Embarking on the journey of starting a business may seem daunting at first, but by breaking down the process into manageable steps, you can simplify the task.
Instead of feeling overwhelmed and uncertain about where to begin, you can rely on the proven methods used by successful entrepreneurs.
By following this 15-step, you can effectively turn your business idea into a tangible and thriving entity.
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How to start a business in 15 steps
1. Find the right opportunity
When deciding on the type of business to start, it is important to consider your skills, available time, and financial resources. There are various small business ideas that can be started from the comfort of your home with minimal expenses.
The COVID-19 pandemic has led to a rise in e-commerce and remote businesses. Therefore, it is crucial to choose a business idea that has the potential to generate profit.
2. Write a business plan
Creating a solid business plan is crucial when starting a business. It not only helps in preparing for various business aspects but also serves as a presentation to potential investors and lenders. The business plan should contain information about the products or services you intend to provide, your revenue generation strategies, the required team members, and other important details.
When starting a business, it is important to provide comprehensive financial projections, budgets, and detailed explanations on how you intend to utilize investor funds or loans. As projected income and expenses may vary, it is beneficial to view the financial aspect of the business plan as a dynamic and adaptable document.
Starting a business requires careful planning and strategizing. A well-developed business plan is essential as it helps you outline your business goals, identify potential obstacles, and find ways to overcome them.
It is a document that undergoes several revisions and refinements until your business idea becomes a reality. Seeking feedback from industry professionals and accountants can be beneficial as they can provide valuable insights into the feasibility of your projections and identify any hidden expenses you may have overlooked.
3. Choose a business structure
When starting a business, it is important to consider the legal structure as it can have various impacts, such as tax obligations and liability. For instance, a sole proprietorship does not have a legal distinction from its owner, while limited liability companies (LLCs) and their owners are seen as separate entities by law, offering greater protection for personal assets.
Seeking advice from a tax professional can assist in determining the most suitable business structure for your needs. It is also important to note that as your business expands, you have the flexibility to change your legal structure.
4. Get a federal tax ID
To commence a business, it is crucial to obtain an employer identification number (EIN). This number is required for various important activities such as filing taxes, opening bank accounts, and carrying out other essential tasks.
Even if you do not have any employees, there are advantages to acquiring an EIN. The application process is free and can be completed online within a few minutes.
5. Apply for licenses and permits
Starting a business often requires certain licenses and permits depending on the industry. For instance, restaurants need to undergo health inspections and obtain liquor licenses, while hair stylists must acquire cosmetology licenses.
Additionally, regardless of the field, it is possible that your city will mandate the application for a business license. Moreover, if you are planning to renovate a space for selling products or providing services, it may be necessary to request a zoning change from local authorities.
Allocate some time in the beginning to research and determine the licenses and permits required to start your business.
Although hiring a lawyer is not always necessary for obtaining a business license, their assistance can be valuable in guiding you through the application process and reviewing important documents such as lease agreements or loans before you finalize them.
Additionally, industry associations, local government officials responsible for economic development, and local business associations like the Chamber of Commerce can provide helpful advice and guidance.
6. Open a business bank account
When starting a business, it is essential to maintain a clear distinction between your personal and business finances. This practice is crucial for effectively managing your business’s financial affairs.
By separating the two, you can easily identify and deduct business expenses during tax season. One effective way to achieve this separation is by opening a business bank account, which is a relatively straightforward process.
7. Understand your startup financing options
Starting a business often requires some initial capital. However, it can be challenging for businesses that have been operating for less than six months to qualify for traditional business loans.
Online lenders typically prefer businesses that have been in operation for at least a year. In such cases, startups should explore alternative financing options or capitalize on other strengths of their business, such as having a strong credit history or valuable collateral.
If your business does meet the criteria for a loan, it is important to carefully consider factors like interest rates, potential prepayment fees, and personal liability terms. Starting a business often requires entrepreneurs to use their personal savings as a source of funding.
However, alternative options such as crowdfunding, personal loans, business grants, and equity financing are also worth exploring. Equity financing, particularly suitable for high-growth-potential startups, involves offering partial ownership to investors in exchange for capital.
8. Get a business credit card
One way to start a business is by using business credit cards. These cards can provide short-term financing options to help purchase necessary supplies and pay bills, especially during times when cash flow is uncertain.
It is important, however, to only spend within the card’s limit and pay off the balance in full each month to avoid falling into a cycle of debt. In addition to providing startup financing, business credit cards can also help keep business and personal finances separate.
Furthermore, they offer the opportunity to earn rewards, such as cash back, on the money spent. Typically, eligibility for a business credit card is determined based on the individual’s personal credit score.
9. Choose the right accounting software
When starting a business, it is crucial to maintain proper records that document your earnings and expenses. Utilizing accounting software can assist in tracking and analyzing these financial figures by generating reports and keeping a record of sales patterns.
Additionally, there are even free options available. As your business expands, it may be beneficial to collaborate with a bookkeeper. This professional can help guarantee the accuracy and completeness of your records, simplifying tasks such as tax filing and applying for financial assistance.
