Starting a new business is as exciting as unnerving. Many new entrepreneurs have an excellent business idea but face trouble identifying what actionable steps they must take to turn their idea into a profit-making business.
Luckily, there are many public and private organizations that offer support, including the Small Business Association, which recommends these 15 steps to get your business off the ground. This is a complete guide on how to start a business from scratch. Read along, learn more about each step and download helpful resources for starting your business from scratch.
15 Simple Steps to Start a Small Business
1. Find a Business Idea
Choosing what kind of business to start is the first step toward business ownership. Choose a small business idea that suits your interests, your personal goals, and your natural abilities.
It will also keep you motivated when times get tough and greatly increase your chances of success. What is the easiest business to start? This depends on your expertise, time commitment, and capital.
A number of small-business ideas are low-cost and can be run from home.
2. Refine Your Business Idea
When starting a business, you probably already have a vision of what you will sell or at least a target market.
Try searching for companies already successful in your industry. Look at what industry leaders are doing and figure out how you can improve.
Ask yourself these questions, do you have a unique problem to solve, can you solve a problem more effectively than your competition, can you convince lenders and investors that your business idea will work?
Define Your “Why.”: Glenn Gutek, CEO of Awake Consulting and Coaching, told Business News Daily, “Always start with why.”
It is good to know why you are starting your business. If this is the case, it may be time to distinguish between serving a personal why and serving a marketplace why.
Make your business idea about the market and your customers. Your ambitions alone cannot make your business successful if the market does not need them.
Franchising may be an option: Another option is to open a franchise for an existing company. Concept, brand following, and business model are already in place; all you need is a good location and funding.
Identify Your Target Audience.: According to Desaulniers, too many entrepreneurs jump into launching their business without thinking about who their customers will be and why they would want to buy from them or hire them.
During the ideation phase, you should iron out the major details. If the idea isn’t something you’re passionate about or there isn’t a market for it, it might be time to brainstorm other ideas.
3. Plan Your Business
Planning is the key to building a successful business. Make a game plan before investing money and other resources in your business. Make sure to complete the following at least:
Conduct Market Research
Doing some up-front market research is an important step to validating your idea.
Since starting a new company takes a lot of time, effort, and financial investment, it’s very important to make sure the idea is worth pursuing in the first place.
Speak with friends and relatives about your idea and ask for sincere and honest feedback, and conduct in-depth interviews about their experiences and how your business may be able to solve them.
Furthermore, conducting anonymous surveys or questionnaires that target your future customers to get valuable insight as to the viability of your business idea.
Conduct a SWOT Analysis
SWOT refers to strengths, weaknesses, opportunities, and threats. By conducting a SWOT analysis, you can get a clear picture of how your product or idea might perform on the market and decide what direction to take the idea.
Choose Your Business Name
It’s not easy to pick the perfect business name – after all, it’s the very basis of your company’s identity!
A good business name should be short, easy for your customers to remember, and of course not already taken by another company. Check with your Secretary of State to make sure your business name isn’t already taken.
Some other things to consider would be registered trademarks that could be confused with your company name, website URLs, or social media accounts that customers may confuse with yours.
Differentiating your business from your competitors begins with choosing the right business name.
Pick Your Business Location
Your company’s physical location is an important component that may impact your ability to hire workers, visibility to the surrounding community (including any traffic that may pass by your headquarters), and even what business permits you to need and tax implications for your operations.
Choosing one location over another business location may award your local, state, and/or federal government incentives that could provide important strategic advantages over competitors.
In addition to your physical location, any online operations that your business conducts will have “virtual locations” as well, such as your company’s website URL, any social media platforms that your company maintains, and any other digital registries that highlight your business.
For a business to succeed, your customers must have easy access to you. Let Wise help you choose a better business location to help you succeed.
Write Your Business Plan
Your business plan is the foundation of your business.
