How to Start a Successful Small Business in Michigan

By | May 30, 2011

Entrepreneurship isn’t for everyone. Many are attracted by the “make your own fortune, be your own boss” mystique, but the regrettable fact is that most small businesses — more than 64 percent — fail in the first decade. Successful business owners usually have three or four failed ventures under their belt before they find financial success and personal well-being. The reasons are both opaque and complex, but having counseled more than a dozen aspiring business leaders in the last two years, I’ve seen false expectations about business ownership color people’s judgment in astonishing ways.

That warning notwithstanding, starting a small business — if done properly and soberly — can be a rewarding experience. No two people start a business for the same reasons. Some want a little cash on the side, others want to begin a new career. The major contributors to success are commitment to the enterprise and the perseverance to manage the small details that can sometimes spiral out of control if left unattended.

Never trust a consultant who gives you “tips” and “secrets” to being successful without first getting to know the client’s needs and motivation; they are selling snake oil in a jar cleverly labeled as hope. Starting a company in Michigan does not require an external expert who will charge you $500 do to $50 of work, nor do you need to shell out cash for business-in-a-box kits. There are some common steps that every new entrepreneur who wishes to transact business in Michigan must climb, but the path isn’t especially difficult. Please allow me to share some observations about the journey.

  1. Reflect on what motivates you. Too many leave this part off; they just decide to go to the races without figuring out why they back a particular horse. Make sure you fully understand why you are starting the business, and be honest with yourself about what you hope to gain and what you’re willing to sacrifice to see your fledgling company thrive. Think through whether you really do have the expertise and the emotional stamina to succeed.
  2. Recruit a mentor. Find a seasoned business professional who can help you navigate the Scylla and Charybdis of infinite dreams and finite resources. The Small Business Administration — besides being a wealth of knowledge about entrepreneurship — offers the Service Corps of Retired Executives, or SCORE, a program that pairs veteran business leaders with new owners. Take advantage of it, if you can.
  3. Find your niche. Many business ideas are a dime a dozen. Identify something special and valuable about what you will offer. Perhaps a cleaning company may target mortgage companies and Realtors for deep cleaning of properties for sale. Perhaps a bakery will trumpet its Kosher roots. Whatever your choice, give customers a reason to prefer your product or service.
  4. Decide on a name, address, phone number, email and Web presence. Do this before you get bright ideas for ordering stationery. Visit LARA — the Michigan Department of Licensing and Regulatory Affairs — to conduct a business entity search to see if other companies have similar names. Depending on the scope of your enterprise, you may also wish to visit the U.S. Patent and Trademark Office to check trademarks nationwide, to reduce your risk of an infringement lawsuit in the future. After settling on a name, decide what address and phone number you want for your company. Some people use their home information, but be careful — do you want crabby customers to know where you live? A Post Office box or rented office space may do nicely for small companies that just need a desk and a mailing address. Look to solutions like Google Voice for a phone number that’s separate from your home or cell number. Finally, look for easy-to-remember domain names so you can implement branded Web sites and email. Nothing screams amateur like a generic, free email account.
  5. Determine a method of organization. Michigan permits sole proprietorships, partnerships, limited liability companies, C Corporations and S Corporations. Each of these forms of organization have different legal and financial impacts. Consult with a certified public accountant or competent business attorney for advice on which method works best for you.
  6. Verify state license requirements. Dozens of industries and professions in Michigan require specific licenses. Some, like private security agencies, require the business owner to be licensed; others, like cosmetology, require the practitioner to be licensed. Check LARA’s database for the most current list of regulated professions, and be sure to comply scrupulously with state requirements. Also, visit Michigan Business One-Stop for user-friendly information about specific industries and trades.
  7. File the paperwork to establish the company. Each method of business organization has different filing requirements. In general, proprietorships simply need to file a certificate of assumed name at the local county clerk’s office. LLC’s file articles of organization using Form 900, and corporations use any of a variety of forms, typically but not exclusively Form 500. These forms are standard templates; any document that includes the required information will suffice. Submit the forms to the state by postal mail, or use the state’s MichELF fax service for expedited delivery.  
  8. Obtain an Employer Identification Number. Sole proprietorships use the business owner’s Social Security number, because the company and the owner are legally indistinguishable. Other forms of organization allow the owner to request an EIN using Form SS-4 through the Internal Revenue Service. The IRS allows applicants to file online and receive an instant number, at no charge.
  9. Verify county and municipal regulations about the place and nature of your business. Check with the county, city and township clerk of your jurisdiction to verify whether there are any special rules or permits needed to transact business. Pay special attention to zoning regulations, as you cannot legally run many kinds of businesses from a home if you’re in a residential zone. Some areas only allow certain types of businesses, and other areas have stringent requirements for things like business licenses, liquor licenses or mandatory health inspections. Failure to comply with local regulations may end up hitting you hard in the pocketbook, so take the extra time to verify the requirements of your community.
  10. Develop business and marketing plans.  Take the time to work through a formal business and marketing plan. These documents — intended to be dynamic but long-term — help focus the company’s efforts and identify its intended success vector.  The Small Business Administration has a helpful, step-by-step tutorial on developing business plans, and a good primer for creating a marketing plan. One reason these are helpful: Some commercial lenders require a formal business plan before they will grant lines of credit.
  11. Compute prices or rates; establish banking relationships. Determine your pricing structure. Make sure you have a good rate card for various products and services. Identify any warranty or refund policies and establish a commercial banking account in the company’s name. Open a merchant account, or use services like PayPal or Square to accept electronic payments from customers.
  12. Establish a market presence. Having laid the infrastructure for the company, now you must market your firm to your potential clients. Typical marketing tools include the basics like a well-designed logo, a tagline and a coherent stationery set including quality business cards. Avoid self-made or “free” cards. Develop promotional materials — flyers, brochures, posters, trinkets — to help sell your message. Establish a robust online presence with a Web site, custom URL (and business-branded email accounts). Explore the use of social media services like Twitter and Facebook fan pages; some industries use them competitively while others have little use for online media. Nevertheless, many entrepreneurs, especially those in cutting-edge industries, find an online marketing strategy essential for their success. Podcasts, webcasts, online white papers, blogs: Many are the content channels. Customize them to meet your needs (Gillikin Consulting can help). Finally, engage in word-of-mouth networking: Join BNI chapters, LinkedIn or MeetUp groups, the local chamber of commerce, the Lion’s Club, whatever. Just get your name, tagline and business card out there to start building relationships with your future clients.

Oh, and don’t forget the last step — reward yourself for having taken the plunge. Good luck, fearless entrepreneur. May the force (of profit!) be with you!

Be Sociable, Share!

    • Russ P.

      Great article! I really enjoyed reading it as I am looking to expand my small sole-proprietorship into an independent business, possibly a S-Corp since I will be looking into becoming a federal contractor.

    • Jason Gillikin

      Thanks, Russ — much appreciated!

    • Krystal M

      What would you say to someone who knows what they want, have a project underway with ideas for more a group of motivated and dedicated teammates and all we need is a workspace and testable product?

    • Charlie Putt21

      Really useful information. Thanks for the info, super helpful. I’ve found some decent tutorials on how to fill a form out online here