Regardless of your major, summer is a great time to test out your entrepreneurial skills. What’s that you say? You’re not planning to start your own business ever? Don’t be so hasty. According to the Kauffman Index of Entrepreneurial Activity report over half a million new businesses started up in 2020 (the most in the last 15 years), and most of those entrepreneurs were NOT business majors. Instead they were an eclectic bunch in a variety of careers. But because of the poor job market, they couldn’t get hired anywhere else. So they took the bull by the horns and created their own employment opportunities.
Today there are more college degree options for entrepreneurs than there ever have been before. And with the popularity of online education growing, students can learn the mechanics of running a business from the comfort of their own homes—which is where most small businesses start anyway. Sole proprietorships, with just one employee, that being the person who started the company, are taking over as the most popular business structure (because the economy is forcing people to take their careers into their own hands). So even if you’re an art major, or studying to be a teacher, or going into health care or human resources, chances are you will end up being self-employed at least once throughout your career.
So in the interest of getting a jump on your future, here are four steps that can take you from college student (or recent college grad) to a full-fledge business owner (name plaque not included).
- Define Your Product or Service
Small businesses do one of two things; they produce a product that people will buy or they provide a service that’s easier for people to pay for than do themselves. If you do more than one thing well, pick the thing you do best and then build your business around that. A fair amount of small businesses fail because the business owners try to be all things to everyone. You have a better chance of success if you provide your customers with one perfect thing, instead of several mediocre things they could get anywhere else (and probably at a cheaper price).
- Decide on a Business Structure
Basically, there are three ways to structure your business: sole proprietorship, corporation, or LLC (limited liability company). Each state has specific rules on how these run, so check with your local government websites to find out more.
However, in a nutshell, a sole proprietorship is usually just one person—you doing business as (DBA) your business name. You use your social security number as your business’s tax ID, but the downside is you have to pay a 15 percent self-employment tax on your business income IN ADDITION to the state and federal income tax you already pay.
Corporations and LLCs have more tax advantages, but they also have a lot more government paper work that has to be filed quarterly and annually. The downside here is if you forget to file it on time you’re usually on the hook for some hefty fines.
- Pick Your Business Name
Too many times people don’t put enough thought into their business names. Studies have shown that companies with clever names get more unsolicited business than those with generic family names that do nothing to describe the product or service. For example, a hair salon called “Curl Up and Dye” will probably get more spontaneous foot traffic than one called “Betty’s Hair Salon.” Of course, eventually it all comes down to customer service and referrals. But initially you want to create as much buzz about your business as possible and a good business name can help you do that.
- Select Your Management Team
If your business is a sole proprietorship where you’re the only employee, then YOU are your management team. However, if you’re going into business with multiple people (or even one other person) you have to decide who will be responsible for what. DON’T ASSUME ANYTHING! Write down job descriptions and be as detailed as possible. Remember, you can always change it along the way, but never start out assuming that everyone has the same mindset as you. The number one thing that kills small businesses is infighting among management. If your management team is dysfunctional, then your business will be, too.
If all this seems overwhelming, rest assured help is out there. Take a basic accounting or entrepreneurial class BEFORE you start a business. Online education is a great way to get some quick training without giving up your current job. Business schools at most colleges now offer majors in entrepreneurship (or at least classes), leaving you with the hard part of deciding how to use your skills to start your own business (this summer and beyond).