Tips for Starting Your First Business in Missouri
Any Missourian will tell you that our local communities are changing and becoming better places to live and work thanks to recent growth in small businesses. This hasn’t happened by chance — both Missouri state and local governments have made a concerted effort to support the economic development of communities and growth of downtown business districts through programs like DREAM (Downtown Revitalization and Economic Assistance for Missouri), which selected Chillicothe as one of its target communities in 2007. Today, Chillicothe is considered one of the top communities in Missouri to start a small business, with the average establishment receiving over half a million dollars in revenue each year.
According to the US Small Business Administration, small businesses in Missouri account for 97.5 percent of all state businesses, employing almost half of all working residents. Economically, the success of small businesses makes sense, as residents of Missouri have more spending power than many other states. A higher than average minimum wage coupled with lower than average costs of living, including lower housing and childcare costs, as well as lower than average student loan debt, means that Missouri residents have more disposable income at hand. If you’re thinking about starting your own small business, this is a great place to do it. Below you’ll find some tips on how to get started.
Create a Business Plan
Most people decide to start a small business because they have an idea for a store, restaurant, good, or service, and they want to turn that idea into a livelihood. But building a successful enterprise on an idea, no matter how good it is, will never be simple, as there are many different aspects of running a business that must be considered before you set up shop. The Small Business Administration (SBA) recommends that everyone who wants to start a business begin by writing a business plan. Business plans not only allow you to envision the reality of your small business, but are also helpful to show the viability of your future business to potential financial partners, including lenders, landlords, suppliers, and local government agencies.
Traditional plans can be quite detailed, taking time and deliberation. If you know you will need to apply for funding to help cover startup costs, the more exacting your plan is, the better. According to the SBA, traditional business plans can contain many different elements (listed below), depending on the type of business and how the plan will be used. Here is a brief overview of possible items to include in your plan, but for details, examples, and templates, visit the SBA website:
- Executive Summary and Company Description: Include mission statements, what your business will sell or provide, basic facts such as information about employees, location, and who will run the company, as well as financial information. In the description, you’ll go into detail about your company including details about what needs your company will address in your community or beyond, who your customers will be, and your business’s strengths.
- Market Analysis, Marketing, and Sales: Show that you have examined your competitors to see what they’re doing right (or wrong) and what business trends will support your success. Consider what a common business transaction will look like. You’ll also want to talk about how you’ll reach your potential customers and keep them coming back.
- Organization and Management: Talk about who is in charge of your company and in what capacity. Give a little bit of information about the leaders (yourself included) and why they’re suited to their roles in the overall organization. If there will be a lot of employees, an organizational chart would be helpful here. In this section, you’ll also need to choose and describe a business structure (information below).
- Service or Product Line: Spend some time describing your product or service. Why will customers come to your business? What will the community get out of it? If you’re developing a product, make sure you can get a copyright or patent for it.
- Funding Requests and Financial Projections: Think in terms of the next five years. How much money will you need to establish and run your business, from buying equipment and securing a lease to paying employees and other ongoing costs. How much money will you need to borrow to get going? Do you have any collateral to use including personal property to help secure a business loan?
Chances are you will not be able to complete a thorough business plan in one shot. Begin with a rough draft of your plan, setting aside anything you’re not sure about to return to after you’ve done your homework. In the next section you’ll find more details about certain aspects of planning your business, but keep in mind that there are numerous resources, from state agencies and local chambers of commerce to community lenders, who can help guide you through the process of planning your small business.
Know the Legal Side of Running a Business
As you start down the road of establishing your business, one of the first legal requirements you’ll encounter is creating a business entity and choosing the form it will take, or its business structure. The idea is that you create a legal entity that is separate from you, the individual business owner. Choosing the right kind of entity is extremely important and should be done with care. As The Entrepreneur advises, “Not only will this decision have an impact on how much you pay in taxes, it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.”
The Basic Kinds of Business Structures
- Sole Proprietorship/Doing Business As (DBA): Common and easy to create as there is only one owner. However, that owner is personally liable for the business’s financial obligations. In Missouri, a Sole Proprietorship does not require articles of incorporation to be filed with the Secretary of State, but you do need to register the name of your business as a “Fictitious Name.”
