The difference between a small business owner succeeding or failing is the foundation you build when you first start your business.
Businesses that survive and thrive have a competitive advantage. They’re started and run by people who prepare for what’s ahead of them.
If you want a competitive advantage, we’re here to help you get started.
That’s because you should prepare thoroughly before starting a business. And you should know how to adapt to changing situations – as often happens when you run your own business.
This is the most complete step-by-step guide online on how to start a business.
It may seem overwhelming, but with this step-by-step guide and our tips for starting a business, you’ll have everything you need to know to start a successful, profitable small business.
While some people say it’s easy to start a small business in a few hours, that is rarely true.
Starting a business involves careful planning with a business plan, making key financial decisions, and completing a series of key legal activities.
You need every advantage you can get when starting a business.
We’ve covered each of the below steps in great detail, with insights, tips, resources, and step-by-step guides.
How to Start a Business: The Definitive Step-by-Step Guide
- Develop and refine your business idea
- Research your intended market
- Write a business plan
- Hire an experienced business attorney
- Decide your legal business structure
- Set up accounting and bookkeeping
- Open a business bank account
- Assess your finances
- Fund your business
- Find business partners
- Purchase business insurance
- Crunch the numbers for your business
- Create a strong brand identity for your business
- Build an online presence for your business
- Create a sales plan for your business
- Find business vendors and suppliers
- Build your business team
- Grow your business
Develop and refine your business idea
If you want to start a business, you need to consider your strengths, weaknesses, and interests.
After all, the most basic question you can answer is why do you want to start a small business? The answer to that question will help you focus on a single idea.
You probably already have a business idea of what kind of business you’d like to start.
Many people want to start their own, unique business.
But for others, a franchise of an established company would make more sense. Starting a business can be hard, but it’s easier for most people if you start a franchise. With franchises, the concept, branding, audience, product or service, and business model are typically well-defined and in place. You don’t need a comprehensive business plan. You just need to find a good location, find funding and obtain a franchise.
Whether you’re starting a brand new small business or opening a franchise, you still need to know, understand, and refine your business idea.
That’s the most important part of getting started with a new business.
But often, it’s not what people spend the most time assessing. Many people make the mistake of worrying about their business name and spend weeks or months struggling to find the perfect business name before they move on to other tasks.
You’ll have to find a great business name, but you don’t need to do that just yet.
Instead, start by evaluating existing businesses in the market niche of your choice.
That way, you can learn what they are doing well, and come up with a plan for how you can do it better.
Think about how you can integrate your natural skillset into your business so that you can stand apart from your competition. At this point, you might have many business ideas and you should be working to pick one business idea that fits you best. Ask yourself the following questions when starting a small business, and take time to reflect on the answers:
- What skills set me apart?
- What is the purpose of my business?
- Do I know a lot about the product or service I want to sell?
- Who am I providing a service or product to?
- What is the maximum figure I can safely spend on this business?
- Do I need outside capital? How much?
- Am I good at sales and customer service?
- What kind of work/life balance am I looking to achieve?
- What are my expectations of being an entrepreneur?
Don’t be afraid to discuss some of these questions and each business idea with your friends and family. After all, they know you well and can help you answer some of the questions. And they can be a great sounding board to your many business ideas.
And don’t be afraid to brainstorm other business ideas when starting a business if your original idea isn’t supported by your market research or you find that you’re no longer passionate about that idea.
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Find a niche
You’ll also want to consider what specific niche is right for your business.
This is one of many business decisions you’ll need to make when starting your business.
Is your product or service geared toward men, women, or children?
Are you looking to attract a particular demographic of any kind?
Don’t make the expensive mistake of trying to build your own business geared toward too broad an audience.
Make sure you build your business to meet the needs of a specific niche to avoid overspending and underwhelming all of your potential customers.
You’re more likely to succeed if you start your small business with a specific product or service designed for a particular group of people.
Here are some niches to consider when starting a business:
- Restaurants – Are you thinking of opening a cafe? A diner? A trendy fusion sushi bar? Whatever you choose, narrow your focus with specific patrons in mind.
- Clothing brand – With so many different kinds of apparel, make your business stand out by making the best women’s sleepwear. Or, by designing the most durable children’s activewear. Maybe you have the widest selection of specialty socks! If you’re interested in the apparel industry, we have a terrific guide on how to start a clothing brand.
- Real Estate – Are you a brokerage catering to retirees? Are you selling vacation homes? Are you an expert in short sales? With real estate firms in widespread competition with each other, make yourself the go-to business in your niche.
- Retail – Are you selling novelty toys? Rare automobiles? All-natural candles? Vintage candy? Find a way to break out of too broad an area with a focused starting place.
- Legal – With so many areas of law to practice, it’s helpful to position yourself as an expert in a specific field. Consider branding yourself as an expert in real estate, personal injury, family law, intellectual property, or even admiralty law. There are many areas to choose from to give your practice a chance to stand out.
- Landscaping – Are you more of a mow-and-go company, or are you catering toward elaborate garden design? Maybe you work extensively with patio building. Pick an area and play it up.
- Consulting – Do you have a ton of expertise in an area and want to help others? Consulting may be your path to success. We have a detailed, complete guide on how to start a successful consulting business.
When thinking about business ideas, use these techniques:
- Aim for quantity, not quality. Finding one great business idea is obviously your primary goal. Quality is important. But, worrying about quality taps into convergent thinking, inhibiting your ability to generate new ideas. It will only hold you back at this stage of the game. Putting the focus on generating lots of ideas takes the pressure off. Have confidence that the best ideas will reveal themselves. You can’t force only the best ideas to come forward. But, they will appear together with other, less effective ideas. And, that’s okay.
- Have fun and be silly. True creativity and ingenuity occur when you don’t try to control the process. Free-form, stream-of-consciousness associations are most effective for brainstorming new business ideas. So stretch your cognitive process by allowing silly business ideas to have a voice.
- Don’t edit or judge yourself. There are no bad ideas this early in the process. And, finding a profitable business idea is a process. Allowing yourself to riff off of an idea that may not work is part of the journey to finding an idea that will.
- Write everything down. It’s important to keep a record of all your business ideas. You may not see a business idea’s true worth until later. You may read the list again later and discover a new business idea you hadn’t thought of at the time. All of that creative thought is valuable. So, keep a copy of it.
Whatever type of business you choose, make sure you’re passionate about it. That passion will come through in everything you do, and your customers will appreciate and embrace the authenticity of your brand.
Research your intended market
Before you dive into your business plan, it's important to know the market you're entering.
Conducting thorough market research in your intended market when starting a business and understanding the demographics of your clients and potential clients will help you write your business plan, find the right product or service, get your business started, and will also help you turn your business idea into a sustainable, successful business.
Who is the direct competition? Is someone else already doing what you want to do? Is the product or service you plan to sell already being offered for sale? If not, is there a reason why that is?
According to the Small Business Administration, there are more than 30 million small businesses in the United States. In fact, small businesses make up an incredible 99.9 percent of all U.S. businesses.
Small businesses in the U.S. employ 58.9 million people, which represents 47.5% of all people employed in the U.S.
According to the SBA, four out of five small businesses survive one year in business. About half survive five years, and a little over 30% survive 10 years or longer.
A lot of the work to come relies on information gleaned from market research. It’s crucial that you don’t skip this stage, so you have the data you need to make informed decisions.
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There are two major types of market research: primary and secondary. Here’s what you need to know about both.
Primary research answers many key questions, such as:
- What factors do your potential customers consider when purchasing similar products or services?
- What do they think is working and what needs improvement in their current choices?
- What do they like and dislike about the options currently available to them?
