Step 1: Choose the Right Business Idea
The first step towards business ownership is deciding what kind of business to start. Look for a small business idea that suits your interests, your personal goals, and your natural abilities. This will help you stay motivated when the going gets tough and will greatly improve your odds of success.
“Starting a business is the first step towards financial freedom. It must be something that you have passion for, and wouldn’t mind doing each and everyday. The passion is what’s going to drive you when the going gets tough.”
Step 2: Plan Your Business
Successful businesses are built through careful planning. Before committing a significant amount of money and other resources toward your business, critically analyze your idea, and create a game plan. At a minimum, you should complete the following:
Choose a Business Name
What will you name your business? When naming your business, you’ll want to choose an available name that follows your state’s naming rules and resonates with your customers. You can use platforms like Godaddy to see if the name you want is available or uspto.gov to search if it been trademarked.
Find a Business Location
Do you know where your business will be located? Whether you’re opening a brick-and-mortar establishment or starting a business from home — your business location informs the type of licensing and permits you’ll need as well as your business’s growth potential.
Conduct Market Research
Have you gotten to know your market? Before you write your business plan, conducting thorough market research is crucial. This can involve conducting surveys, doing search engine optimization (SEO) research, or holding focus groups. The goal of market research is to better understand your target market and competitors in order to craft an effective business plan.
Write a Business Plan
A well-crafted business plan doesn’t just help you get organized while you start your small business. Business plans are used to obtain business funding and help you reach important milestones.
Here are some of the main components of a well-written business plan:
- Product Development: What problem does your business solve? What will set your product or service apart from the competition?
- Sales & Marketing: Who are your potential customers? How will you get their attention and convert them into buyers?
- People and Partnerships: What roles will you need to hire, and what professional relationships will you need to form in order to succeed?
- Financial Planning: How many clients or sales will you need in order to break even? How much money will it take to get there, and where will you get the funding?
Step 3: Get Funding
It’s no secret that you need funding to start a business, but before you can secure the money you need to cover startup costs, there are a few things you need to do first. Calculate your business costs before seeking outside funding. This will help you choose the right funding source for your business’s needs. Next, be smart with your spending and get organized by creating a detailed financial plan.
Explore Business Funding Options
- Bootstrapping: This is the do-it-yourself approach to business funding which means you provide the capital for your business through personal savings as well as your current income. Once your business is in operation, profit is reinvested back into the business to continue its growth.
- Friends and Family: Financing your business through friends and family loans can be a great way to get the capital you need to start your small business. When mixing business with family and friends, it’s a good idea to establish a written agreement and repayment plan.
- Small Business Grants: Small business grants are essentially business funding for your business you don’t have to pay back. You can obtain a small business grant by completing an application process with a grantor.
- Small Business Loans: You can typically apply for small business loans through a bank or other lending institution. This funding method requires repayment but will provide you with the capital to cover startup costs or more.
Step 4: Choose a Business Structure
Registering your business as a legal structured business entity — such as an LLC, corporation, or nonprofit — has two major advantages:
- Increased credibility
- Protection from personal liability in the event your business is sued
A sole proprietorship is an informal business structure that isn’t incorporated or separated from its owner. This means that 100% of the business’s profits go to the owner; however, 100% of the financial liability should the business accrue debt or get sued falls on the owner as well.
A partnership, like a sole proprietorship, is an informal unincorporated business structure but with multiple owners. Similarly, partnerships do not have liability protection that you find with a formal business structure.
A limited liability (LLC) combines the personal asset protection of a corporation with the flexibility of a partnership or sole proprietorship. Most small businesses prefer the LLC structure due to its easy maintenance and favorable tax treatment.
A corporation is a separate legal entity that is owned by its shareholders. Corporations have more formal regulations than LLCs and tend to be more attractive to investors. Most large companies like Apple fall under the corporate category.
A non-profit organization is one that is funded by donations instead of investors. Nonprofits are typically created to further a social cause and are exempt from paying taxes. The Red Cross is an example of such an organization.
If you choose not to register your company as a business entity, you will be held personally responsible for the debts and liabilities of your business.
In addition, partnership and sole proprietorship business owners may need to file a DBA, sometimes known as a “fictitious name,” “trade name,” or “assumed name” depending on the state. A DBA IS NOT A BUSINESS STRUCTURE.