- Partnership: Two (or more) people share profits and losses, taxed through their individual tax returns. Like a sole proprietorship, partners are personally liable for any financial problems, it doesn’t need articles of incorporation, but does need you to register a Fictitious Name.
- Corporation: Protects individuals from personal liability. Requires a lot of bookkeeping and articles of incorporation to be filed with the Secretary of State.
- Limited Liability Corporation (LLC): A cross between a corporation and a proprietorship or partnership. An increasingly popular option, it allows owners to be protected from liability like a corporation, while enjoying the tax benefits of sole proprietorship. Also, requires articles of incorporation to be filed with the Secretary of State.
Because whatever structure you choose will have different ramifications depending on your type of business and its needs, take your time to do your research, and seek assistance at state or local offices, as well as at your selected financial institution, with any questions or concerns you might have.
Understanding Other Legal Requirements
After you file the appropriate articles of incorporation or register your business name, there are a number of additional agencies that you must confer with in order to legally do business. Below are a few of the big ones, but refer to the Secretary of State’s page of important agency and organization links for a more comprehensive list.
- Missouri Department of Revenue: All businesses must register and file taxes, including sales tax if you sell products, with the Missouri Department of Revenue. Their site provides information tax requirements for small businesses.
- Internal Revenue Service (IRS): All corporations must apply to get an FEIN or Federal Employer Identification Number. If you’re a DBA you can choose to use your social security number instead.
Regardless, you’ll need to regularly file several different income and employment taxes with the IRS.
- Division of Workers Compensation: In Missouri, if you are going to employ five or more employees, you’ll need workers’ compensation insurance either through an insurance carrier or self-insurance, which sometimes can save on costs.
- Missouri Division of Professional Registration (MDPR): In order to protect the public from fraud, negligence, and other forms of misconduct, the MDPR provides regulation and professional licensing for 42 different fields, from acupuncture to real estate. If your small business is part of one of these, you will be required to apply for and renew a license with them every year.
Find the Right Location
When all is said and done, one of the most important decisions you can make as a small business owner is determining where you will be doing business. Even if you are selling products online, you will need a place to store those products, as well as an office where you will conduct business. There are a number of factors to consider, but here is a simple list to get you started:
- Neighborhood: Will it be easy for your target market to find you? Is the area around the location inviting for your customers? Is there already a lot of competition nearby?
- Visibility to people passing by/potential customers: Would a location on a busy street increase foot traffic?
- Proximity to you and your employees: Will the commute make it hard to attract employees or make it harder for you to visit your establishment?
- Parking and accessibility: Will your customers, including disabled customers, be able to easily park and enter the premises?
- Local taxes: Do certain local municipalities have higher or lower taxes?
- Zoning: Are there any restrictions that would prevent you from legally conducting business in certain locations?
- Size and layout of space: Is the space big enough? Too big? Will it grow with you if your business expands, or will you have to plan to move in the near future? Will the utilities and existing features serve your needs, or will it require upgrades or renovations?
- Cost of space: Is the cost sustainable given your projected income? Is it worth trading off some beneficial features for a lower rental or purchase price?
Ultimately, you’ll want to find a space that will help, instead of hinder, the success of your business. As Nick Banks, a real estate advisor at LoopNet writes, “For some businesses, location is critical. For others, it doesn't matter as much as one might think. The determining factors have to do with what business you are in, how you reach your customers, and how you interact with your team of employees.”
Establish a Relationship with Your Local Financial Institute
Lastly, you may be surprised at how central your financial institution will be in both the startup and the everyday goings-on of your business. Establishing a relationship with a bank that you can depend on as you venture down the road of small business ownership is vital for its success.
BTC Bank is here to help local businesses!
BTC Bank recently celebrated our 100th anniversary, and we’ve been privileged to be an integral part of our local economy for the past century. We are a dedicated, Missouri-based bank who proudly supports the growth of local businesses and their surrounding communities, providing a number of services from small business and agricultural loans to deposit accounts. Visit one of our 12 locations to find out what we can do for you and your small business.