- What price do they pay? Do they feel it’s reasonable and provides good value?
You answer these questions by talking to potential customers. Surveys, focus groups, one-on-one interviews, and questionnaires are the tools of choice for primary research.
Secondary research is information pulled from existing sources.
You can identify competitors and define your market segments or demographics using currently available data. Key attributes like age range, lifestyle, and behavioral patterns are some of the data points used to divide your target customers into segments.
Once you have this information, you’ll refer to it as you build and launch your business. Make sure you spent a decent amount of time collecting data, so the decisions you make are based on solid research.
More on market research
When conducting comprehensive market research for your new business, you should be focusing on key questions. These questions include:
- How many customers are in the market?
- Can these customers pay for your company’s products or services?
- Do these customers have the needs you solve with your business?
- How many competitors are competing for your customers’ business?
- How does your business compare to your competitors?
- Do your competitors sell the same product or service you sell?
- How frequent is the product development cycle from your competitors?
How many customers are in the market?
A market can be huge but dominated by only a few players. Or a market perceived to be global can be dominated by a few regions. You need to know how many potential customers are in your target market. If the market is too small, your business idea will likely fail and you should not start a business in that market.
Can these customers pay for your company’s product or service?
The prices you charge for your products and services will be influenced by your customers’ ability to pay.
Put another way: not every market is the same – the profit margins of businesses in some large markets are tiny, even if the market size is huge. Starting a business only makes sense if the market can support your business.
For example, Tom Tunguz, a venture capitalist at Redpoint, compared the margins of grocery stores, with restaurants and software companies (chart from Tom’s post on choosing market segments):
Many startups focus on restaurants or grocery stores whose ability to pay for new projects is limited by their relatively small profit pool. The average Safeway store sells about $25M of merchandise annually, but generates about $2.7M in profit.
Due to the relatively small potential contract values in restaurants, startups serving these customer segments have to build very efficient sales teams or online customer acquisition tools to aggregate many of them inexpensively. On the other hand, startups targeting software makers have more flexibility in their approach because these companies generate multiples more profit.
Do these customers have the need you solve with your business?
Customer behavior can change, and it’s important that you understand both their existing behavior and how you must adapt to the changes.
Whether you’re opening a small restaurant or hopeful that you’ll build the next billion-dollar startup, it doesn’t matter whether it’s easier or more difficult to build a large audience.
Far more important is whether that audience has a need that you solve.
Twitter solves a need – and has been able to build a large audience (but has not yet been able to monetize that audience fully). There are many other companies that solve the specific needs of customers – but also millions that have failed because they did not solve any specific need.
Once you pick a segment, you should figure out whether customers in that segment have the need you solve.
How many competitors are competing for your customers’ business?
If the market is over-saturated with competitors, it will be both difficult for you to stand out and also difficult to get funding. There will simply be too many products and services similar to the ones you offer. More importantly, if you reach for a broad market, you will need more business financing than if you pick a more targeted, niche market. You need to know and understand your competition. This is critical to building a successful and sustainable business. This is a situation where your business idea may be great, but you’ll need resources beyond your reach to build a successful business.
How does your business compare to your competitors?
Ultimately, once you’ve defined your market, identified a need, assessed your competition, and picked the right products and services to sell, you should evaluate whether the value proposition you provide is robust enough to cut through the noise and be attractive to your potential customers. This will be an important section in your business plan and will help set your business on a sustainable path to success. Keep in mind that price isn’t value – it’s very difficult to compete on price alone.
Write a business plan
Once you find and refine your business idea, it's time to write a business plan.
Although writing a business plan isn’t mandatory, it can help you to crystallize your ideas. After all, it’s not enough to start a business – you also need to know how to open a business and how to run a business too.
In fact, people make a lot of mistakes when they start a new business and rush into things before considering the important aspects of their business. A business plan can help you plan.
What is a business plan?
A business plan is a document that outlines the financial and operational goals of your business. It defines the objectives of your company and then provides specific information that shows how your company will reach those goals.
A business plan a vital part of any new venture. That’s because a successful business starts with a great business idea, but long term success is about execution.
Your business plan doesn’t need to be 100 pages long. Keep it short and concise and focus on the key details.
And you don’t even need to have a business name when you write your business plan – you can add that later.
Studies show that entrepreneurs who take the time to write a business plan when starting a business are 2.5 times more likely to follow through and get their business off the ground. The work that goes into creating a business plan also helps new entrepreneurs build skills that will be invaluable later.
A traditional business plan has the following sections:
- An executive summary. This section summaries the entire plan, so it is generally written last. Anyone reading your plan will read the executive summary first, so it’s an important element.
- An industry overview. This section gives a brief overview of the industry sector your business will operate in. It includes key players, industry trends, and estimates of industry sales.
- Market analysis. This looks at the target market for your products and services. It has a breakdown of your market segments, their geographic location, and what their needs are. This section shows anyone reading that you have a thorough understanding of the people you plan to sell to or serve and the product or service you plan to sell.
- Competitive analysis. Who are your direct and indirect competitors? How do they currently meet your target market’s needs, and how will you differentiate your product or services?
- Sales and marketing plan. What is your unique selling proposition? What’s your marketing strategy and how are you going to promote your business and persuade your target audience to buy? This section goes into detail on questions like these. There are many different business models – include the potential models that apply to your business.
- Management plan. This section outlines your legal and management structure. It shows who your leadership team is and what your staffing needs will be. If you plan to seek funding, you should describe your advisory board here, as well.
- Operating plan. Your business location, facilities, equipment, and what kind of employees you’ll need are in this section. Any suppliers, manufacturing processes, and any other operating details also appear here.
- Financial plan. This section is for all things financial. There are three key financial documents of any business that go here: an income statement, a balance sheet, and a cash flow statement.
- Appendices and Exhibits. Any information that helps support your business idea goes here, including market studies, legal agreements, photos of your products, and more.
But don’t get obsessed about getting every detail right in your business plan. Barry Moltz, a small business expert, speaker, and author of numerous books, including his most recent, How to Get Unstuck, tells us that:
The business never turns out exactly as it seems when you get started. There are always unexpected hurdles. The biggest ones are typically a sales pipeline, people, cash and productivity.
And don’t get bogged down with learning before you actually get started. There’s no shame in failing, as long as you’re not starting a business merely to fail.
In his book Bounce, Barry Moltz points out that:
Conventional business wisdom tells us that there is always something to learn from failure. Not true — sometimes it just stinks! Failure that offers no real learning value becomes a big jolt to the basic business belief system.
Barry Moltz advises that you should:
Spend time learning what you can but don’t dwell on it. Have a pity party if that helps. But the key is to let the failure go and take action to give yourself another chance of success.
For insights and free downloadable business plan templates, read this definitive guide to writing a business plan.
Consider an exit strategy
Also, remember to consider an exit strategy in your business plan.
Knowing how to start a business is only part of the challenge. You also need to learn how to operate and grow a successful business, and to set your goals so that you know when to sell the business.
This will be especially important to investors. If your business plan doesn’t have an exit strategy, investors won’t know how they will get a return on their investment.
Some people want to operate a sustainable, profitable business for the long-term. Others want to start a new business and operate it for a few years before exiting the business by selling it.
A business plan will help you figure out how you’ll build the new business, how you’ll grow it, what you’ll need to sustain the business and the milestones you’ll need to reach to sell it.
Hire an experienced business attorney
Most small business owners dread having to talk with and hire a business lawyer when starting a business. Some fear they’ll end up paying exorbitant legal fees or that they’ll receive bad advice that will destroy their business. Others agonize over how to find a reasonably priced, competent business lawyer.
