10 Steps to Starting a Business: A Comprehensive Guide
Steps to Starting a Business: A Comprehensive Guide - Starting a small business can be an exciting and rewarding experience, but it’s important to do your research first. Find out where to begin and how to make your small business successful.
- It's important to do your research and be well-prepared before starting a business, but remember that things won't always go as planned. To be successful, you'll need to be able to adapt to changing circumstances.
- Conducting in-depth market research is an important part of crafting a business plan. This involves running surveys, holding focus groups, and researching SEO and public data.
- You can’t start selling your product or service until you build up your brand and get a following of people who are ready to jump when you open your doors.
Naming your business and creating a logo are obvious, but what about the less-heralded, equally important steps? Whether it's determining your business structure or crafting a detailed marketing strategy, the workload can quickly pile up.
Starting a business can be difficult, but following this 10-step checklist will make the process easier. Make sure you have a solid plan and take things one step at a time to get your business off the ground.
How to start a small business
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1. Refine your idea
If you're thinking about starting a business, it's important to do your research first. Look into existing companies in your chosen industry and see what products or services they offer. That will give you an idea of what kind of competition you'll be up against.
Also Read : Small Business Ideas
Start by studying what current brand leaders are doing. Then, see how you can do it better. If you think your business can offer something that other companies don't (or do the same thing, but faster and cheaper), go for it! You'll need a solid business plan to get started, though.
Define your "why."
When starting a business, it's important to remember Simon Sinek's mantra: "start with why." Knowing your motive for starting a business will help you determine its scope. Is your business designed to meet a personal need, or does it serve a need in the marketplace?
Another option is to open a franchise of an established company. Franchisees receive the benefit of a pre-existing concept, customer base and business model, making startup simpler. All you need is a good location and the means to fund your operation.
Brainstorm your business name
No matter which route you choose, it's important to understand the reasoning behind your decision. Stephanie Desaulniers, business owner and former director of operations and women's business programs at Covation Center, warns entrepreneurs against writing a business plan or brainstorming a business name before nailing down the idea's value.
Clarify your target customers
Desaulniers says that too often, people jump into launching their business without spending time to think about who their customers will be and why they would want to buy from them or hire them.
"You need to clarify what it is you want to accomplish by working with these customers – do you have a passion for making people's lives easier?" Desaulniers said. "Or enjoy creating art to bring color to their world? Identifying these answers helps clarify your mission. Third, you want to define how you will provide this value to your customers and how to communicate that value in a way that they are willing to pay."
When coming up with an idea, it's important to iron out all the details. If you're not passionate about the idea or there's no market for it, it might be time to brainstorm other ideas.
Tips: Business owners should first ask themselves "why?" They need to determine their motivation for starting a business. Once they know their reason, they can focus on identifying their target market and finding a memorable business name.
2. Write a business plan
Developing a business idea is just the beginning- you next need to think about the important questions that will help you plan and execute your business. What is the purpose of your business? Who are you selling to? What are your end goals? How will you finance your startup costs? These questions can be answered in a well-written business plan.
There are a lot of things to think about when starting a new business. One of the most important is understanding your target customer base. Who will be buying your product or service? If you can't find any evidence that there is a demand for your idea, then what's the point?
Conduct market research
Conducting market research is important when starting a business. This involves surveys, focus groups, and researching SEO and public data. By doing this research, you can get an idea of what your potential customers want and how to reach them.
Gathering demographic information and conducting a competitive analysis are important ways to understand your target customer, industry and competitors. Small business professionals recommend these measures to better understand opportunities and limitations within your market.
All businesses strive to have a product or service that is differentiated from their competitors. This can give you a significant advantage because it allows you to show potential customers the unique value of what you have to offer.
Consider an exit strategy
When creating your business plan, it's a good idea to think about your exit strategy. Considering how you'll eventually leave the business forces you to consider the future.
Josh Tolley, CEO of both Shyft Capital and Kavana, warns that new entrepreneurs often put too much focus on their product and not enough on their exit plan. "They give very little, if any, time to show the plan on leaving the business," he said.
