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 an unfair advantage. They’re started and run by people who prepare for what’s ahead of them.
If you want an unfair advantage, we’re here to help you get started.
This is the most complete guide online on starting a business.
It may seem overwhelming, but with this guide, you’ll have everything you need to know to launch a successful, profitable small business.
Starting a business involves careful planning, making key financial decisions, and completing a series of key legal activities. You need every advantage you can get. So, let’s get started!
Here are 12 steps to start a business:
- Develop and refine your business idea
- Research your intended market
- Write a business plan
- Decide your legal business structure
- Purchase business insurance
- Crunch the numbers for your business
- Create a strong brand identity for your business
- Build a web presence for your business
- Create a sales plan for your business
- Find business partners or investors
- Build your business team
- Grow your business
1. Develop and refine your business idea
If you want to start your own 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 business? The answer to that question will help you focus on a single idea.
You probably already have some idea of what kind of business you’d like to start.
It’s important to evaluate 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. Ask yourself the following questions, and take time to reflect on the answers:
- What skills set me apart?
- What is the purpose of my business?
- 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?
- 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 with your friends and family. After all, they know you well and can help you answer some of the questions.
Find a niche
You’ll also want to consider what specific niche is right for 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 create a 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 business with a specific product or service designed for a particular group of people.
Here are some niches to consider:
- 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.
Whatever niche 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.
2. Research your intended market
Before you dive into your business plan, it’s important to know the market you’re entering.
Who is the direct competition? Is someone else already doing what you want to do? 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.
There are two major types of market research: primary and secondary.
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.
3. Write a business plan
Although writing a business plan isn’t mandatory, it can help you to crystallize your ideas. Toby Nwazor advocates for creating a business plan:
Any experienced entrepreneur knows a company without a business plan is like a fish without water. The plan does not need to be lengthy at first. Rather, it should be one or two pages, identifying the key elements of the clothing line’s business strategy.
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.
Your business plan doesn’t need to be 100 pages long. Keep it short and concise and focus on the key details.
Studies show that entrepreneurs who take the time to write a business plan 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.
Traditional business plans have the following sections:
- An executive summary. This section summaries the entire plan, so it is generally written last. Anyone reading your plan will read this 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 product or service. 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.
- 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? 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 more information about how to create a business plan, the Small Business Administration has you covered. Click here to see their complete guide on how to write a business plan.
4. Decide your legal business structure
There are many different types of legal structures for various business entities. For new business owners, choosing the best one for your business can feel overwhelming.
Don’t rush yourself into making a decision.
Instead, spend some time reading about each possible entity your business might fit into. Consider which structure is most helpful for your business, and how each 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 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 is a great resource.
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.
The forms you need and where you have 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 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.
If you’re a sole owner 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.
For more on different business structures and other legal mistakes that small business owners commonly make, take a look at the following video.
5. 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, and many 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.
6. Crunch the numbers for your business
When you start a new business, understanding the numbers involved 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.
To start a new business, your costs may include:
- your brand design (logo, business cards, and website)
- any 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.
7. 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.
In today’s noisy world, a strong brand is more important than it has ever been.
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 company 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 name for your business.
You can learn more about the nuts and bolts of establishing and maintaining consistent brand identity in Grow Your Small Business with Consistent Branding.
8. Build a web presence for your business
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 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.
9. 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 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.
10. Find business partners or investors
One of the biggest challenges for every new business is saving enough capital to sustain and grow the business.
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 partners or outside investors 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 partnership or investor?
- 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?
As with any relationship, it’s important to know what your goals and expectations are. Are you more interested in raising capital? Or are you looking for someone that can help you grow your business?
Once you’ve thought through what you want, and where you want things to go, it’s time to evaluate your options. Things used to be more straightforward: venture capitalists and angel investors were the most common options. But they were rarely good options for most small businesses.
Now there are more avenues for you to explore. Here are a few to consider:
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.
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 Capitalists
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.
Small business grants
Take a look at Grants.gov, a searchable directory of 1,000+ federal grant programs.
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.
11. 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.
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.”
12. 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. These 12 steps will give you an unfair advantage and will help get you started on the road to owning a successful business of your very own.
Frequently Asked Question About Starting 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.
Small Business Resources
Interested in other types of businesses or how-to guides? Here are our comprehensive guides:How to Start a Business: The Complete 12 Step Guide to Starting a Business in 2020 How to Start a Successful Consulting Business in 2020: The Complete 10 Step Guide How to Start a Real Estate Business in 2020: The Complete 11 Step Guide The Complete 6-Step Guide to Starting a Cleaning Business in 2020 How to Start a Successful Clothing Brand or Clothing Line From Scratch in 2020: The Definitive Guide How to Start a Brewery Business in 2020: The Complete 9 Step Guide How to Start a Medial Marijuana Dispensary Business in 2020 How to Start an Etsy Shop: Your Comprehensive, No-Stress Guide to Starting an Etsy Shop in 2020 How to Start a Successful Photography Business in 2020: The Complete 10 Step Guide How to Start a Business in Texas: The Complete Step-by-Step Guide (Updated for 2020) What is Brand Identity and How To Create a Unique and Memorable One in 2020 The Definitive Guide to Creating a Compelling Visual Brand for Your Restaurant in 2020 Facebook Messenger Chatbot Marketing: The Definitive Guide (Updated for 2020)
We regularly update this guide to keep it current. It was most recently updated on March 8, 2020.
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