Here’s what you need to know to hire a good lawyer for your new business.
Hire a lawyer who adds value
We’ve met and have sat across the table from many lawyers who are deal-killers. Overzealous and often inexperienced, they focus on the wrong issues and forget that their client needs the deal to move forward. When you talk with lawyers you’re considering hiring, ask them about one or two complicated negotiations, and how they were able to overcome obstacles.
Don’t make price your main criteria for hiring a lawyer.
Often, the least expensive lawyers are also less experienced – especially in the areas where you may need help. Paying a cheaper hourly rate might feel good initially, but in the end, you may end up paying far more than if you hired an experienced (more expensive) lawyer in the first place.
Also – be clear about your budget and expectations. Your lawyer should understand that your budget is limited and that they should not waste that budget on irrelevant details.
For example, you don’t need a lawyer to write your business plan. But there are sections of the business plan that could use review by a lawyer.
Hire a lawyer responsive to your needs
Your lawyer won’t be very helpful if they’re not responsive when you need them. Because many deals and transactions are time-sensitive, be sure that your lawyer will be there for you when you need them.
Before you start working with a lawyer, communicate with them using different channels. For example, call them, email them, fax them, etc. Are they responsive across all communication channels? Are they uncomfortable working electronically via email? How quickly do they return your phone calls when you leave a voice mail? Can you reach them in the evening? What happens when they go on vacation and you need their help?
Also, talk to current and former clients specifically about communication and whether they felt they were kept fully informed about the progress on their matters and whether they ever had problems reaching the lawyer when they needed her help.
How to manage legal costs
Most small business owners are frustrated when they finally start receiving bills from their legal counsel. Often, the bills include unexpected costs – something you thought would cost $250 ends up costing you $2,500. That’s quite a difference to a small business or a young startup.
Ask for fixed fees, especially if you’re asking your lawyer to draft specific documents. For example, if you need a standard employment agreement, ask the lawyer for a fixed fee to draft and negotiate the agreement, so that you don’t have to worry about how much you’ll end up paying for that agreement.
Also, be clear about the scope of work you need from your lawyer. If you need a simple employment agreement or option plan, explain exactly what you need and be clear about the business terms that must be included in that agreement.
Finally, don’t ask your lawyers to do things you can easily do yourself. If you need to fill out some forms – fill out the forms and send the completed forms to your lawyer to review and file.
How to hire the right lawyer
If you’re a small business or startup, hire a local lawyer or firm that typically works with small businesses and startups. Bigger, more experienced firms might seem attractive options, but if they’re not used to working with small clients, you’ll run into many issues (communication, high billing, responsiveness, etc.). Talk to some current and former clients that are sole proprietorships, small businesses, and startups and be sure those clients are happy and comfortable working with the lawyer you’re considering hiring.
Remember that you’ll generally find more added value when working with local lawyers, as opposed to lawyers located across the country. A local lawyer will have local connections that will help you with funding, can make introductions to other businesses that can help you, and will invite you to local events where you can meet their other clients and network.
When to hire a lawyer
Typically, the best time to start a relationship with a lawyer is before you start your business. This is especially important if you plan to be a venture or angel investor-backed company (because the type of entity you create will impact many other things).
Too many people make the mistake of forming a company and reaching agreement among co-founders without consulting a lawyer. In some cases, some co-founders leave (retaining their interest) and the rest are left to try to make the business work. A good lawyer will help you find the right business structure for the business – and split ownership interests – in ways that will protect everyone and give you flexibility going forward.
Make sure your lawyer knows what issues are important to you and what issues are less important (or not important). You can also help by negotiating the business terms yourself – without involving your lawyer – and then ask your lawyer to put together an agreement that reflects the deal you negotiated.
How to hire a lawyer you understand
Many lawyers speak and write in legalese. This is a problem because it leads to more confusion, higher legal costs, and more difficulty in negotiating deals and agreements.
Before hiring your lawyer, ask them for a few sample letters and/or agreements they’ve written. Are these documents easy to understand and well-written? Are they filled with complex and hard to understand legalese?
Decide your legal business structure
Before starting your business, you need to decide on the type of entity you need to register.
Your legal business structure affects everything, from how you file your taxes, to your personal liability, to whether you need to comply with any special additional requirements at the local, state, or national level.
There are many different types of legal business structures for various business entities. For new business owners, choosing the best business entity for your business can feel overwhelming.
Don’t rush yourself into making a decision to register your business immediately. For example, while a sole proprietorship might be quick and inexpensive in the short term, it might expose you to more risk, create an unfavorable tax treatment, and create problems for you in the long term. A limited liability company (LLC) might make more sense in most situations.
Instead, spend some time reading about each possible entity your business might fit into. Consider which business structure is most helpful for your business, and how each business structure can help you accomplish your professional and personal goals.
What are the 4 types of business entities?
- A sole proprietorship is the most basic business entity. A sole proprietorship means that one person is solely responsible for business profits and debts.
- A partnership is a shared responsibility between two or more people who both hold personal liability for a business.
- Limited Liability Company (LLC) is a business structure that permits owners, partners or shareholders to limit personal liability, but still includes tax and flexibility benefits associated with a partnership.
- A corporation is an entity legally considered separate from its owners. That means that corporations are permitted to own property, can be held liable, must pay taxes, and may enter contracts.
Be sure to look at which entity will work best for your current needs while still considering any future business goals. For more information, the Small Business Administration (SBA) is a great resource. If you need to register a business entity, the SBA is a great starting point.
Once you decide on your legal business structure, be sure to register with the government (typically your state and sometimes, your municipality) and the IRS, and obtain all required business licenses and business permits.
The forms you need, whether you need to register your business, and where you need to register, are determined by your business structure.
You can find a full list of the forms for each type of entity on the SBA website. You can also find state-specific tax obligations on the same site.
In some cases, you may need federal, state, or local business licenses and permits to operate. The SBA’s database lets you search for licensing requirements by state and business types. And remember to contact your municipality to see if there are any local licensing or registration requirements.
You may also need to get an employer identification number (EIN) from the IRS. Among other things, you’ll need the EIN to deduct federal and state taxes, and social security taxes, if you have employees, or if you pay yourself as an employee.
If you’re a sole owner (operating your small business as a sole proprietorship) and don’t have employees, this is not required. But you might want to get an EIN anyway to keep your personal and business taxes separate and to be sure that you can quickly hire when the time comes to expand your business.
The IRS has a useful checklist to help you decide whether you will need an EIN to run your business.
If you do need an EIN, you can register online for free.
Also, remember that most states require you to register your business with the secretary of state or county clerk in the county in which you operate your business if the trade name under which you operate your business differs from the legal business name of your business.
For example, if your registered company is a limited liability company (LLC) and the legal business name is Three Brothers, LLC, you cannot operate that business lawfully in most states if you’re selling products under the trade name Three Tigers. That’s because the registered business name, and your trade name, are different.
Fortunately, this is not a difficult problem to overcome. You can simply register your actual trade name with your state (and or local government) by filing a “doing business as” (DBA) certificate. DBAs are also commonly called “assumed name”, “fictitious business name”, or “trade name”. Here’s a terrific resource that explains what a DBA is, the DBA state requirements, and how to file a DBA for your business in all 50 states and U.S. territories.
For more on different business structures and other legal mistakes that small business owners commonly make, take a look at the following video.
Set up business accounting and bookkeeping
In order to keep track of your finances when starting a business, you’ll need to set up a bookkeeping and accounting system. This is important so that you understand your business’s cash flow and will also be important for tax-filing purposes.
Here’s what you need to know about accounting and bookkeeping for your new business.