When travelling by plane, the first thing you are shown is how to get off it safely. Before a movie starts, cinemas point out where the exits are. At kindergarden, children are taught fire drills so they can exit the building safely. Too often, business leaders don't plan for alternative exit routes if something goes wrong. This can lead to a lower company value and even destroyed relationships with family members.
When starting a business, it's important to have a plan in place. This document will help you figure out your company's goals, strategies for overcoming any obstacles and what you need to keep it going. There are a variety of free templates available online to help you get started.
3. Assess your finances
Starting a business always has a price tag, so you need to determine how you're going to cover those costs. How much money do you have to fund your startup? Will you have to borrow money? Are you planning to leave your current job to focus on your business? How long can you live without making a profit? Figuring out your startup costs is critical.
Many startups fail because they run out of money before turning a profit. This is often due to underestimating the amount of startup capital needed. It can take a while for a business to bring in sustainable revenue, so it’s always a good idea to overestimate the necessary funds.
Perform a break-even analysis
A break-even analysis is an important part of financial planning that can help business owners determine when their company, product or service becomes profitable. It calculates the point at which your revenue equals your expenses.
The formula is simple: Fixed Costs ÷ (Average Price - Variable Costs) = Break-Even Point
This business formula is beneficial for all entrepreneurs because it reveals the minimum performance your company must achieve to maintain profitability. Additionally, it shows you where your profits originate from so you can set production goals accordingly.
There are a few reasons to perform a break-even analysis:
Determine profitability. Business owners always want to know if their business is profitable. That's the number one question on their minds.
Ask yourself: How much revenue do I need to cover all my expenses? Which products or services turn a profit, and which ones are sold at a loss?
Price a product or service. When pricing products, many factors must be considered. One of the most important factors is how much it costs to produce the product. Additionally, it is important to look at what your competitors are doing and how their prices compare to yours.
Ask yourself: What are the fixed rates? What are the variable costs? What is the total cost? What is the cost of any physical goods? What is the cost of labor?
Analyze the data. You need to sell a lot of products or services to be profitable in today’s economy. Convenience stores and grocery stores are no exception – they’ve had to adapt to compete in a modern world.
Ask yourself: How can I reduce my overall fixed costs? By decreasing the amount of square footage I lease. How can I reduce the variable costs per unit? By increasing efficiency in production. How can I improve sales? By increasing marketing efforts.
Watch your expenses
When starting a business, be mindful of what types of purchases make sense - and avoid overspending on unnecessary new equipment. Keep track of your business expenses, so you stay on track and don't run into financial trouble.
"Many startups waste a lot of money on unnecessary things," said Jean Paldan, founder and CEO of Rare Form New Media. "We worked with one startup that had two employees, but spent a lot on an office space that would only hold twenty people. They also leased a professional, high-end printer - even though they only needed it for occasional use. Save as much money as you can when you're starting out, and only invest in the essentials that will help your business grow and be successful. Luxuries can come later."
Consider your funding options
There are a number of ways to get startup capital for your business. The best way to get funding depends on things like your credit score, how much money you need and what options are available to you.
1. Business loans
There are a few different ways to get financial assistance if you need it for your business. A commercial loan through a bank is a good starting point, although these can be difficult to get. If you can't take out a bank loan, you can apply for a small business loan through the U.S. Small Business Administration (SBA) or an alternative lender.
2. Business grants
There are two types of business assistance: grants and loans. Business grants do not have to be paid back, while business loans do. Business grants are also typically very competitive, and come with certain stipulations that the business must meet in order to be considered. When trying to secure small business grant money, look for ones that are uniquely specific to your situation. Consider minority-owned business grants, women-owned business grants or government grants.
If you're a startup with a lot of expenses in the beginning, you may want to bring on an investor. An investor can provide several million dollars or more to help your business get started, with the expectation that the backer will have a hand in running the company.
There are a few different ways to raise money for your business. You could launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers. Crowdfunding has helped numerous companies in recent years, and there are dozens of reliable crowdfunding platforms designed for different types of businesses.