Note that three states (Kansas, New Mexico, and South Carolina) do not have DBAs.
Step 5: Form Your Business
Once you’ve chosen your business structure, the next step is to form your business. No matter what formal business structure you choose, there are a few common steps, including:
- Naming your business
- Choosing a registered agent an individual or business entity that accepts tax and legal documents on behalf of your business.
- Getting an Employer Identification Number (EIN): a number assigned by the Internal Revenue Service (IRS) to help identify businesses for tax purposes.
- Filing formation documents.
In addition to these steps, each business structure has its own requirements that are unique to that business structure.
Start a Corporation
If you think starting a corporation is right for your business, there are five steps to starting your business as a corporation. Additionally, you’ll need to decide the type of corporation your business will be, such as C corporation, S corporation, or B corporation.
- Name Your Corporation
- Choose a Registered Agent
- Hold an Organizational Meeting
- File Formation Documents
- Get an EIN
Form a Nonprofit
Choosing to form a non-profit involves many of the same steps as a corporation or LLC; however, with this business structure, you can apply for tax exemption, otherwise known as 501(c)(3) status, through the IRS.
- Name Your Nonprofit
- Choose a Registered Agent
- Select Your Board Members and Officers
- Adopt Bylaws and Conflict of Interest Policy
- File The Articles of Incorporation
- Get an EIN
- Apply for 501(c)(3)
Step 6: Set up Business Banking, Credit Cards, and Accounting
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these three steps:
1. Opening a business bank account:
- Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company’s credit history, which can be useful to raise capital
3. Setting up business accounting
An accounting system helps you track the performance of your business and simplifies annual tax filings. Quality accounting software lets you download your bank and credit card transactions, making accounting fast and easy.
Step 7: Get Insured
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance you should consider are:
We recommend that all small businesses, including home-based businesses, purchase a general liability policy. Businesses selling professional advice or services, such as consulting and accounting firms, should also consider a professional liability policy.
Each state has its own workers’ compensation requirements and often depends on the number of employees a business has.
Step 8: Obtain Permits and Licenses
To operate your new business legally, you will need to comply with federal, state, and local government regulations. In many cases, this involves obtaining one or more business permits and/or licenses. For example, a restaurant will likely need health permits, building permits, signage permits, etc.
Step 9: Hire Employees
For any business (unless you plan to be your business’s sole employee), building a strong team is a crucial next step in starting a successful business. But it isn’t just about finding the right people; you need to ensure you stay compliant with requirements for hiring employees legally. This includes ensuring that you are registered with the IRS for employee taxes.
Once you’ve built your team, we strongly recommend utilizing a payroll service to issue paychecks, track time, and make tax season more manageable.
Step 10: Define Your Brand
The strongest and most memorable businesses are built on a solid brand. When developing your brand, you should consider:
- what your business stands for
- what are your core values
- what will earn customer trust
Step 11: Build Your Business Website
After defining your brand and creating your logo the next step is to create a website or landing page for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own and control.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Step 12: Promote and Market Your Business
Promoting Your Business
There are many different methods to promote your business, but the most effective methods are:
- Press Releases
- Google My Business
Press releases are a great way to promote your brand and are one of the most cost-effective strategies as they:
- Provides publicity
- Establish your brand on the web
- Improve your website’s SEO, driving more customers to your website
- Are a one-time cost in terms of effort and money
- Have long-lasting benefits
A Facebook page is a great, free way to interact with your customers. But, it does require ongoing effort to be successful.
A Facebook page can be used to:
- Establish your local business presence
- Showcase your business products and services
- Communicate with your customers
- Get and share reviews from customers
- Promote your business through ads, though this may not be suitable for your business.
With billions of global YouTube users, there is a giant customer base looking for content your business could be producing. A YouTube channel for your business can be used to:
- Improve your SEO by boosting your Google ranking and conversion rate.
- Drive social media engagement and create stronger bonds with your customers.
- Provide detailed explanations about products and services.
Google My Business
Google My Business is a helpful tool that allows businesses to manage how their business appears on Google’s search engine results page (SERP) and Google maps.
Google My Business can be used to:
- Link to important information about your business such as your website, physical address, hours of operation, phone number, and customer reviews.
- Increase brand awareness by improving local SEO and driving traffic to your website.
- Engage with customers and increase credibility.