How to Start a Business in California
According to the Small Business Administration, California is home to 4 million small businesses that employ over 7 million people. The Golden State’s large population, proximity to cities, beaches, and mountains, and talented workforce make it a wonderful place to open a business.
But do you know how to start a business in California? Keep reading to learn the essential steps!
10 Steps to start a business in California
While your new business will have unique demands to get started, almost all people will need to complete each of these tasks.
1. Evaluate your idea
People often fantasize about starting their own store or bar and being their own boss. With shows like Shark Tank and The Profit showing us the endless possibilities of self-employment, it’s no wonder why many people want to become entrepreneurs.
Also, with so many successful venture capitalists on the West Coast, many money-motivated people want to know how to start a business in California and cash in on the craze.
However, you need to be honest with yourself and carefully review your business idea. Pulling the trigger too soon and rushing into things can result in lost money, debt, and even legal problems.
So, ask yourself these questions to see if you should go forward with starting a business:
- Am I financially prepared? Many new businesses do not make money during the first year, so you better have savings or other income.
- Do I have the time and energy? Entrepreneurs do not work a simple 9-5 schedule. You will be up day and night managing your business.
- Am I ready to manage others? Depending on your idea, you might need to lead a team. This includes hiring, training, and firing workers.
- What happens if I fail? Unfortunately, 50% of small businesses close within five years of opening. Make sure you have a plan in case you must shut down.
2. Write a business plan
After determining to continue down this path, you want to form a well-thought-out business plan. This step is essential as a business plan helps you review all the key aspects needed to get started. The document will also help you obtain financing at a bank or attract partners and private investors.
The Small Business Administration suggests covering these topics in your plan:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
3. Acquire startup funds
No matter how innovative your idea is, you will need money to make it a reality. For many small business owners, funding is the largest hurdle to get over. Unlike experienced entrepreneurs who have vast networks of investors, new business owners have limited resources to get started.
Luckily, there are a few methods to finance your business:
4. Create and register a legal business entity
With money in your pocket, you can now begin to invest in your California business. One of the first steps is to form a legal business. Not only does this make you much more professional, but it also provides several aspects of protection.
First, creating a business entity places a clear separation between your personal and professional lives. For example, if the business acquires debt or faces lawsuits, only the business will be responsible for repayment (in most cases).
Second, registering your business secures your official name. The State of California will reserve your name and prevent other similar entities from doing business under that name.
To form an entity, you need to choose one of the following:
- Corporation
- Limited Liability Company
- Limited Partnership
Next, you will need to register your business with the California Secretary of State.
5. Register for an EIN
Since you are creating a separate business, you will need a separate tax account. The Internal Revenue Service provides businesses with an Employer Identification Number (EIN), which is similar to your personal social security number. This EIN will be required when filing taxes, paying wages, and handling other business functions.
6. Open a business bank account
Just as forming a business structure separates personal and professional, so does opening a business bank account. At the very least, you will want a checking account to handle all financial transactions. No personal funds should ever enter this account, preventing you from comingling money and complicating bookkeeping.
As a nice perk, starting a business bank account also makes you appear more professional. All checks, invoices, and other documents will have your business name instead of your personal identity.
7. Get your business licenses
No matter what type of product or service you provide, you will need some official licenses or permits to do business. California has an array of permits for businesses, but some common items include:
- Business tax certificate
- Sellers permit
- Public safety permit
- Alcoholic beverage license
California makes finding the right licenses incredibly easy. You can use the CalGold wizard to search for required permits.
8. Choose a location
Next, you will want to find the right commercial property to open your business. California is very large and has a range of cities and towns, so the cost of this step will vary dramatically. However, most Chron reports businesses should not spend more than 20% of their expected monthly income on rent.
In addition to cost, you want to consider these aspects when choosing a location:
- Proximity to your market: Most consumers do not travel over 20 minutes for their routine purchases. Try to stay close to your customers to capture this demand.
- Growth possibilities: As your store or restaurant expands, can you re-organize your space to keep up? Look for a building that will allow you to grow without needing to relocate.
- Utilities: Does the property have internet, phone, cable, or anything else you’ll need?
- Condition: Will you need to update the building to do business? Does the HVAC system heat and cool effectively?
- Accessibility: Do customers have a place to park? Can trucks deliver goods easily?
9. Buy the right equipment
With your lease signed, you can now decorate your building and outfit it with the right gear. This step is where you truly get to add your own charm to the space, but you also want to make it functional. From hardware to paint schemes, you want everything about the layout to encourage customers to buy from you.
Additionally, you will need supplies for all aspects of the business. Investing in these items now will let you jump right into business without hiccups.
Some core items you’ll need include:
- Decorations
- Retail displays
- Lighting
- Point of sale software
- Uniforms
- Marketing materials
- Cleaning products
- Shelves
- Storage boxes
10. Hire and train employees
Running your business by yourself is possible, but this is not sustainable for most people. Even if you are a solo operation, you will eventually want help with bookkeeping or marketing. On top of this, hiring employees allows you to focus on strategy and grow your business.
When it comes to hiring, you want to assess a few key qualities. First, your employees should be competent, meaning they can handle what’s required of them. Next, they should have the right personality to work with a team and interact with customers. Last, they should be reliable and show up on time to work.
Asking these interview questions can help you assess these traits.
As for training, you will want to follow a plan to ensure you cover all core areas. The earlier the form this training guide, the more thorough you will be. Make sure to spend enough time to cover all areas, since rushing things will only lead to mistakes.
During training, be sure to demonstrate by example, even when it comes to the smallest things like clocking in and out. This way, you can guarantee that each employee was taught how to do things correctly. Also, make time for questions and encourage staff to speak freely. The more confusion you clear up now, the fewer errors your employees will make.
Start your California business with Epos Now
Our economy relies on technology more and more each year. If you are doing business in California, you will need the right hardware to win over customers. For many retail and hospitality businesses, no device is more important than the point of sale system.
Epos Now is a multinational POS company with offices around the world. Our systems are built to simplify core business functions so staff can serve customers faster and owners can focus on more important tasks.
With an Epos Now POS system, you can:
- Process cash, card, and contactless payments
- Manage inventory in real-time
- Build custom menus and floorplans
- Generate reports to analyze your business
- Connect to dozens of apps like Mailchimp and QuickBooks
Contact Epos Now today to see a demo!