Choose the right business bank
When choosing a business bank, size is an important consideration. Marcus Anwar, co-founder of OhMy Canada, recommends smaller community banks because they are in tune with the local market conditions and will work with you based on your overall business profile and character.
Small banks are different from big banks in that they are more likely to loan money to small businesses and want to develop a personal relationship with their customers. They are also quicker to make decisions than big banks.
Anwar recommends asking yourself these questions when choosing a bank for your business:
1. What are the bank’s interest rates?
2. What are the bank’s terms and conditions?
3. What is the bank’s history?
4. What are the bank’s size and resources?
5. What is the personal relationship you have with the banker?
Ultimately, which bank is right for your business depends on your needs. Writing down what your needs are will help you focus in on what to look for. Schedule meetings with various banks and ask them questions about how they work with small businesses so you can find the best bank for your business.
4. Determine your legal business structure
There are different types of business entities, and before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong. So it’s important to choose the right one for your business.
If you're the only owner of your business and you will be responsible for all debts and obligations, you can register as a sole proprietorship. Keep in mind that this option can have a negative effect on your personal credit score.
Alternatively, a business partnership means that two or more people are held liable as business owners. If you can find a business partner with complementary skills to your own, it's usually a good idea to add someone into the mix to help your business flourish.
There are a few types of corporations you can form to separate your personal liability from your company's (e.g., S corporation, C corporation or B corporation). Each type of corporation is subject to different guidelines, but they all basically make a business a separate entity from its owners. This means the corporation can own property, assume liability, pay taxes, enter contracts, sue and be sued just like any other individual.
Businesses that are planning on seeking public funding or venture capitalist funding in the near future should consider incorporating as C corporations, said Deryck Jordan, managing attorney at Jordan Counsel. C corporations offer many benefits that can be crucial for a business's success.
Limited liability company
Small businesses can use a number of structures, but the most common is the limited liability company (LLC). This hybrid offers the benefits of being a corporation (legal protections) and a partnership (tax benefits).
You will need to decide what type of business entity is best for you. There are a few choices, and it's important to learn about them all. If you're undecided, talking to a lawyer or business advisor may help.
5. Register with the government and IRS
You will need to acquire a variety of business licenses before you can legally operate your business. For example, you need to register your business with federal, state and local governments. In order to do so, you'll need to gather some important documents together.
Articles of incorporation and operating agreements
In order to become an officially recognized business entity, you must register with the government. This includes filing documents such as the articles of incorporation (for corporations) or an operating agreement (for LLCs). The document will provide details about your company, such as its name, purpose, structure and stock.
Doing business as (DBA)
If you don't have articles of incorporation or an operating agreement, you will need to register your business name. The business name can be your legal name, a fictitious DBA name (if you are the sole proprietor), or the name you've come up with for your company. You may also want to take steps to trademark your business name for extra legal protection.
Operating a business under a fictitious name generally requires you to obtain a DBA certificate. This varies by state, so it’s best to check with your local county clerk’s office for specific requirements and fees. There is usually a registration fee involved.
Employer identification number (EIN)
You’ll need to get an employer identification number from the IRS once you register your business. This is not mandatory for sole proprietorships without employees, but it might be a good idea to get one anyway. This will help keep your personal and business taxes separate, or make things simpler if you do decide to hire someone in the future.
If you need an EIN to run your business, the IRS provides a checklist to help determine if you require one. You can register online for free if you do need an EIN.
Income tax forms
You will need to file certain forms to fulfill your tax obligations. The forms you need are determined by your business structure. You should check your state's website for information on state-specific and local tax obligations.
Starting a business can be daunting, but it doesn’t have to be hard. Natalie Pierre-Louis, licensed attorney and owner of NPL Consulting, says that you should start with a strong foundation so your business has fewer problems down the road. " wing it with a PayPal account and social media platform, but if you start with a proper foundation, your business will have fewer hiccups to worry about in the long run," said Natalie Pierre-Louis, licensed attorney and owner of NPL Consulting.
Federal, state, and local licenses and permits
Some businesses may require licenses and permits from federal, state, or local governments in order to operate. The best place to start is by checking with your city hall. You can then use the SBA's database to search for specific licensing requirements by state and business type.
