a screeching halt. In the end, you may have to choose a domain that’s “good enough” so you can move on.
Choose a Color Palette
Choose a color palette for your website that has one primary color and one or two secondary colors. Use colors that will resonate with your users. Yellow might be your favorite color, but that doesn’t mean everyone will respond well to it.
Color speaks to people on an emotional level, which is where most people make buying decisions. That’s why the web is so blue. It turns out blue is most people’s favorite color and it instills a subconscious feeling of trust and dependability. We don’t know for sure why that is, but you don’t need to understand why in order to use the knowledge to your advantage.
I’m not saying you should use blue and not consider other colors. Mint.com uses green hues quite nicely to tie into their financial theme and Komen.org uses pink hues in accordance with their breast cancer awareness campaign. I’m a big fan of blue (which should be obvious from my website and book cover), but it can be just as effective to choose a color that’s appropriate to your cause.
Create Your Logo
Unless you’re a graphic designer, don’t try to do this yourself. Your logo is the face of your business so it needs to look professional and you have a lot of inexpensive options to get a very professional looking logo designed online.
Craft Your Tagline
Most large websites like Facebook and Google don’t use taglines anymore because everyone already knows what they do. However, a well crafted and memorable tagline can add a lot of benefit to your brand new online business.
Consider using humor, rhymes, alliterations, puns and 3-word lists in your tagline. Be creative and edgy if it fits with your image.
Set Your Pricing
The easiest way to do this is by looking at your competition, which you should have already done during the planning phase. Under-pricing them isn’t always a good decision, though. Try to differentiate yourself in a way other than price. At QuoteCatcher, we actually charged more than our established competition, but we also offered a higher quality product and service.
Get Your Financials In Order
Please tell me you don’t use the “shoe box” method of bookkeeping. That’s a recipe for disaster if you are unlucky enough to get audited (like I was). Use a program like QuickBooks, Peachtree, Mint, Outright, Shoeboxed, or some similar tool to keep your finances organized.
Hire an Accountant
Business taxes are NOT easy. Don’t try to do them yourself. Your time is better spent working on your business. Plus, a good CPA will save you more in taxes than they charge for filing them.
Research Manufacturers and Suppliers
If you’re going to sell things on your website and you’re not planning to make them yourself, you’ll need to get them from somewhere. Now’s the time to find out where, and most importantly, how much it’s going to cost you. If you can’t but your merchandise at a steep enough discount to allow for a proper markup, you may need to go back to the drawing board.
That brings us to the end of the Starting Your Startup phase. If you’ve completed all the tasks on this list, your web startup is well on its way. Congratulations!
Now, you can take a break and appreciate your progress and all your hard work, or head over to the next section on Building Your Website >>