Business accounting is how your business records, organizes, interprets, and presents its financial information. Accountants analyze the financial condition of a business to help the business owner make better decisions.
Bookkeeping is the recording, organization, storage, and retrieval of financial information related to your business.
Accounting and bookkeeping do overlap in many ways. The main difference between the two is that bookkeeping is how you record and categorize financial information, whereas accounting puts the information to use through analysis, strategy, and tax planning.
Why are accounting and bookkeeping important to your business?
The basics are pretty simple: you need to pay vendors, bill customers, make deposits, and pay your taxes. And you’ll also need some basic financial statements and forecasts in your business plan. Beyond that, it starts to get complex, pretty quickly.
The best way for small business owners and startup entrepreneurs to deal with that complexity is through careful planning, detailed documentation, and careful organization. The worst thing a business owner can do is to let those bills and invoices, pile up which can not only make things crazy difficult when tax time comes around, but can also serve to kill your cash flow and, ultimately, your ability to stay on business.
Accounting helps you plan for growth. If you don’t understand your financial information, you won’t know how to set proper goals.
Accounting will also help you to secure a business loan. Every lender, including every bank, will ask for up-to-date financial statements and statements dating back at least three years. And you’ll need to provide at least a one-year cash flow projection. You won’t be able to deliver any of these unless you have an accounting system in place.
With the right people in place and the right tools at hand, bookkeeping and accounting tasks can become relatively simple and the commitment of your time surprisingly minimal.
Start by hiring a bookkeeper
A great bookkeeper is not the same as an accountant. Many business owners hire a bookkeeper with some simple goals in mind: keep me organized, get my bills paid, and get me prepared for the work that will be handed to the accountant.
Typically, bookkeepers are less expensive than CPAs (certified public accountants) and can be trusted to record and organize your day-to-day business transactions, keep your bank accounts balanced, produce simple reports, and assist with keeping your financial records in order.
Many small businesses will use an outside bookkeeper, paid hourly, who is in the office on a regular basis to handle all entries, pay all the bills, and manage invoicing and receivables. Having help with this aspect of managing a small company can be indispensable, and the time it can free for a busy owner, invaluable.
A bookkeeper can help you organize your financial information
Any business from the smallest of hot dog stands to the largest of public companies creates data. Sales data, inventory data, employee data, customer data. The list is endless. And like any kind of data, if data is not organized and accessible it is completely useless.
With accounting data, this is doubly-true and the speed at which a small business can fall behind can be breathtaking. Even a few weeks of unrecorded sales transactions or a month of un-mailed invoices can quickly swamp a small business, destroy cash flow, and put it out of business faster than you can spell IRS.
A good bookkeeper can help you set up a filing system, keep bills organized and paid on time, be sure customer invoices go out promptly, and put systems in place that will force you to do these things in a disciplined and methodical way.
Review your accounting processes annually and make adjustments
Do not under-estimate the importance of a periodic review of your bookkeeping, accounting, and tax strategies. It is at your own peril that you neglect to take a hard look at the systems you have in place and the people managing those systems.
Are you doing your accounting in the most productive and cost-effective way? Does your CPA have the right level of industry knowledge to advise? Does your tax-preparer have the skills and expertise to keep you (and your investors) on the right side of the law? And finally (the big one), can you find ways to reduce your expenses while maintaining high-quality controls?
Take the time to reconsider your overall accounting strategy and find ways to strengthen and improve it.
Pick the right software to maintain your financial data
A small business owner or manager needs to choose the right accounting software. This is often driven by your choice of accountant: if your CPA uses Quickbooks, it’s a reasonable bet that you will, too. But not all accountants use QB and there is no rule that says you need to use it.
In fact, the trend is away from installed accounting packages and towards cloud-based solutions for small business bookkeeping and accounting. So, while Quickbooks had myriad features and some very powerful tools and is, in many ways, the industry standard, some of the online options also provide robust tools and feature sets and offer the convenience and economy of cloud-based software. Three of the leaders in subscription-based small business accounting packages are Wave Accounting, Xero, and Freshbooks. These services offer accounting, invoicing, and project management tools as well as standard reporting and tax-preparation features.
How to find a good accountant
Large companies have large accounting departments, and will often have a CFO (Chief Financial Officer), a controller (aka ‘comptroller’), accountants, and bookkeepers on staff to handle the flow of financial data and oversee the quality of reporting.
Often, these companies will engage an outside tax accountant who specializes in the arcane details of the IRS as well as state departments of revenue or taxation.
Small businesses are more likely to hire an outside accountant who is versed in managing books, creating reporting systems, and preparing corporate taxes. Smaller accounting firms tend to be populated with these jack-of-all-trades type accountants and will meet the needs of most small businesses.
High-growth startups and mid-size companies will also often outsource accounting, but will usually have at least two accountants on the team, a generalist as well as a tax specialist.
A good accountant will not just keep your books in order and your business on the right side of the tax code, but can and should also act as a trusted advisor, someone who can answer your questions, assist with your business strategy, and help you grow and develop your company over time.
Where to find this person? Ask business associates, friends, or even your attorney. Referrals are the best way to find the right match and to enter the relationship with some certainty and a reasonable level of trust.
Open a business bank account
Be sure you find a strong banking partner when starting a business.
Here’s what you need to know about business bank accounts for your new business.
It’s common for people thinking about how to start a business to overlook getting a business bank account.
This is typically a mistake.
Business bank accounts typically offer benefits that are not available in a personal bank account. For example, business bank accounts offer limited personal liability protection by keeping your business funds separate from your personal funds.
Additionally, banks that offer merchant services (allowing you to accept credit card payments) offer purchase protection for your customers and ensures that their personal information is secure.
By creating a business bank account, you’ll also create a great level of trust with your customers and prospects. Customers will be able to pay with credit cards and write checks to your business instead of directly to you.
And, many banks offer a line of credit, allowing you to take out loans on an as-needed basis. You can use such loans if there’s an emergency or if you need to buy new equipment or launch a new product or service line.
Finally, a business bank account helps you make large purchases and establishes a credit history for your business.
Community versus national banks
Many different financial institutions offer business checking accounts and business savings accounts for small businesses. These include big, national banks, local, regional banks, and online-only banks.
There are advantages and disadvantages to all. For example, business bank accounts from online banks are known for flexibility and limited fees. Business bank accounts from big, national banks are known for ATM and retail branch access.
For most businesses, the best banking partner is a smaller community bank. That’s because smaller community banks understand local market conditions and are built to service smaller businesses. You don’t want to be one of a million business customers with a major national bank – you won’t get their attention and will quickly get lost in the crowd. This is especially important if you want to build a close relationship with a bank.
Schedule meetings or calls with various banks and ask questions about ways they work with small businesses. These conversations will help you find the best bank for your new business.
Business checking and savings accounts
If you’re looking for a business bank account for your new business, focus on the business checking accounts. Business checking accounts allow you to manage your finances on a day-to-day basis.
But, if you’re looking for a way to store your business capital and earn interest on that capital, you’ll want to consider the best business savings accounts. But remember that savings accounts limit accessibility, so those types of accounts are not ideal for a new small business.
Assess your finances
When you start a new business, assessing your finances is crucial. These numbers include being able to track your sales and profits - but a smart business will need to account for much more than sales alone.
Here’s what you need to know about business finance and how to crunch the numbers for your new business.
Business finance is the use of your company’s financial information to help you manage your money and make your business operations profitable and sustainable.
You have many business financing options.
That’s important because you need to determine how you’re going to fund your new business and how you’ll grow it. If you don’t understand the numbers, you’ll have a tough time building a sustainable, profitable business.