Certain trades, such as being a contractor or driving commercial vehicles, require professional licenses. One example of this is a commercial driver's license (CDL). CDL holders are allowed to operate certain types of vehicles, like buses, tank trucks and tractor-trailers. There are three classes of CDL: Class A, Class B and Class C.
You should also check with your city and state to find out if you need a seller's permit. A seller's permit allows you to collect sales tax from your customers. It goes by numerous names, including resale permit, resell permit, permit license, reseller permit, resale ID, state tax ID number, reseller number, reseller license permit or certificate of authority.
There are a few things to keep in mind when it comes to getting your business license and seller's permit. The requirements and names of these documents can vary from state to state, so be sure to check the state government website for the specific states you're doing business in.
"For example, New York sales tax generally is not required for the sale of most services (such as professional services, education, and capital improvements to real estate), medicine or food for home consumption," Jordan said. "So, if you sell only medicine, you do not need a New York seller's permit. But New York sales tax must be collected in conjunction with the sale of new tangible personal goods, like furniture or a cell phone, or utilities, like electricity or gas."
6. Purchase an insurance policy
There are a lot of things you need to do before launching your business, and purchasing the right insurance is one of them. If something goes wrong, like property damage, theft or a customer lawsuit, you'll be glad you have insurance to cover the costs. So don't forget about it - make sure you're fully insured before opening for business.
Basic insurance plans that most small businesses should consider include workers' compensation, unemployment insurance, and property insurance. Each of these plans has benefits that can help protect your business against certain risks. Be sure to research which policies are right for your business and get quotes from multiple insurers to find the best rates.
You should consider purchasing general liability (GL) insurance if you are a small business. GL provides coverage for property damage, bodily injury, and personal injury to you or a third party.
Professional liability insurance is important for business owners who provide services. It covers you if you make a mistake or fail to do something you should have done while running your business.
7. Build your team
To get your company off the ground, you're going to need to recruit and hire a great team. Joe Zawadzki, CEO and founder of MediaMath, said entrepreneurs need to give the "people" element of their businesses the same attention they give their products.
Zawadzki said that identifying your team and figuring out how they will work together is important. Determining roles and responsibility, division of labor, and how to give feedback are all crucial aspects of a successful team. He also advises establishing how the team will work together when not everyone is in the same room. This can prevent many problems down the line.
8. Choose your vendors
You and your team might feel overwhelmed trying to do everything on your own. That's where third-party vendors come in. They exist to partner with you and help you run your business more smoothly. Whether it's HR, business phone systems, or any other industry, there are companies who can help make things easier for you.
When looking for a business partner, it's important to be selective. These companies will have access to important and sensitive business data, so it's critical to find someone you can trust. In our guide to choosing business partners, our expert sources recommend asking potential vendors about their experience in your industry, their track record with existing clients and what kind of growth they've helped other clients achieve.
Every business is different, so not every business will need the same type of vendors. However, there are some common products and services that are almost essential for all businesses. Here are some essential functions that every business should consider.
When it comes time to taking payments from customers, it's important to offer a wide variety of payment options. This will make it easy for your target customers to pay you in a way that is most convenient for them. In order to do this, you'll need to compare different credit card processing providers and find the one that is best suited for your type of business. This will save you money in the long run.
Managing finances: When starting a business, many business owners can manage their own accounting. As the business grows, however, it can be more efficient to hire an accountant or compare accounting software providers.
9. Brand yourself and advertise
Before you open your business, you need to build up your brand and get a following of people ready to jump when you do. You can start by getting active on social media and promoting your product or service there. Once you have a strong online presence, you can start marketing offline as well.
Small businesses need to take their reputation online by building a company website. Customers will often look to the internet to find information about a business, so it’s important that your small business is represented online. A website is also a great way to communicate with current and potential customers.
There are a variety of social media platforms that can be useful for promoting your new business. You should consider which platforms will reach your target audience most effectively. Utilizing social media as a promotional tool can offer coupons and discounts to followers when you launch.