It documents the specific problems you’ll solve for customers, the activities your company will conduct in order to do so, what products and services you’ll offer to them, and what marketing activities you’ll perform in order to communicate to them.
It describes what your mission and vision are that shape the ways you’ll make strategic decisions in the future. It analyzes industry trends and how these trends will impact the future of your business and your customers.
Furthermore, it provides an in-depth analysis of your finances in both the near-term and long-term horizons.
- How to Write the Perfect Business Plan:
- Professional Free Business Plan Samples
- 25 Reasons Why You Need a Business Plan
Consider Your Exit Strategy.
When drafting your business plan, you should also consider your exit strategy. Having an idea of how you will eventually exit the business forces you to look forward.
You can use a business plan to figure out where your company will go, how it will overcome potential obstacles, and what it needs to survive.
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4. Analyze Your Startup Costs
Any business has costs, so you need to decide how you’ll cover them. Find out how much you will need to spend to get started.
Many startups fail due to a lack of funding before they can turn a profit. It’s never a bad idea to overestimate the amount of startup capital you will need, especially at the beginning when the business is just starting up.
Analyze the break-even point
You can perform a break-even analysis to determine how much money you need. Using this information, business owners are able to determine when their company, product, or service will become profitable.
It is as simple as this:
Break-Even Point = Fixed Costs / (Average Price – Variable Costs)
The goal of this formula is to inform you about the minimum performance your business must achieve to avoid losing money so you can keep your business afloat.
Further, it helps you understand where your profits come from so you can set production goals accordingly.
The following are the 7 most common reasons to conduct a break-even analysis:
- Price Smarter: By knowing your break-even point, you will be able to price your products more effectively. Understanding how pricing affects your gross profit margins is just as important as knowing the psychology behind it.
- Cover Your Fixed Expenses: Most people think of pricing in terms of how much it costs to create a product – these are variable costs. You still need to cover your fixed costs, such as insurance or web development fees. A break-even analysis can help you do that.
- Identify Costs You Missed: You can easily overlook expenses when you’re planning a small business. In order to determine your break-even point, you have to lay out all your financial commitments. Doing so will eliminate surprises down the road.
- Set Your Sales Revenue Targets: When you complete a break-even analysis, you will know exactly how much you need to sell in order to be profitable. Having this information can help you set more realistic sales targets.
- Take Smarter Steps: When it comes to business, entrepreneurs often act based on emotion. Feelings are important, but they are not enough. The most successful entrepreneurs base their decisions on facts. Having done the work and having useful data available will make deciding much easier.
- Limit the Financial Strain: Performing a break-even analysis allows you to mitigate risk as it shows you when to let go of a business idea. It will help you avoid failures and limit the financial damage that bad decisions can have on your business. Instead, you can take a realistic outlook on what could happen.
- Fund Your Venture: The break-even analysis is essential to any business plan. This is usually a requirement if you want to take on investors or other debt to finance your business.
5. Fund Your Business
As the old adage goes “you have to spend money to make money” and for larger business ventures, you may not be able to afford all of the up-front costs required to get your business off the ground and profitable.
Fortunately, there are a plethora of ways to take a loan for starting a business, be it bank loans, friends and family members, strategic business partners, crowdfunding, or venture capital.
Funding can be internal or external.
The internal funding includes:
- Personal savings
- Credit cards
- Contributions from family and friends
If you finance the business with your own cash or with a credit card, you’ll have to pay back the debt and you’ll lose a chunk of your wealth if the business fails.
In allowing family or friends to invest in your company, you risk strained relationships and hard feelings if the company fails. Business owners who want to minimize these risks should consider external funding.
External funding includes:
There are many ways to obtain startup capital for your business. A number of factors, such as creditworthiness, financing needs, and options, will determine the best method for acquiring funding for your business.
- Business Loans: If you need financial assistance, a bank loan is a good first step, although these are usually difficult to get. If you can’t get a bank loan, you can apply for a small business loan through the U.S. Small Business Administration (SBA) or an alternative lender.
