Starting a Business Guide Chapter 1

The Michigan Small Business Development Center (MI-SBDC) provides resources and support to help small businesses in Michigan.

The guide is designed to provide information about the process of starting a business in Michigan, including tax obligations, business organization, business planning, management, and more.

The guide includes general information about starting a business, but it also includes specific information about Michigan.

You can find updated information about the topics covered in the guide on the Michigan SBDC's Learning Management System (LMS).

Besides the Michigan SBDC itself, resources for starting a business include the U.S. Small Business Administration (SBA), Michigan Economic Development Corporation (MEDC), local economic development organizations, trade associations, chambers of commerce, and educational institutions.

This guide is not intended to replace legal or financial advice; it is a general information resource.

The information in the guide is subject to change due to revisions in laws and policies.

The guide is a resource to make the process of starting a business in Michigan less overwhelming.

Calculating the total income your business could generate if you sold all your products or services to all potential customers.

Businesses that offer products or services directly competing with yours.

Businesses that offer similar or alternative products or services to yours.

The process of gathering information about your target market, competitors, and industry.

Publications specific to a particular industry.

Government-collected data on various economic activities.

A collection of information about companies' financial performance.

Using the internet to gather information relevant to your market research.

A market refers to the total number of potential customers or businesses interested in buying your product or service. It encompasses all individuals, businesses, or organizations who may have a need for what you're offering.

Customers are the specific individuals or businesses that actually purchase your product or service. They've taken the step from potential to actual buyers.

Market segments are groups of customers within a larger market who share similar characteristics. These characteristics can include demographics, interests, purchasing behaviors, or needs, making it easier to target them.

Industry research is a process of analyzing the overall trends, conditions, and factors affecting a specific type of business or industry. It helps entrepreneurs understand the bigger picture of their chosen sector.

B2B (Business-to-Business) refers to businesses that sell products or services to other businesses or organizations, not directly to individual consumers.

B2C (Business-to-Consumer) refers to businesses that sell products or services directly to individual consumers.

Market potential is an estimate of the total revenue or sales opportunities available for a product or service within a specific market segment. It helps businesses assess the potential growth and profitability of their ventures.

Using your personal money, assets, or income to fund your business.

Money you can readily use, like cash in your checking or savings account.

Selling something you own (like a car) to get cash for your business.

Gifts or investments from friends or family for your business.

Using your credit card for business expenses, but be careful of high interest rates.

Cash value of life insurance or retirement funds, potentially used for funding.

Earnings from a job that can contribute to funding your business.

Money given to organizations or individuals for a specific purpose. Rarely goes directly to businesses.

These private institutions offer financial support to small businesses, entrepreneurs, and community organizations that may not qualify for traditional financing, often focusing on low-income or underserved communities.

Credit history is a record of how a borrower has managed their past debts and is a crucial factor for lenders when evaluating loan applications.

Government grants, funded by taxpayers, are not free money. They require strict compliance and reporting to ensure the funds are used effectively.

While some business grants are available through government programs, others come from state/local programs, nonprofits, and other organizations. These may require matching funds or combined financing.

Lenders assess the reliability of borrowers by reviewing their credit history. They look for a track record of responsible debt management.

Traditional and non-traditional lenders use specific criteria to determine the eligibility of business loan requests.

CDFIs often work with low-income communities or those who may not have access to traditional financial services.

Grants are not always free money. They might require the recipient to contribute funds or utilize the grant with other forms of financing.

Refining your business idea based on financial analysis to ensure its feasibility, often involving reducing its scale to manage costs and financial risks.

A comprehensive document that outlines your business goals, strategies, and financial projections; essential for attracting investors and securing funding.

A financial analysis that helps you determine if your business idea is viable and aligns with your personal financial situation.

The reduction of a business idea's scope or scale, often done to manage costs and risks, focusing on the core elements while minimizing unnecessary expenses.

The ability to generate enough revenue to cover business expenses and achieve profitability within a reasonable timeframe.

The potential for financial loss associated with a business venture.

The cost of launching and operating a business, including things like rent, utilities, inventory, and marketing.

The difference between how much money your business takes in from sales and how much it spends on expenses.