CRM software solutions make it easy to store customer data so you can better market to them. Clever email marketing can really help you reach customers and communicate with them effectively. However, you'll need to strategically build your email marketing contact list if you want to achieve success.
Creating a logo that represents your brand can help customers more easily identify your company. Use the logo consistently on all of your marketing materials to create a unified look.
Make sure you keep your website up-to-date with content that is both relevant and interesting to your customers and industry. Ruthann Bowen, chief marketing officer at EastCamp Creative, says that many startups have the wrong mindset about their websites.
"Small business owners who don't see the importance of having a great website are making a mistake," Bowen said. "In today's digital age, it's essential to have a strong online presence. Those who understand this will have a head start."
Creating a marketing plan is essential to building a clientele by continually getting the word out about your business. This process, especially in the beginning, is just as important as providing a quality product or service.
Ask customers to opt in to your marketing communications
When building your brand, be sure to ask customers and potential customers for permission to communicate with them. The best way to do this is by using opt-in forms. These are forms of consent given by web users, authorizing you to contact them with more information about your business, according to Dan Edmonson, founder and CEO of Dronegenuity.
In a recent interview, Edmonson discussed how opt-in forms can be useful for e-commerce businesses. "Opt-in forms usually pertain to email communication," she said. "They're often used in e-commerce to request permission to send newsletters, marketing material, product sales, etc. to customers. By getting customers to opt in to your services in a transparent way, you begin to build trust with them."
Opt-in forms are an essential way to build trust and respect with potential customers. They're also required by law; the CAN-SPAM Act of 2003 sets out requirements for commercial email by the Federal Trade Commission. This law doesn't just apply to bulk email; it covers all commercial messages, which the law defines as "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service." Each email in violation of this law is subject to fines of more than $40,000.
Tips : Creating a strategic marketing campaign that combines various marketing channels is key to success. A company website, social media, email newsletters, and opt-in forms are great ways to reach customers.
10. Grow your business
Your first sales and launch are only the beginning of your journey as an entrepreneur. To make a profit and stay in business, you always need to be growing your business. It's going to take time and effort, but you'll get out of your business what you put into it.
Growth can be achieved by collaborating with more established brands in your industry. Reach out to other companies and ask for promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer your time or products to get your name out there.
Starting a business is hard work, but there are ways to make it easier. By following these tips, you'll be on your way to a successful launch. Keep in mind, however, that there's no such thing as a perfect plan – you have to be prepared to adapt as your business grows.
Said Stephanie Murray, founder of Fiddlestix Party + Supply: "Be prepared to adjust." There's a saying in the military that "no plan survives the first contact," meaning that you can have the best plan in the world, but as soon as it's in action, things change, and you have to be ready and willing to adapt and problem-solve quickly. As an entrepreneur, your value lies in solving problems, whether that is your product or service solving problems for other people or you solving problems within your organization.
FAQs about starting a business
How can I start my own business with no money?
You don’t need any startup money to launch a successful business. Just find an idea that capitalizes on your skills and offers something new to the market. Work on your business in your spare time to reduce the financial risk.
Once you have your business idea in place, you'll need to think about how to finance it. One way to do this is to attract investors who believe in your idea. You can also gather funding through online crowdsourcing platforms like Kickstarter, or use money you've saved up to invest in your new business. Finally, you can apply for loans from banks or other lending institutions to get your business started.
What is the easiest business to start?
Dropshipping is a great business to start because it doesn't require a lot of upfront investment or training. With no inventory to manage, this type of business is perfect for those who want to avoid the hassle of owning and managing stock. Another company will fulfill your customer orders on your behalf.
This company will take charge of handling your inventory, packaging your products, and shipping them to your customers. You can get started by setting up an online store with the help of their catalog of partner products.
When is the best time to start a business?
When it comes to starting a business, there is no one-size-fits-all answer. The most important thing is that you have enough time to devote attention to the launch and that you time it correctly based on your product or service. If you have a seasonal business, you want to launch in the quarter before your busy season. If you have a nonseasonal company, spring and fall are popular times of year to launch. Winter is the least popular launch season, because many new owners prefer to have their LLC or corporation approved