Be extra careful to conserve your funds when starting a business. Don’t overspend.
Some purchases will be necessary and will make sense for your business, but others, like expensive and unnecessary equipment, will threaten your small business’s survivability.
In order to keep track of your finances, you’ll need to set up a bookkeeping and accounting system. We talked about this above. This is important so that you understand your business’s cash flow and will also be important for tax-filing purposes. Your accounting and bookkeeping system will include income, expenses, capital expenditures, profit, loss, EBITDA, etc.
Fund your business
One of the biggest challenges for every new business is saving enough capital to sustain and grow the business.
Here’s everything you need to know about funding your new business.
Bootstrapping your business lets you control your own destiny, but it’s not for everyone and it will typically take you longer to build a successful business when you bootstrap it.
Small business grants
Business grants are similar to loans in that an organization gives you money to use toward your business.
But, grants have a distinct advantage over loans as a financing option – you are not required to pay them back.
Aside from the time invested in finding the grant and writing the grant proposal or application, grants are free money you can use for your business.
And, according to the experts at Finimpact,
Typically, they are granted to people in disadvantaged areas or from specific groups – veterans, women, Hispanics, African Americans, etc.
So, if you’re disadvantaged in some way (which logically suggests a greater need), you stand a better chance of winning a grant.
But don’t assume that you’ll get a grant. When you write your business plan, assume that grants will be very difficult to get (and celebrate if you’re lucky and get one).
Grants are available from federal and state governments, non-profit organizations and other advocacy groups. This list from Fundera is a great place to start your research for the best small business grants. And, if you’re interested in federal small business grants, look here.
But remember, while these lists are a great place to start, they’re also the same lists a lot of other small businesses are looking at – and competing for. Take the time to do your own research and don’t assume in your business plan that you’ll fund your business solely through grants.
Small business loans
A business loan means borrowing money from a bank or other lender and then paying that money back over time with interest.
There are general business loans like SBA (Small Business Administration) loans, micro-loans, short term loans, term loans, business term loans, and merchant cash advances. Then there are the ultra-specific loans like equipment financing, PPP (Paycheck Protection Program) loans, accounts receivable financing, and commercial mortgages.
Loans are available with short repayment terms and long repayment terms, for very large amounts and very small amounts. Some have very specific parameters for how they can be used, while other loans are jacks of all trades that can be applied to any financial need for your business.
Remember that banks will check your personal credit score for a business loan, so make sure the credit score is sufficiently high to qualify for a business loan.
Small business credit cards
Credit cards are one of the more risky – but agile – small business financing options available on this list.
Grants and loans often have a lengthy application process. And, there may be restrictions on how you use the money. But, a small business credit card can be used whenever you need it and for almost any type of business purchase.
But, credits cards are a double-edged sword – agility on one side and high-interest rates on the other. (Always negotiate the lowest interest rate you can. And, take the time to shop around. It’s worth it.)
Luckily, it’s relatively easy to get a small business credit card. But, your credit history will determine the kind of interest rate for which you qualify.
You don’t need a formal business structure to apply for a business credit card. Sole proprietors can apply, too.
And, you don’t need a business credit history. Your personal credit history will be used to calculate your interest rates.
But, remember that nearly all small business credit cards require the business owners to be personally liable for the charges on the credit card if the company cannot pay.
Used responsibly, credit cards are good for building your business credit. Just make small, predictable purchases and pay them off on time. And, if you find you have to use a credit card for a larger purchase, be sure that you have a plan for how to repay that debt.
A business line of credit
A business line of credit is like a hybrid between a loan and a credit card.
With a line of credit, you have access to a lump sum amount – like a loan. (According to lending experts at Lendio, lines of credit are available from $1000 to $500,000.) But you only repay (and pay interest on) the amount you actually use – like a credit card.
And, as long as you pay back the line of credit according to the agreed-upon terms, you can continue to dip into that money again and again. Your line of credit remains waiting in the wings to absorb unforeseen future expenses. This is in contrast to a loan that can only be spent once.
A line of credit is ideal for covering unexpected purchases that may be beyond the scope of a small business credit card. It’s also great for helping to smooth out cash flow from month to month.
Still not sure if a business loan or a line of credit is the right small business financing option for your business? Give this article from Lendio a read.
Unlike most of the small business financing options on this list, creating a joint partnership doesn’t rely on applying for money or credit. Instead, this strategy involves two complementary businesses working together to help each other out.
A joint partnership occurs when two businesses temporarily join forces to share resources and achieve a common goal. Those resources may be information, audiences, finances, or even products or services.
If you find your business waning, don’t overlook the possibility of forming a joint venture to help buoy your performance.
Mary Hall of Investopedia explains:
When a joint venture is successful, participating companies share in the profit as agreed upon in the initial contract. Likewise, a failure in a joint venture results in all participating companies realizing their portion of the losses.
Both partners are invested in the success of a joint partnership because they both stand to benefit – and neither party wants to suffer a loss. But, even if your joint endeavor does fail, your losses are cut in half (or whatever terms you’ve agreed upon).
Because of the unique and specific nature of this tactic, we can’t provide you with a list of businesses to partner with. But, we can offer you this advice…
- Brainstorm a list of other businesses (not competitors) that share your audience.
- Think of other businesses who share a goal with yours.
- Think of businesses with a complementary service or product to your own.
Your goal is to find a business that is complementary to – not competing with – your company.
Then develop your ideas for the partnership before approaching them. You’ll be far more likely to win their buy-in if you’ve clearly done your homework ahead of time.
Startup incubators and accelerators
Startup incubators and accelerators, like YC, Techstars, Founder Institute, and many others, help new or startups businesses move to the next level. Most provide free resources, networking opportunities, consulting, and help to build your business. Some will also provide seed funding in exchange for some equity in your startup.
Business partners can come in many forms. A real business partnership occurs when both parties invest equally in the success of the business. Both partners devote comparable finances, resources, and labor into making the business work.
If you don’t already have an equal partner by your side, you can also establish more casual or temporary partnerships with existing brands, businesses, or retailers. Look for companies that are complementary to your business. Make sure that you share the same goals.
There are many other creative ways to partner with an existing company. As long as you and your partner have the same goals, you’ll be motivated to work together to achieve them.
Raising funds from a group of people genuinely interested in your business and its offerings can be a great way to start.
Crowdfunding sites like Kickstarter and IndieGoGo have made it easy to connect with potential customers and build capital that way. The challenge is finding enough people interested in what you have to offer, and then following through on your promises.
As we pointed out,
Reports have shown a consistent increase in crowdfunded investments since the great recession in 2008. In a recent study on the Crowdfunding Industry, World Bank predicted that the crowdfunding market could increase to between $90 and $96 billion, which is approximately 1.8 times the size of the global venture capital industry today.
Don’t look at crowdfunding if you want a true business partnership.
If, on the other hand, you want to gauge consumer interest and form a direct relationship with people who believe in your business, you might want to give crowdfunding a try.
Angel investors and venture capital firms
Angel investors and venture capitalists provide a more traditional route to raise funds. You’ll need to sell these investors on the financial viability of your business.
But know that this is a very tough path to raising funding for most small businesses. Venture capitalists and angels are looking for billion-dollar exits and most small businesses aren’t tackling problems big enough that justify such exists.
If you have an idea that could potentially interest a VC or angel investor, it’s essential to walk into your pitch meeting knowing what you’re looking for and how you’re going to get there. No one wants to invest in someone who doesn’t understand their own business.
Be prepared for investors to want a greater role in your business.
Investors are investing their money in your business in the hopes that they will make a return on their investment. They want to be sure that you’re running your business in a way that is likely to ensure that return.