10. Prepare to pay your taxes
As an entrepreneur, starting a business comes with certain tax obligations that you must be aware of. These responsibilities may include paying taxes throughout the year, rather than just during tax season.
However, along with these new responsibilities, you may also come across various tax advantages for your business. Filing taxes can be a complicated process, especially for small business owners.
It is beneficial to establish a relationship with a tax professional from the beginning as they can provide valuable guidance and advice for your business in the long run.
11. Protect yourself with business insurance
Starting a business requires taking measures to safeguard both your business and personal assets. One crucial aspect of this is obtaining business insurance, which serves the purpose of providing protection.
NerdWallet advises that all businesses should have general liability insurance to cover potential legal claims.
Additionally, depending on the situation, you may require insurance to fulfill contractual obligations, such as setting up a booth at an event or working as a subcontractor on a larger project.
12. Establish your online presence
Having an online presence is extremely important for any business, particularly if you intend to sell products online. It is advisable to create a website and establish social media profiles as early as possible, even if they are basic.
This will enable you to begin building relationships with potential customers from the very beginning.
13. Set up a payments system
If you are running a business that accepts credit and debit cards, it is important to have a payment processor and a point-of-sale (POS) system. Many POS system providers also offer processing services, making it easier to make a decision.
However, you should keep in mind the costs of hardware such as card readers or POS registers, as well as the monthly fees for POS software and processing fees. It is worth noting that online payments usually have higher processing fees compared to in-person payments, so it is crucial to consider all the fees involved when selecting a provider.
14. Hire employees
When starting a business, it may not be necessary to immediately hire employees. Some small business owners actually prefer to work alone, known as solopreneurs, for the entire duration of their business.
However, if you do decide to hire employees, there are certain considerations and steps you need to take. This includes obtaining workers’ compensation insurance, implementing payroll software, and more. In this guide, we will discuss the essential aspects involved in hiring your first employees.
15. Get financing to grow your business
When your business has been operating for a period of six to 12 months, you may become eligible for business loans. Acquiring financing can be beneficial for the growth and expansion of your business.
It can be used to purchase equipment, renovate your office, expand your inventory, or provide support during a slow season as you prepare for potential future revenue growth.
FAQs about starting a business
What are the four basics for starting a business?
When embarking on a new business venture, there are four fundamental aspects to consider: selecting a business name, determining the business structure, acquiring a business registration certificate, and obtaining all necessary licenses.
It is crucial to follow the appropriate legal and regulatory procedures in each of these areas before commencing operations. While securing external funding and creating a comprehensive business plan are wise decisions, they are not compulsory legal requirements.
How can I start my own business with no money?
Starting a business doesn’t necessarily require any initial capital. Focus on a business concept that utilizes your unique skills and brings something fresh and groundbreaking to the market. As you work on establishing your new venture, consider continuing with your current job to minimize financial risks.
When you have formulated your business concept and are prepared to begin working on a business plan, it is important to come up with innovative ways to secure funding. One approach is to pitch your idea to potential investors in order to raise money.
Another option is to use crowdsourcing platforms like Kickstarter to gather funds. Additionally, you can allocate a portion of your weekly earnings towards your new business. Lastly, you can explore loan options from banks and other financial institutions to help establish and start your company.
What is the easiest business to start?
Starting a business becomes much easier when it doesn’t require a significant upfront financial investment or extensive training to get started. One of the simplest types of new businesses to launch is a dropshipping company. With dropshipping, there is no need to manage inventory, which eliminates the hassle of purchasing, storing, and tracking stock.
Instead, you can have another company handle your customer orders on your behalf. This company will take care of managing the inventory, packaging the goods, and shipping out the orders for your business. To begin, you can create an online store by choosing specific products from the catalog provided by partners.
Which types of businesses can I start from home?
If you are considering starting an online business in today’s era of remote work, there are various ideas you can explore. Online businesses that do not involve inventory and can be operated from home are relatively easy to initiate.
Examples of such businesses include copywriting services, online tutoring platforms, and dropshipping ventures. Utilizing your skills and passions to fulfill a demand from home can lead to a successful home-based business.
When is the best time to start a business?
The process of starting a business can vary for each individual. It is important to only begin when you have sufficient time to dedicate to the launch. If your business revolves around a seasonal product or service, it is advisable to start the business one quarter before the anticipated busy period.
For nonseasonal companies, spring and fall are commonly chosen as launch times. Winter is typically the least popular season for starting a business, as many new owners prefer to have their LLC or corporation approved for the upcoming fiscal year.
Bottom Lie
If you are interested in starting a business, it is important to understand that it requires dedication, hard work, and determination. However, if you are willing to invest the necessary effort, it can be a fulfilling way to achieve your aspirations.
It is crucial to conduct thorough research, develop a strong business plan, and be open to making changes as needed. Once your business is up and running, it is essential to remain focused and organized in order to foster its growth.