- Business Grants: A business grant is similar to a loan; however, it is not repaid. Look for small business grants that are tailored to your particular needs. You can apply for grants for minority-owned businesses, grants for women-owned businesses, and government grants.
- Investors: Companies that require significant funding up front may want to hire an investor. Some investors invest several million dollars in a new company, with the expectation that they will be a part of the company’s management.
- Crowdfunding: As an alternative, you can raise smaller amounts of money from multiple supporters by starting an equity crowdfunding campaign. Over the past few years, crowdfunding has helped numerous companies, and there are dozens of crowdfunding platforms designed for different types of businesses.
Let Wise Business Plans help you secure the needful business fund you need for your business. We have assisted our clients in raising more than 1 Billion Dollars in funding from banks (debt financing) and investors (debt/equity financing).
6. Choose a Legal Business Structure
There are several different businesses or organizational legal structures that may impact your operations. This can affect how much you pay in taxes, the ability to raise money through investors, the legal paperwork you need to file, and even your personal liability.
You’ll need to choose your business structure before registering your business, so it may be helpful to speak with a business counselor, attorney, or accountant to understand your options.
- Sole Proprietorship: You can register as a sole proprietorship if you own the business entirely by yourself and will be responsible for all debts and obligations. Be careful, though, as this route may negatively affect your personal credit.
- Partnership: An alternative is a business partnership, in which two or more people are personally liable as business owners. You don’t have to do it alone if you can find a business partner with complementary skills. For your business to thrive, it is often a good idea to add someone on board.
- Corporation: In order to separate your personal liability from that of the business, you may want to consider forming one of several types of corporations (e.g., S corporation, C corporation, or B corporation). While each type of corporation has its own legal guidelines, this legal structure generally allows businesses to exist separately from their owners.
- Limited liability company: Among the most common structures for a small business is the limited liability company (LLC). A hybrid structure offers the legal protections of a corporation while allowing for tax benefits of a partnership.
Ultimately, it is up to you to decide which type of entity is appropriate for your current needs and future plans.
Learn more about types of business structures to help you choose the best one for your business. If you’re having a hard time making a decision, it’s not a bad idea to consult a business or legal advisor.
7: Form Your Business
After you’ve picked the perfect business name, it’s time to register your company to protect your business brand. No matter what business structure you choose, there are a few things you need to do:
- Choosing a business name
- It is important to choose a registered agent, who will accept legal and tax documents on your behalf.
- Getting an Employer Identification Number (EIN) is a way to identify your business for tax purposes.
- Filling out the formation documents.
In addition to the steps above, each business structure has its own requirements.
Create an LLC
The LLC is the easiest form of formal business structure to form and maintain. It takes six simple steps to form an LLC, requiring less paperwork than other business structures.
- Choose Your State
- Give Your LLC a Name
- Select a Registered Agent
- File Your LLC With the State
- Establish an LLC Operating Agreement
- Obtain an EIN
Create a Corporation
If you think that starting a corporation is a good idea for your business, there are five steps you need to follow to make this happen. You’ll also need to decide what type of company you’ll form, such as a C corporation, an S corporation, or a B corporation.
- name your corporation
- Select a Registered Agent
- Hold an organizational meeting
- File Formation Documents
- Get your EIN
Create a Nonprofit Organization
Forming a nonprofit is similar to forming a corporation or LLC; however, you can apply for tax exemption, otherwise known as 501(c)(3) status, through the IRS with this structure.
- Choose a nonprofit name
- Select a Registered Agent
- Choose your board members and officers
- Ensure the adoption of bylaws and conflict of interest policies
- Fill out the Articles of Incorporation
- Get your EIN
- Fill out the 501(c)(3) application
DBA (Doing business as)
When you don’t have any articles of incorporation or operating agreements, you will need to register your business name. This can be your legal name, a fictitious name (if you are a sole proprietor), or the name you come up with. Additionally, you may want to take steps to trademark your business name for extra legal protection.