Find business partners
The right business partner can be the difference between your business failing or succeeding beyond your wildest dreams.
Here’s what you need to know about finding a great business partner for your new business.
A business partner is a partner in a business formed by two or more individuals to carry on a business as co-owners or partners. Typically, the partners in a business invest in the business and each has a share in the profits and loss of the business.
What are the types of partners in a partnership?
Partners in business can include individuals, groups of individuals, companies, and corporations. General partners participate in managing the partnership and have liability for the partnership debts and obligations. Limited partners invest but do not manage the partnership.
Partners can be paid employees, but can also have a share in the ownership of a business but not work for the business.
Finally, a business might have different levels of partners. For example, there might be junior or senior partners, which is often the case in professional services partnerships like law firms and accounting firms.
How do you form a partnership in a business?
To form a partnership, you just need to register the partnership in the state where it is going to do business and create the partnership operating agreement, which defines what each partner is responsible for, the different types of partners, how the partners will be paid, and how to handle changes in the partnership. Take a look at the section of this guide on business structure to learn more about different business structures, including partnerships.
Why are there different types of partners?
Some people may want a different role in the partnership. For example, some want to contribute more money while others may not want to contribute any money but want to work in the business and earn a salary. Some partners are willing to take on more responsibility and liability, while others want less responsibility and liability.
Don’t confuse types of partners and types of partnerships
Don’t confuse different types of partners within a partnership with the types of partnerships (general partnerships, limited partnerships, and limited liability partnerships). A general partnership may have only general partners, while a limited partnership may have general partners and limited partners. A limited liability partnership has no general partners. And, all partners in a limited liability partnership (LLP) have limited liability.
How can you find the right partner for your business?
The best partners are often people you knew before you started your new business and formed a partnership. Great business partners almost always have had a prior history of working effectively and productively with each other.
If you think you’ve found a great potential partner but you don’t have that kind of history, then find ways to test working together by trying a few smaller projects. You don’t want the first time you have to work through disagreement to be at a crucial point in the early stage of your business.
The best partners also agree on the vision. When partners work against each other, the business suffers and fails.
Strong partners also take the time early to talk candidly about money. It’s very tempting to skip the tough conversations when you start a new business. Both of you are excited about the idea and are busy with all of the details. Some founders just decide to split the equity equally.
But this can lead to problems. In fact, conflict among partners is one of the biggest reasons many businesses fail.
Good partners know who the real leader is. You can’t lead a company by a committee and expect success. Every great company has a visionary leader and someone else great at operations and execution. But, partners much recognize and accept that when they disagree about something, one founder has the right to make the final decision.
Great partners also understand how committed the other partner(s) are to the business. Be clear on how much time you can devote to the business and how your other commitments (an outside job, family, travel, health, etc.) will impact your contributions.
The best partners also have compatible skills. A technology company with only engineers will likely fail. One with only visionaries will fail too because it won’t be able to build anything. Having partners with complementary but different skills offers unusual benefits and leverage.
Great partners also have compatible leadership styles and personalities. If you work at different times of day, at different paces, and rarely talk, it’s hard to understand the benefits of partnering. So, while you don’t want partners with exact leadership styles and personalities, you want people who are compatible.
Finally, great partners are comfortable talking about what will happen if the partnership fails. Few companies last forever. Whether you sell your business or go out of business, you need to decide how you’ll collaboratively deal with those situations.
Where can you find the right partner for your business?
Start by evaluating your co-workers at your current or past jobs. It helps to choose a partner with whom you have working experience. That’s because you already know how that person works, what motivates them, and whether they’re reliable.
Many people go into business with a friend. Experts often advise against this because a business partnership can quickly destroy even the strongest friendship. That’s because startups are hard.
You can also take advantage of networking at in-person and online events. If you meet people at such events, find a few small projects to work on together before you decide to partner with them on a new business.
Many people partner with a family member, like a sibling or cousin. This can sometimes lead to lots of friction within the family if and when the business fails.
Finally, you can attend a business course or conference and look for people who can complement your skills and personality.
How can you work well with your business partner?
Here are 10 strategies that will help you to work well with your business partner.
- Listen to your partner. Emotional and social intelligence are key when building and maintaining this all-important relationship and it is the responsibility of each partner to watch for the cues and read the signs when working together.
- Don’t compete with one another in the business. You are in this together and the urge to compete with your partner can be greatly damaging to the relationship and to your business. This is very difficult for many of us – entrepreneurs tend to be A-types, hell-bent on winning, winning, winning, and the urge to compete even with those closest to you is probably your second nature. Fight it.
- Don’t argue in front of the team. What you say and do has a profound impact on your team, on the culture you’re working hard to build, and on your company’s workplace atmosphere. It is only natural that you will have disputes with your partner and inevitable that conflict will arise, but when it does, take it outside and spare the team the stress that your argument creates. Remember, the team is watching everything you do, so always be a leader by example and set the atmosphere for the rest of the company.
- Share the load. The sheer volume of work involved in starting and running a company can be overwhelming. The key is to share the load with your partner in order that everything gets done. Each of you has inherent strengths and weaknesses and these are a good place to start when dividing up the work. If one has an aptitude with analytics and business intelligence, let her handle that; if the other is great at negotiating with vendors, then she should be the one who does that. This is not to say that you shouldn’t work outside of your comfort zones, and chances are your partner is a great one to teach you the ropes with a new skill you’re looking to learn.
- Trust that your partner knows what she’s doing. As in any relationship, trust is probably the biggest driver of success and you need to work hard to build this with your partner.
- Spend time together. In the office, it can be difficult to get any kind of quality time for just the two of you to talk, to relax, to share with each other how things are going. This may sound a lot like date-night with your spouse, and actually that’s because it is. Just as in a personal relationship, time alone together is critical to communication and understanding. Take time away from the workplace to share information, get on the same page, and develop and maintain the shared vision that brought you together in the first place.
- Don’t be bossy. Your partner is your equal – you are not the boss of him, nor is he the boss of you (but see a few sections above about having one final decision-maker). Your attitude and actions with one another should reflect this, and this mutual respect and deference should color the relationship. When one partner puts themselves ‘above’ the other, or behaves in a manner that makes the other feel subordinate, even if this is not intentional, it can become a recipe for trouble. Always keep in mind that your partner is just that – your partner; they are not someone who works for you and your deeds should reflect that fact.
- Don’t be grabby. Workplaces have a rhythm and sharing is an important part of that rhythm. It is always vital to let others take the lead on projects large or small. As a competitive person and a leader we often have a tendency to just ‘do it myself’ rather than letting a partner give it a shot. Fight your instinct to grab a project, and instead share the work and let your partner give it a try.
- Ask, don’t assume. The corollary to number 8 is that sometimes when discussing a project or task, you should just ask your partner, ‘Shall I do this, or would you like to?’ You’ll be surprised how often they would just as soon lead the effort and you will be equally happy to not have to do the extra work.
- Share the glory and the blame. Not only does your partner and the rest of the team probably deserve it, but it feels so good to let everyone bask in the adoration that comes with success. Of course the same goes for things that do not work out so well – when the inevitable flop happens, take your share of the blame, whether you have it coming or not. Your partner and your team will appreciate that you put yourself forward when they most needed your support.
Purchase business insurance
You'd be surprised how many new business owners forget to protect themselves and their business by purchasing insurance before they start their business.
It doesn't help you to buy insurance after you started your business and incurred claims against you or your business.
Insurance can cover property damage, theft, intellectual property lawsuits, and other incidents. Those can be very costly to small businesses and you need to properly protect yourself and your new business.
