California is the country’s biggest market—in fact, one of the biggest markets in the world. That can make it an intimidating place to start a new business. But the more an entrepreneur knows about the Golden State before they open their doors, the stronger their position.
California has many laws and requirements for businesses, some similar to those across the U.S. and some unique. Make sure you’re not caught unaware when trying to get your footing in this competitive market. There are several important aspects every California entrepreneur should understand.
Before picking your location and making the investment needed to open a business, make sure you understand what market you’re stepping into. You’ll want to find a market where a dominant competitor doesn’t already provide the goods and services you want to offer. You won’t be able to avoid competition, but you can give yourself a fighting chance.
One of the best ways to boost your odds in the competitive California market is to do market research. There’s no better way to find out how to succeed than from the customers you’re seeking to impress. This can also help you understand the competition better.
First, figure out what you need to know about your market. Narrow your questions down to focus on the first step, and look for low-cost ways to conduct your research. Online surveys may not be the most scientific method but can give you a broad picture of your market.
Every state has its own laundry list of regulations for new businesses, and California has one of the more complex business codes. It may be worth getting an attorney to review your business plans and ensure you’re not unintentionally running afoul of any state or local codes with your business plans. Businesses that don’t plan ahead might find themselves forced to close their doors as soon as they open.
California changes its business regulations frequently, and each new legislative session may bring some surprises. Keep on top of any major changes and be prepared to adapt your business. The most important time for knowing business regulations is before you open to ensure you have any needed licenses and paperwork. Costly fines can be serious trouble if a business hasn’t had time to build up a nest egg.
California is a massive and lucrative market, especially in the big tourist areas, but that can be a double-edged sword. It’s also a state with a high cost of living and one of the highest tax rates in the country. Businesses start with a basic tax rate of 8.4 percent, but they may be liable for both business and personal taxes.
Make sure to understand all your tax liabilities before the first reporting date comes along. California’s tax code can be complicated for both small and large businesses, and you’ll want to be aware of corporate, franchise, and alternative minimum tax rates before you decide how to expand your business. Having a good accountant or tax attorney can help you avoid costly penalties.
Proper insurance is one of the most essential needs for any business. Some forms are legally mandated, including workers’ compensation for almost all businesses with employees. This insurance covers your employees’ costs in the event of an on-the-job injury and protects you from liability should they accept the workers’ compensation benefits.
Business owners should also look into professional liability insurance in California. This all-purpose insurance covers you if your company offers a service. Also known as errors and omissions insurance, it’ll cover your legal costs and associated fees if you’re sued for a mistake or bad advice provided by your company. It will also cover any settlements or judgments against your company up to the level you purchase, which can save a business from bankruptcy.
How to Adapt
California’s market is always in flux between major corporations moving in and out of cities and changing laws on local and statewide levels. Businesses always need to be versatile, but in California, only those that can think on their feet survive long-term.
The most successful businesses adapt quickly and figure out how to make changes that benefit their business models. Doing market research, not being deterred by failures, making sure employees keep learning and training, and promoting accountability on all levels of the organization are good ways to ensure your business never gets complacent and can react to changes quickly and productively.
Welcome to the Golden State
Moving into California is one of the biggest steps for any established company. But new and veteran businesses alike can set themselves up for success with a few simple steps. The rewards for those who brave this massive economy successfully will be huge.