Business 101

Business 101

Starting your own business can be incredibly rewarding. For some people, the flexibility, the chance to steer their own ship and follow their passion is the path to personal fulfillment. But there are risks—like losing money, long hours and a lack of security. So what’s an idealistic entrepreneur to do?

Plan and prepare

Ah, the thrill of starting your own business. So many possibilities. So much opportunity. Unfortunately the dream of being your own boss also comes with a harsh reality: many new businesses fail. But there are things you can do to make sure you end up on the right side of the ledger.

Leverage your experience

Look at the skills you've built. Your experience is your greatest asset as you start to think about the kind of business you want and the way you want to operate.

Do some market research

Find out: “Do people need my products or service?" "What's the size of the market?" "Who is my competition?" Also, it's good to figure out if there's a big enough audience for you to make a go of things.

Check out “how-to" books

You'll wear a lot of hats as a business owner—marketing, sales, negotiations, finances, operations and maintenance—so it makes sense to learn all you can. Basic business books provide a great introduction to a lot of the new challenges coming your way.

Know your demographics

Understand who your audience is and what they want. You might even want to share your ideas with a small focus group consisting of your target audience. The feedback and insight you get can help you tailor or improve your product or service before you hit the market.

Understand the financial responsibility

As a business owner, paying the appropriate taxes on time, having a realistic sense for the cost of operations and knowing how much revenue you need to generate, are just a few of the critical things you'll need to stay on top of in order to keep the doors open. Having a sound financial strategy and good financial partner—long before your business opens its doors—is key.

Work with a mentor

Having the advice of someone who has been there is a huge asset. The insight, emotional support and encouragement you get from people who've been there will be invaluable when the river gets rough. The government offers great mentoring programs, including the Service Corps of Retired Executives (SCORE) and Small Business Administration (SBA). You'll find a list of other programs at the end of this article.

You can also check with your local chamber of commerce, and local branches of trade associations or other professional groups specific to your industry.

Creating a Business Plan

The best launch pad for a new business is a thorough business plan. It explains your business idea, why it's needed in the marketplace, how it will succeed and who's going to make it happen. It will be your guiding light as you start your business and helpful as you evolve and grow.

A business plan typically includes:

  • A description of your business
  • A complete financial plan, which should include an estimate for 3 years, including start-up expense, cash flow, income statements and balance sheets
  • A marketing plan
  • An operational plan
  • The appropriate tax ID – license – registration and permits
  • Description of the type of organization and ownership management
  • Vision and goals statement
  • Description of product/service
  • Location and market area
  • Competition, suppliers and business processes

Writing out a detailed business plan will help you see any weaknesses in your idea or its execution. It also gives you a chance to correct things before you get in too deep. Once you're up and running, your business plan will remain a valuable compass to help you stay on track.

Business Types

You'll have to determine a structure for your business. Talk with your lawyer about which of these options best fits your needs.

Sole Proprietorship

An unincorporated business with one owner, this is the simplest business to set up and is popular with individual contractors and business owners. Liabilities of the business can become the owner's personal liabilities.

Limited Liability Company (LLC)

An LLC is made up of one or more individuals or entities, through a written agreement. This structure is similar to a corporation, in that individual members cannot be held personally liable for the debts and actions of the LLC.


A legal entity that is separate and distinct from the people who form it. Corporations may be formed for-profit or nonprofit purposes.


An unincorporated business owned by two or more individuals. Each person contributes money, property, labor, or skill, and expects to share in the profits, losses and management of the business.

Tax Identification Numbers

The federal government requires businesses to have an identification number for tax reporting purposes. Depending on the structure of your business, you may use either your Social Security Number, or an EIN (Employer Identification Number).

Like a Social Security number, the EIN is a nine-digit number. The number includes information about which state the business is registered in.

Sole proprietors generally use their Social Security numbers as their taxpayer identification numbers. If you have employees, file pension tax returns or file excise tax returns, you'll need to apply for an EIN.


To be a legal business In Washington State, you'll need to take care of some paperwork. You'll need to obtain a business license and register your business with the state agencies. Also, be sure to check on any additional documents they require.

Business lending

Credit is the lifeblood for a lot of businesses. It can help launch a business, or buy inventory and equipment. Having access to credit can also come in handy when short-term cash is needed to cover unexpected expenses, like a broken pipe or fluctuation in revenue.

If you're considering a loan, it's helpful to know what lenders care about. Many will use “the 5 C's” to determine your credit worthiness:

Character: Refers to the borrower's reputation.

Capacity: Compares your business income against debts to determine your ability to repay a loan.

Capital: If you've made a large contribution to the business, lenders believe this will lower the chance of default.

Collateral: Property, large assets or other collateral will help secure the loan.

Conditions: This refers to both the economic climate surrounding the financial institution establishing the loan and also to the intended purpose behind the loan itself.

There's one more “C” lenders pay attention to: Your credit score.

A lender will also need to understand your type of business and how much experience you have in the field. They'll want to know how much funding you need, why you need it and how you'll use it. Is it to buy equipment, hire additional staff, or expand your product line?

Types of financing

How will you finance your business? Many business owners tap into their personal credit cards or Home Equity Line of Credit (HELOC) for capital.

You might also consider equity financing, which involves offering equity in your business to friends, family and private investors in exchange for funding.

Debt financing is another option. It includes conventional business loans and Small Business Association Loans, as well as non-traditional vehicles, like microloans.

Although financial institutions do provide funding, not all start-ups will qualify for a loan. If you do pursue a loan through a bank or credit union, here are the steps you can expect. In your initial interview with a lender, you'll talk about requirements. You'll receive a checklist of the documentation you'll need to apply for a loan.

Once you've completed your application, it will go off to underwriters, who will review your financial information, your business plan and the results of a credit check. Once they've made their decision about your eligibility, the financial institution will contact you (usually through a letter). If everything looks good, the loan-processing phase will begin and you'll be on your way to getting the funding you requested.

It may be a long road to starting your own business, but if you're like a lot of business owners out there, you'll find that the sense of accomplishment, freedom and flexibility are worth every step.

Helpful Resources

Call BECU Member Services at 800-233-2328 or check out these useful websites.