How to Start a Business in 10 Steps
Figuring out how to start a business can feel intimidating. Luckily, no matter what type of business you have in mind, the process is largely the same.
We’ll walk you through the process from start to finish, from refining your business concept to scaling your business later on down the road. Here’s what you need to know.
1. Pick a business concept
The first step in figuring out how to start a small business is to come up with a business concept. Ideally, you want to land on a business idea that is something you’re passionate about and that also serves an unmet need in your community.
If you’re unsure about the type of business you would like to open, here are a few questions to help you start coming up with ideas:
- What do you like to do in your spare time?
- What are you good at? What skills do you have?
- What would you do if money were no object?
- Can you work from home or do you want to invest in office space?
- What type of businesses do you wish you had access to in your community?
- What causes are most meaningful to you?
After you’ve done some brainstorming, take time to research your potential business ideas. Ask family and friends for feedback on the concept and scope out any competition in your local area. Then, leverage your findings to select the most viable option.
- How to start a retail business
- How to start a restaurant
- How to start a clothing line
- How to start a nonprofit organization
- How to start a business as an immigrant
2. Create a business plan
A business plan is a document that’s meant to serve as a roadmap for your new business. It illustrates how you’ll turn your business idea into a thriving venture by providing explanations of each facet of your organization, from marketing to finances.
A business plan helps lenders and investors know that your business idea is feasible and profitable. However, as a business owner, creating a business plan can also help you identify your strengths and any potential pitfalls before you hit the ground running.
3. Choose your business structure
Next, it’s time to select a business structure. The type of business entity that you choose for your business will determine how you pay taxes, the type of paperwork you’re required to file and the level of personal liability you may face if you default on a small business loan.
Changing a business’s structure can be difficult, so it’s important to do your research early in order to decide which type of business entity makes the most sense for you. You’ll typically pick from one of the following options:
- Sole proprietorship: Sole proprietorship, meant for one-owner companies, is the simplest business structure. As a sole proprietor, you don’t have to register your business with local authorities while doing business under your own name, but your business assets won’t be separate from your personal assets.
- Partnership: A partnership is a simple business structure for a group of people running a business together. It can be a good idea for those who want to test out a business idea before committing to a more formal structure like an LLC.
- Limited liability company (LLC): LLCs are a decent option for those who want to separate their business and personal assets while lowering their tax burden. It’s also less labor intensive than forming a corporation.
- Corporation: Forming a corporation allows you to separate your business entity entirely from any shareholders, making it a good fit for those who can see leadership changing hands in the future. However, corporations are subject to double taxation, so they can be more expensive to run. There are different types of corporations for different situations.
- How to choose the right business entity
- What is a sole proprietorship?
- Partnership vs. corporation
- How to start a business partnership
- LLC vs. corporation
- S-corp vs. c-corp
4. Register your business
Once you have a business structure in place, the next step is to register your business with the appropriate governmental agencies. Often, this means registering your business name and important documents, like your articles of incorporation, with your area’s governing bodies. However, it can also include setting up an employee identification number (EIN) for tax purposes and gathering any applicable licenses and permits.
It’s also important to note that you’ll need to keep up with any registration requirements on an ongoing basis. For instance, soon after you register, you may be required to send additional documents to your state or franchise tax board. You may also need to renew a business license every few years.
- Government business regulations to know
- What is a DBA?
- Understanding the articles of incorporation
- Understanding the Employer Identification Number (EIN)
5. Organize your business finances
Now, it’s time to organize your business finances. It’s crucial to keep your business and personal finances separate from the start in order to minimize your personal liability. That’s why taking steps like opening a business bank account and getting a business credit card are so crucial when you’re just getting your business off the ground.
- Tips to manage your business finances
- How to get a business credit card
- How building business credit protects your personal credit
6. Fund your business
After you’ve put the right financial systems in place, it’s time to figure out how to fund your business. Accessing traditional types of funding, like short-term or long-term business loans, can be difficult for a newer business. However, there are plenty of methods available to get the money you need.
For one, there are business loans for startups. Once you’re a more established business, you might want to consider SBA loans, which can provide large amounts with relatively low interest. There are also small business grants that you could apply for, but competition can be steep. You could also try to find investors, whether they end up being family and friends or more official venture capitalists.
- How to get funding for a business
- How to get a business loan
- Best startup business loans
- Venture capital financing
- How to use GoFundMe for business
7. Protect yourself with business insurance
You’ll likely need to have insurance for your business, even if you’re a sole proprietor who works from home. There are several different types of business insurance available that you can customize to fit your needs. But in general, you may need liability protection for lawsuits, property insurance for any brick-and-mortar locations, and business interruption insurance to help you and your employees stay afloat in the event of an emergency.
While you can certainly shop for coverage on your own, it may be helpful to talk to an insurance agent, who will likely be able to point you in the direction of the policy or policies that will suit your needs.
8. Invest in tax and accounting software
At this point, it can be a good idea to invest in some tools that will help you run your business more smoothly. While you don’t want to spend too much money upfront as a startup, investing in some key tools, such as accounting and tax software, can make a big difference in the ease of your day-to-day operations as well as your year-end fiscal planning.
- What is bookkeeping?
- Best accounting software for small business
- Best small business tax software
- Best payroll services
9. Market your business
Too many business owners get so focused on perfecting their products or services that they forget the importance of coming up with a cohesive marketing plan. After all, a marketing plan outlines the steps you will take to draw potential customers to your business and encourage them to make a purchase so you can turn a profit.
Start by researching your competition and your target audience. Learn which marketing channels they’re utilizing most heavily. Then develop your own strategy around those channels. For example, if your competition runs a successful blog, you may want to invest heavily in search engine optimization (SEO) efforts and develop your own blogging strategy.
10. Scale your business
At some point, you may want to consider scaling your business. Scaling involves replicating your business operations for a larger customer base with the goal of increasing profits. As the business owner, it can give you a chance to step outside of that key owner-operator role into a more hands-off, managerial position.
The first part of scaling is developing a strategy for how to do it. Again, it can be helpful to look toward your competitors to do this. Then it’s about putting the right team in place, focusing on specific metric goals that facilitate your growth and finding the funding to make that growth possible.