You must get a DBA in most states. When you’re in a general partnership or a proprietorship operating under a fictitious name, you may need a DBA certificate.
You should contact or visit your local county clerk’s office and inquire about specific requirements and fees. Generally, registration fees apply
8. Get Your Federal and State Tax ID Numbers
Your state tax ID number and federal tax ID number – also known as your Employer Identification Number (EIN) – function like your social security number for your business. You can use them to pay state and federal taxes.
Getting a federal tax ID number
Your Employer Identification Number (EIN) is your federal tax identification number. It’s mandatory to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.
Applying for an EIN is free, and you should do it right after you register your business.
When your business does the following, it needs a federal tax ID number:
- Do you have any employees other than yourself
- If you’re incorporated
- If your business has any partners (it is a multi-member LLC)
- Purchasing or inheriting an existing business
- If you are self-employed, you have a retirement plan (like a 401(k) or Keogh plan).
- You want to open a bank account for your business (not all banks require a taxpayer identification number, but most do.)
- You declare bankruptcy
Your EIN allows you to:
- Make filing your taxes easier: An EIN allows you to file business taxes, decreases the chances of being audited when you claim deductions, and avoids tax penalties.
- It protects you legally: When you have legal difficulties, your EIN will establish that you are separate from your business. Your EIN protects you if your business is ever sued.
- It also helps protect your personal information: Instead of giving vendors and clients your personal Social Security number, you can give them your EIN. As a result, your personal information will be kept safe and secure, making it unlikely you will suffer from identity theft. Identity thefts in the business world do occur, but they are much less common than those in the consumer sector.
Establish your business credit: Much like a person’s credit history, an EIN helps a business build credit. You can use this to improve your chances of qualifying for business credit cards and loans.
The next step is to apply for an EIN. You can apply online at the IRS website. Once you have been accepted, the IRS will send you your EIN paperwork either by mail or by email as a PDF file as soon as possible.
It costs $255 to get an EIN, but it will last for the duration of your business.
Replace or Change Your EIN
You may need to change or replace your existing EIN if certain changes have occurred with your business.
- Change of name
- change of address
- Ownership changes
- Management changes
- Tax status changes
Depending on your business structure and the kind of change that occurred, your requirements may differ. To find out if your EIN needs to be changed or replaced, contact the IRS.
Get your state’s tax ID number
If your business has to pay state taxes, you need a state tax ID number. You may be able to use state tax ID numbers for other purposes, such as preventing identity theft for sole proprietors.
Tax obligations differ at the state and local levels, so you will need to check your state’s website.
In order to determine if you need a state tax identification number, learn your state’s laws regarding income taxes and employment taxes, which are the two most common forms of state taxes.
It is similar to getting a federal tax ID number to get a state tax ID number, but it will vary by state. Be sure to check with your state government for specific instructions.
9. Set up Your Business Banking, Credit Cards, and Accounting
Personal assets should be protected by using dedicated business banking and credit accounts. In the event that your business is sued, your personal assets (your home, car, and other valuables) are at risk.
Follow these three steps to protect your business:
1. Open a Business Bank Account
Once you’ve obtained your EIN, you can open your business bank account. In fact, the business account should be opened as soon as you start accepting or spending money on your business.
Common business accounts include a checking account, savings account, business credit cards, and merchant services account.
A Business Bank Account is important to get several benefits including liability protection, a business line of credit for the company, more purchasing power, and last but not least a professional platform to receive payments and pay customers.
2. Getting a credit card for Your Business
- Separates personal and business expenses.
- Builds your company’s credit history, which can be useful when raising capital (small business loans, grants, etc.).
3. Setting up Your Business’s Accounting
Your accounting system allows you to track your business’s performance and simplify annual tax filings.