And if you will employ people, you’ll need to have workers’ compensation and unemployment insurance. Coverage varies by location (for example, a business in New York pays substantially more for insurance than a business in Omaha), and most general liability (GL) policies will cover at least workers’ compensation.
If you provide services, you’ll want to have professional liability insurance so that you’re protected against possible claims.
Here’s a good read on the different types of insurance you should consider as a business owner.
Crunch the numbers for your business
When you start a new business, assessing your finances is crucial.
These numbers include being able to track your sales and profits - but a smart business will need to account for much more than sales alone.
You need to determine how you’re going to fund your startup and how you’ll grow it.
Perform a break-even analysis
One way you can determine the amount of money you need is to perform a break-even analysis.
What is break-even analysis?
A break-even analysis is a financial tool that helps you determine at what stage your company, service, or product will be profitable. It's an essential element of financial planning. Break-even analysis considers your fixed costs (costs that stay the same no matter how much your sales change), your variable costs (based on sales), and the average price (the average amount that your competitors price for their products or services).
The break-even analysis formula is Fixed Costs / (Average Price - Variable Costs) = Break-Even Point.
There are many reasons you should conduct a break-even analysis.
The most important reason when starting a new business is to determine profitability for your business.
You can also perform break-even analysis when you price a product or service, taking into account fixed rates, variable costs, and competitive pricing.
Finally, you can perform a break-even analysis to analyze your data to determine how much volume of sales you’ll need to be profitable.
Assess your new business startup costs
To start a new small business, your startup costs may include:
- your brand design (logo, business cards, and website)
- any business license or permit fees
- deposits and rent for a physical work location if you plan to lease your own workspace
- basic infrastructural costs like phone and internet service, invoicing software, etc…
- marketing and advertising costs
- manufacturing costs
- salaries or wages for any employees
Once you know how much it will cost to get you started, compare that with the funds you have. Then plan how you’ll make up any difference.
But be realistic. For example, many companies offer small business loans, but they’re often expensive, require personal guarantees, and require you to be already operating profitably for a number of years.
Consider ways to leverage third parties to help you get your products or services to market more quickly. For example, traditional product design firms typically charge $50,000 to $100,000 (and often more) to help you design a physical product. You can save tens of thousands of dollars by working with experienced product designers on crowdspring to get a custom, professional product design.
Run smart calculations to determine how much it will cost to create your business will allow you to plan and think about pricing.
Watch your expenses
Be extra careful to conserve your funds when starting a business. Don’t overspend.
Some purchases will be necessary and will make sense for your business, but others, like expensive and unnecessary equipment, will threaten your business’s survivability.
Set up a good accounting and bookkeeping system
In order to keep track of your finances, you’ll need to set up a bookkeeping and accounting system. This is important so that you understand your business’s cash flow and will also be important for tax-filing purposes. Your accounting and bookkeeping system will include income, expenses, capital expenditures, profit, loss, EBITDA, etc. See the section above for details.
Create a strong brand identity for your business
A strong brand identity is the most effective way your new business can gain a competitive edge in an increasingly crowded marketplace.
As we’ve previously discussed,
…your brand is your company’s public identity. Ideally, your brand should embody the best (and most essential) attributes of your company.
A brand represents how people know you (or your business), and how they perceive your reputation or the reputation of your company.
Your brand identity includes your business name, company logo, and everything visual about your business (including your website, marketing materials, your accounts on social media, business cards, letterhead, and more).
In today’s noisy world, a strong brand is more important than it has ever been.
We just emailed the Brand Identity Guide to you.
Ask yourself these important questions:
- What identity/personality do I want my business brand to project?
- Who will want or need my products or services?
- What can customers get from my products or services that they can’t get anywhere else?
- What can customers get from working with me that they can’t get anywhere else?
- What are my brand values?
- What is the most important part of my customers’ experience?
Barry Moltz, a leading small business expert, adds another important question: “Think about what pain you solve for customers and who you solve it for. Design your brand around that.”
Your answers to these questions (and others like them) will build the core of your brand. All of your future branding decisions should expand on these ideas. Your business name, your company’s logo design, and your website design should all grow from the concepts you laid out here.
Remember that your business name plays a role in almost every aspect of your business.
Here’s a short video that will help you find the perfect business name for your new company.
You can learn more about the nuts and bolts of establishing and maintaining consistent brand identity in Grow Your Small Business with Consistent Branding.
Build an online presence
Your website is one of your new business's most important ambassadors and a crucial component of your marketing and branding strategy.
As we explained previously:
Today, it’s impossible to reach most customers without a website. This is especially true for new small businesses and startups trying to compete in an increasingly noisy world. but it’s also true for even established companies.
Don’t believe us? A recent study shows that 97% of consumers research their purchases online before they buy something.
Start by ensuring that your website design truly embodies your brand. Visitors should be able to understand who you are and what your brand is about as soon as they arrive.
Your website’s visual design and marketing copy should project your brand’s voice and identity. Here are some suggestions:
- Use your brand’s colors.
- Prominently feature your logo.
- Write website copy with your target audience in mind.
In addition to serving as a brand ambassador, your website is also an excellent venue for showing off your products or services to a wide audience.
Aim to create a site that builds your brand and communicates your business’ value proposition. Companies talk about building an MVP–- a “minimal viable product”– and the first version of your business’ website should be that, too.
The initial version of your website should clearly express your brand, who you are, and what you do (or what you sell). Have all possible social profiles like Twitter and buy followers on twitter to get some initial boost in terms of web presence.
Finally, a strong website design will lend credibility and legitimacy to your business. To learn more about great website design, check out Grow Your Small Business With These 7 Website Design Best Practices and 7 Modern Web Design Trends for 2019.
Create a sales plan for your business
Never forget the power of good old fashioned market research when you're ready to open your business.
Not every option will be cost-effective or practical, and you should understand what choices will work best for your business.
How will you sell your products or services? Running a business is more than just organizing it – you’ll need to get ready to find customers.
Running an online store is both less expensive and less labor-intensive than setting up a physical store. There are no monthly rent, mortgage or property taxes to pay, and no fancy light fixtures to buy. It has become incredibly easy to create an e-commerce presence without a lot of technical knowledge, making a digital presence an attractive option for beginning businesses.
Most template-based web design services offer some form of e-commerce functionality. And some, like Shopify, are catered specifically toward e-commerce small businesses.
However, be sure to carefully consider all of the pros and cons before using a template-based service like Shopify.
Remember how important your unique branding is? The templates on those e-commerce sites are available for every other new business brand to use, as well. As we mentioned previously,
It’s not enough to have a website… You also want to be sure that your site’s design is unique and that it showcases your products and you.
Just like your logo, your web design should start with your personal brand. A well-designed website will expand upon and support the values and personality traits that you’ve identified as being core to your business. If web design is not among your many DIY skills, know that there’s help available.
There are self-hosted open-source e-commerce services available that allow you to use your own uniquely branded website with their e-commerce functionality.
And remember that many businesses are required to pay sales tax. So make sure that whatever solution you pick, they can help you to automate that process so that you don’t spend hours every week figuring out the taxes you owe.
And if you want to stay up to date on the latest in small business marketing, take a look at these 16 best small business marketing blogs.
Find business vendors and suppliers
One of the biggest challenges for every new business is finding the right suppliers and vendors.
In a perfect world, we could all fund our own business ventures without any outside help. But, the truth is that most people can't do it alone.
This is where business vendors and suppliers can make a real difference.
As with any aspect of your business, start by giving the matter some serious thought. Here are a few questions to get you started:
- What do I want to gain from this supplier or vendor?
