Business as we know it is changing. Disruption has become the status quo for almost every industry, and there’s no sign things are leveling off just yet. With the labor shortage, inflation bubble, and product scarcity becoming direr every day, most entrepreneurs are changing how they do business.
Adjusting to the new normal is even more critical if you’re starting your own company. Nearly 20% of businesses fail within the first year of operation. That number jumps to 45% after the first two years. But why?
There are many reasons businesses fail, and no two situations are the same. But one characteristic most successful companies share is planning. So, if you live in Pennsylvania and have a small business you want to build to last, you need to set it up the right way.
Here are six steps to creating a successful business in Pennsylvania
Step 1: Make a Plan
When you hear the term “business plan,” you might be tempted to roll your eyes. Of course, everybody’s heard of a business plan, but do they actually do anything? Absolutely!
You’ll need a business plan to present to investors, including financial institutions. If you need a space outside of the home to operate your company, you‘ll need a plan for potential landlords, too.
Business plans are also helpful when applying for insurance. Insurance for businesses in Pennsylvania often requires proof or a plan—but more on that later.
If you need some help getting started, the Pennsylvania Department of State offers great insights into business plans and even has a free business plan template.
Step 2: Brainstorm Names
Another crucial part of business planning is coming up with a name. Naming a company can be one of the most challenging parts of setting up a business because the name defines your brand. It will be one of the first things people notice (and judge) about your company, and it has to be just right!
To do this, start with a good old-fashioned brainstorm. Grab a pen and paper and think about the characteristics, values, and purpose of your company. Bear in mind that 72% of the most recognized brands are either acronyms or made-up words.
Your brainstorm should yield a few decent prospects. Once you finish, don’t get too attached. Make sure the names you like aren’t taken by checking the availability on Pennsylvania’s Department of State website.
Step 3: Learn About Insurance Requirements
All businesses, even small businesses, need insurance. So it may surprise you to learn that 75% of businesses are underinsured, and another 40% of small businesses have no insurance at all. But having too little or no insurance isn’t a risk you should take with your company.
Insurance is an absolute must to conduct business in Pennsylvania, and you want to do everything you can to protect yourself, your employees, and your customers. Start by researching what types of insurance are available and which policies you’ll need to adequately cover your business.
For example, you’ll need to insure your physical structure, including an office or other space you’re leasing to operate your business. And if you’re running a home-based business, don’t assume coverage is unnecessary.
Few homeowner’s policies cover damages to a home-based business. So if something gets hurt, data is lost or stolen, or a natural disaster destroys your workspace, your homeowners’ insurance probably won’t cover the loss.
Depending on the type of business you have, you’ll also need a policy to protect you from accusations of professional mistakes. And in Pennsylvania, you’ll also need to offer employees worker’s compensation and health insurance.
Step 4: Get the Insurance Coverage You Need
There are tons of business insurance coverage options. And no two companies need the same thing. In fact, you’d be hard-pressed to find another small business with the same exact insurance needs as yours.
In most cases, businesses need a custom plan created to meet their unique needs. You can do a lot of research to come up with this plan on your own, but no matter how much research you do, it’s tough to be sure of what, exactly, you need to protect your interests. Here are a few of the most common business insurance needs:
- General Liability Insurance: General liability is a must for all business owners. This type of insurance is almost like an umbrella that covers everything from injured employees to damaged property. General liability also covers lawsuits for libel, slander, and defamation.
- Professional Liability & Errors and Omissions Insurance: No business is 100% accurate, and you need to protect your business when errors occur. Professional liability and errors and omissions insurance is there for you if you miss a deadline, make an error, or face accusations of negligence.
- Workers’ Compensation: Workers’ compensation insurance is mandatory for most businesses in Pennsylvania. Whether you’re required to get it or not, workers’ compensation is a good thing to have. These policies protect you and your employees so when accidents happen, you’re covered. Workers’ compensation covers medical expenses, lost wages, survivor benefits, and retraining.
- Commercial Auto Insurance: Do you use vehicles for your business? If so, you need commercial auto insurance. These policies are similar to standard auto insurance, but they give you the added protection business owners need. Commercial auto insurance covers fender benders, theft, or even damage incurred during natural disasters.
- Commercial Property Insurance: Where do you do business? Whether it’s a rented office, or even your home, you need a commercial property policy to protect your assets. This type of insurance not only covers your business’s physical structure but it also covers property like equipment, inventory, and even income disruptions, if needed.
Step 5: Register Your Business
In Pennsylvania, you need to register your business based on your business structure. The registration process is different for a sole proprietorship, limited liability company, corporation, non-profit, etc. You probably set your business structure during the business planning process.
You may also need to file some additional registrations, licenses, or certifications with the state or local government. Again, this depends on the type of business you have and where. For example, the City of Philadelphia may require companies to retain an additional license not needed to operate in any other Pennsylvania city.
The best way to identify and understand what you’ll need is to create a business registration checklist on the Pennsylvania Department of State website. The registration checklist will also help you learn more about the types of insurance you’ll need to operate in Pennsylvania.
Step 6: Line up Licenses and Permits
Make sure all your professional licenses are current. Every business doesn’t need professional licenses, but most offering professional services have certifications and licenses that need to be current. This includes but isn’t limited to dentistry, medicine, surgery, public accounting, law, and others.
You also need to check for permits. Every municipality is different, and you should check with the local government where you plan to operate your business. They’ll ask a few questions and may need a copy of your business plan before they can tell you what permits, if any, you’ll need to run your business legally.
Running a business isn’t for the faint of heart. This is a grueling exercise for experienced entrepreneurs and budding business owners alike. But don’t let the process prevent you from pursuing your passions.
Make a plan, get insured, register your business, and procure permits. There’s a lot to it, but with the motivation, you can do this!