Quality accounting software allows you to download your bank and credit card transactions, making accounting fast and easy.
10. Get Insurance Policy
Getting the right insurance for your business is a vital step before you launch.
It can be costly to deal with incidents like property damage, theft or lawsuits from customers, so you need a policy that protects you.
Even though you must consider several types of business insurance, most small businesses can benefit from a few basic insurance plans.
- It is a legal requirement to purchase workers’ compensation and unemployment insurance if your business has employees.
- Your business may also need other types of insurance, depending on your location and industry, but the vast majority of small businesses should purchase general liability (GL) insurance. GL covers property damage, bodily injury, and personal injury to you or a third party.
- You may also want to consider professional liability insurance if your business provides services. The policy covers you if you make a mistake or neglect to take action that you should have taken in running your business.
- A commercial property insurance policy will protect your business if any of its property is damaged or destroyed by fire, storm, or theft. It will help pay for the repair or replacement of property, inventory, and equipment.
- You can get commercial auto insurance for any damage caused to or by any vehicles you use for your business. It covers medical expenses, legal fees, and property damage if your vehicle is involved in an accident.
- Business interruption insurance covers the operating costs of your business if it has to shut down or move (for example, because of a fire or hurricane). These costs include relocation, paying employees, and paying rent.
- Cyber liability insurance covers businesses that suffer a data breach. Additionally, an insurance policy can cover the cost of notifying your customers about a data breach, as well as providing them with services if they become victims of identity theft as a result of that data breach.
When it comes to deciding what insurance you need, you need to know what risks are involved in the industry you’re in. A dog grooming business in Florida will have entirely different requirements than a t-shirt printing business in California. Do some research and assess the risks involved with the business you’re starting.
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Let us help you with your business insurance needs.
- General business liability insurance
- Medical insurance
- Term life insurance
- Workers’ Comp
- Surety bonds
- Commercial auto
11. Apply for Licenses and Permits
Once your business entity is formed it is time to become licensed. Staying legally compliant is essential for your company to run smoothly.
The licenses and permits you need will depend on your incorporation status, your industry, and will be different depending on the state, county, city, and even area of town in which you’re operating.
Visit the Small Business Association website for more details on which licenses and permits you may need.
12. Develop Your Team
To get your company off the ground you’ll need to recruit and hire a great team.
However, finding the right people isn’t enough; you must also ensure you comply with legal requirements for hiring employees. This includes being registered with the IRS for employee taxes.
Once you’ve built your team, it’s a good idea to use a payroll service for issuing paychecks, keeping track of hours, and making tax season less stressful.
13. Establish Your Brand
Building a strong brand is the key to building a successful business. Consider these factors when building your brand:
- Who you are and what you stand for
- Your core values
- What will earn the trust of customers
Once you feel comfortable answering these questions, you can move on to naming your business. The name of your business is the foundation of successful branding. You can find more information about creating a successful business name in our guide, How to choose a business name.
14. Market Your Business
It is equally important to market your business because if you can’t reach your customers with your messages, you may find it difficult to boost your sales.
Build Your Business Website: Extend your branding power online with a well-designed website. Present a unified marketing front, with a website that reflects the vision and purpose of your company 24 hours a day, 7 days a week.
Social Media: Use social media to spread the word about your new business, perhaps by offering coupons and discounts to followers once the business launches. The best social media platforms to use will depend on your target audience.
Paid Ads :A paid ad is a great way to get your business to the top of popular search engines such as Google.
- Google My Business: Google My Business enables businesses to control how they appear on Google’s search engine results pages (SERPs) and Google maps.
You can use Google My Business to:
Provide links to important information about your business such as your website, physical address, hours of operation, and customer reviews.
Improve local SEO and drive traffic to your website to increase brand awareness.
Increase credibility and engagement with customers.
The experts at Wise Business Plans create websites that generate leads.