- How involved do I want them to be in the decision-making processes?
- Am I looking for a long-term or a short-term relationship?
Once you’ve thought through what you want, and where you want things to go, it’s time to evaluate your options.
A vendor, also called as a supplier, is a person or a business that sells something to your business. A restaurant, for example, buys meats, fish, vegetables, and other goods at wholesale prices and sells those goods in their restaurant at retail prices to customers.
How can you evaluate vendors and suppliers?
Evaluate vendors and suppliers by focusing on five important factors.
First, consider the price. But remember that price is only one factor, so don’t stop there.
Second, consider reliability. Good suppliers will ship the right number of items, when promised, on time, and those items will arrive in good shape.
Third, consider the supplier’s stability. Suppliers that have been in business for a long time, have a great reputation and a strong record are typically better than new suppliers who just started. Suppliers that ship on time, stand behind their products, and quickly deal with problems are much better than those who give you the run-around anytime there’s an issue.
Fourth, consider the location. If you need items fast, find a supplier near you or be sure that shipping is quick. And clarify freight policies. Sometimes, suppliers will offer free shipping, and other times, you will need to pay.
Finally, be sure your vendors have the items you need, in stock, at all times. Not all suppliers maintain good stock and not all do a competent job letting you know what’s out of stock and how long it will take to backorder the items you need.
What types of vendors will you need?
There are generally four types of vendors: manufacturers, distributors, craftspeople, and importers. It’s unlikely that your business will use all of them, but let’s briefly look at each.
Businesses that sell products typically buy those products through salespeople or independent representatives who handle products from different companies. So you’ll either deal directly with a manufacturer or, more typically, work with an independent representative.
Distributors are known by many names. They’re often called wholesalers, brokers, and jobbers. Distributors typically buy in quantity from several manufacturers and warehouse goods for sale to retail and online businesses.
Distributor prices are higher than a manufacturer’s prices because they need to include a margin for themselves. But distributors will often sell smaller quantities of products and for new small businesses, this is important. After all, manufacturers often have a requirement that you buy a minimum quantity that’s far above what you can reasonably afford or sell quickly. And, because distributors are typically located closer to you, a lower freight bill and quick delivery often make up for the higher cost.
Sometimes, you’ll buy items from independent crafters who sell through reps, at trade shows, or online through sites like Etsy.
If you want to buy products made overseas, you can avoid many hassles and headaches by buying from an importer. Domestic importers operate like a wholesaler.
Of course, you can always travel overseas and buy directly from a foreign manufacturer.
Build your business team
There's a time in almost every entrepreneur's career when you feel like you're going it alone.
When you first start your business, there’s a good chance that you will be.
For your business to scale and grow, however, you'll need help.
If all goes well, you’ll hire many employees. But employees must be paid.
At first, you should only hire for positions that provide the most immediate benefit to your business.
There’s no one right answer for what those positions might be – every business is different. As you plan what positions to hire, consider what aspects of the company pose the greatest challenge. It’s also crucial to consider your own limitations.
Hire an employee who is an expert in areas your business lacks expertise. Build a strong, well-rounded team to create a stable foundation for your business.
With all of that in mind, where should you start?
You may want your first hire to be a part-time assistant. Look for someone who is a jack-of-all-trades, eager to learn new skills, with a strong work ethic. You’ll sleep better if you have someone in the trenches with you that you can rely on.
If you’re new to marketing, a marketer can help you strategize your business.
If you’re not confident with the manufacturing process, hire a manufacturing liaison. If you’re finding it a challenge to keep up with orders, a fulfillment manager might be just what you need.
You’ll need to prioritize and delegate if you want to grow your business, says Barry Moltz, a leading small business expert, author, and speaker:
Ruthlessly prioritize and filter your tasks for the week or month. What are the two or three things that will move the company forward and do those particular tasks support that goal. Another way to look at it is to categorize tasks on a matrix of urgent and important. Urgent and non important plus non urgent and important tasks can always be delegated.
And, remember to plan for appropriate office space. Unless your team will be remote, you’ll need office space where people can work. Since most landlords require longer-term leases, it’s not easy to plan for office space when starting a new business. Consider short term rentals, sub-leases, or flexible co-working spaces in the short to medium term.
The Legal stuff
Of course, hiring staff for your new business means that you’ll have to deal with all sorts of legalities and paperwork. Hiring isn’t an area where you should “wing it.”
To help you with some of the legal issues to consider we went straight to the source. The hiring experts at Indeed recommend that you:
- Get an Employer Identification Number (EIN) by applying on the IRS website (you’ll get your number immediately after applying!).
- Register with your state’s labor department.
- Fill out paperwork to withhold federal taxes from your employee’s wages.
- Set up workers’ compensation insurance if it is required in your state.
You’ll also need to decide whether you’re hiring full or part-time employees.
Part-time employees cost less. These cost-savings can be an advantage when you first get started. As your business grows and you can afford it, you can expand their hours.
Full-time employees also require more paperwork to get set up. To gain more complete insight into the hiring process, read Indeed’s step-by-step guide, How to Hire Employees.
And remember to perform a comprehensive reference check before you hire an employee. This will help you make sure that the applicant has been truthful in their resume and employment application.
Grow your business
You have your business ready to go - your brand is a masterpiece of consistency and charm, your legal and business plans are all squared away, and you have a solid team standing behind your business.
Here comes the fun part - introducing your business to customers!
Look into area newspapers, radio stations, and local events where you can bring your brand to the people. Any outlet that makes sense for your business is one you should be seeking out.
Have early customers post their rave reviews everywhere that matters – your website, your social media platforms, and anywhere else where other potential customers will see them.
Reward those early fans with special treats – access to special events, promotions, or discounts are always great, but even a handwritten thank you card can go a long way in turning a fan into a lifelong follower.
Another valuable (and easy to overlook!) marketing tool for your business are supporting photos, videos, and other visual evidence of your product or service in action.
Let your target market experience as intimately as possible what it is you’re offering – give them a reason to remember your brand and seek you out.
This means you’ll need to put substantial care and effort into all of your branding materials because these images are often used on your website, social media marketing, and advertisements.
Make sure you focus your efforts on your brand and target customers in mind with any marketing materials you create.
Make sure that your photography, videos, and printed materials are professional, and that everything you put out represents your brand in an attractive, engaging light.
That doesn’t mean you need generic, overly stylized images – on the contrary; the more authentic the photos appear, the more likely it is they will engender trust in consumers. For tips on how to take well-composed photos for your business, read these 7 tips from Entrepreneur here.
As a new, up-and-coming business owner, social media is an inexpensive and easy outlet for terrific exposure for all of the beautiful material you’re creating. As we previously explained,
Social media gives you the ability to easily keep customers up-to-date on new products, store policies or sales. It also enables you to build a social rapport with current customers, while building low-pressure relationships with future buyers.
Maintaining Twitter, Instagram, and Facebook presence are important tactics to build a following and connect with your market niche. With the advent of micro-influencers, the potential reach a new business now has is truly massive.
There’s a lot to think about when you’re starting your own small business. This how to start a business step-by-step guide will give you a competitive advantage and will help get you started on the road to owning a successful business of your very own.
Frequently asked questions on how to start a business:
What are the most successful small businesses?
According to the most recent analysis by Sageworks, accounting, tax preparation, bookkeeping, and financial planning where the most profitable types of small businesses, returning an average profit margin of 18.4%. Real estate leasing, legal services, outpatient clinics, property managers, and appraisers, dental practices, offices of real estate agents and brokers, other health care practitioners, management, scientific and technical consulting services, and warehousing and storage rounded out the top 10 industries.