Our company designs professional websites for local and international businesses. Contact us today for business website design services.
15. Expand Your Business
As an entrepreneur, your first sales are just the beginning of your journey. Staying afloat and making a profit requires constant growth. Putting time and effort into your business will reap rewards.
- A great way to achieve growth is to partner with more established brands in your industry.
- Request some promotion from other companies in exchange for a free product sample or service.
- Get your name out there by partnering with a charity and donating some time or products to them.
- Growing your business isn’t just about getting new customers. In many cases, the customers you already have are your best bet for increasing sales, and studies have found that improving customer retention increases the value of the business.
- It’s never a bad idea to attract new customers to your business. You can do that by asking your current customers for referrals.
- If you run a successful business and have developed a system so that others can duplicate it, franchising may be the fastest way to grow your company.
- You should always strive to improve your business and make it stand out from the competition. Be open to new ideas and different approaches to your business.
These tips will help launch your business and get you set up to grow, but no plan is perfect. Even if you prepare thoroughly, things will almost certainly go wrong when you start a business. To run a successful business, you have to adapt to changing circumstances.
6 Tips For Starting A Business
Starting a new business is an exciting time but can turn stressful if careful planning isn’t involved. To help you smoothly start a new business here are 6 tips for starting a business. There is nothing you can do to avoid some ups and downs or even unexpected surprises during the startup phase, but there are ways to keep stress to the minimum.
1. Get Professional Help
Just because you are starting a new business doesn’t have to do everything yourself. You can get professional help for nearly everything from your business plan to your logo design. If you’re not sure about something, don’t be afraid to seek professional help.
2. Start While You Are Still Employed
How long can you live without money? Not long. And it can take a long time for your new business to make any profits. Being employed while you’re in the phase of starting a new business means the money in your pocket while you’re going through the start-up process.
3. Be Focus
You’ll never stop thinking of the next step. A business is like a growing, living thing, It needs to be nurtured. Often there will be slow times or plateaus, but you will constantly be moving forward. The best way to prepare for this is to accept it.
4. You Must Have a Backup Plan
Having a backup plan for issues that could arise is a good idea. If things don’t go exactly as planned or something comes up to prevent you from running the business, you need to know whom you can rely on.
While you don’t want to set unrealistic expectations, it would be wise to have some sort of plan if things grow much faster than expected.
5. Plan Out Your Time Now
Don’t wait until you’re in the middle of everything, go ahead and decide now how much time you can devote to your new business now. Later on, as your business grows and revenue increases, you can reassess.
6. Decide on the Cost You are Going to Invest
If you don’t get investments or funding, how much of your own money can you put into starting a new business? You don’t want to go completely broke starting this business. Having a backup shoestring budget will help you decide what the necessities are and the minimum amount of funds you need to get started.
How much does it Cost to Start a Business?
There is no set cost for starting a business, but many small businesses can start for as little as $3,000 or less. These companies are often home-based with low upfront investments. While your average Main Street franchise may require a larger investment, home-based franchises can be started with as little as $1,000-$5,000.
Do You Need Help in Starting a New Business?
Our professional consultants are available 24/7 who can help you in starting a new business in the USA and Canada. Call us at 1-800-496-1056 or contact us through live chat.
How to Start a Business FAQ
There are several sources of capital for new businesses, and most of them require a business plan to qualify. Among them are the Small Business Administration, private grants, angel investors, crowdfunding, and venture capital.
There is never a right time to start a business. Running a business is like starting a relationship. You should start a business when you have the time and energy to devote to it. However, there is no harm in starting a side business while you are still employed.
The best type of business structure depends entirely on the kind of company you form, your industry, and your goals. Nevertheless, any successful business structure will be one that aids your company in setting realistic goals and pursuing tasks effectively.
It takes a lot of effort and strategy to start up a new business, and there are no shortcuts to success. However, there are a few business models that can be started with little investment, such as cleaning or freelance design.