There are many steps to establishing a business. You may find some of the steps, like registering for a business license, tedious. But overall, starting a business can be an exciting and fulfilling experience. In this article, we'll walk you through the steps you need to get started and turn that business idea into a reality this year.
Why Start Your Own Business?
Whether you believe your business idea can change the world or you simply want to be your own boss, there are no shortage of reasons for wanting to start a company. However, it's best to define yours before you start navigating the steps of establishing a new business.
The path to becoming a successful business owner is not straightforward, nor is it easy. But a clear understanding of why you want to start your own business will help you keep going on the winding road ahead of you.
9 Steps to Starting a Business
Starting a business is a process that requires time, planning and dedication. Being your own boss sure sounds fun, but it also means being a decision-maker and leader. There will be aspects of being a business owner you'll enjoy. However, you should also prepare yourself for a heavy workload and a roller coaster of business wins and losses.
To help you plan and navigate the process of starting a business, here's a step-by-step guide you can follow to make this venture easier.
1. Start With Yourself
Starting and growing a business is a major investment that requires both time and money. Consider whether you're in the right situation in life to commit to as big a project as starting a business.
In the following sections, you'll learn more about the requirements you'll need to comply with in the beginning stages of establishing your company. This includes tasks like deciding on a type of business structure, applying for a business bank account and applying for business insurance.
Use the information to help you plan your next steps. But more importantly, use the information to help you gauge your current circumstances. Do you have the time, money and energy to devote to making a business work?
2. Do Market Research
Market research is a way for you to determine if there's a need for your business idea. It involves gathering information about potential customers, competitors and the industry you're planning to enter. Doing market research helps you create an effective business plan, as well.
One of the primary reasons startups fail is the lack of market need for the new product or service offered. Hence, in your market research, you'll want to find out details about the following:
- Your potential customers: Identify your ideal customers through your market research. What are their buying habits? How old are they? And where will you find them? You can use Explore Census Data to learn about your customer base by demographic.
- Your competitors: Market research will allow you to do a competitive analysis. What are your competitors' strengths and weaknesses? Find out what's working for them, who their customers are and how you can differentiate your business from theirs.
- Industry outlook: Market research will help you identify the needs and opportunities of the industry you're planning to join. You'll also want to check if the industry is growing or shrinking. The Census Business Builder (CBB) is an excellent resource for you to conduct market research on a specific location for all types of businesses.
3. Create a Business Plan
After doing market research, you'll have the information to create a business plan. Think of the business plan as your company's blueprint - a dynamic, ever-changing document that contains the details of your business. It covers what your business will offer as a product or service, how your company will be structured, your startup costs, your marketing strategy, your profit projections, and which permits and licenses you'll need to get.
- Executive summary: This section of your business plan is a short description of what your business is, what it does and why you think you'll succeed. It should also include basic information about your company's structure and other relevant information, such as co-owners, investors and employees if you plan to have any.
- Mission statement: This section is optional, but if you decide to write one, start by answering the question, "Who would you like to serve and what values are important to your business?"
- Company description: Describe your business by answering these questions: What problem does your company solve? How does your product or service benefit your customers? What differentiates you from your competitors? The answer to the last question could be as simple as your business location, mobility or your own expertise.
- Market analysis: This section should back up your claims on the company description with numbers to show there's a need for your product or service on the market. Use your market research to complete your market analysis, which should include information like trends in the industry, the description and size of your target market, your pricing and how much you expect to earn.
- Organization and management: This section details the business model and structure of your company, such as if you'll register as sole proprietorship, limited liability company (LLC) or something else. If you have a partner or co-owner, you'll list your percentage of ownership and a brief description of your responsibilities.
- Marketing and sales plan: Your marketing and sales plan maps out how you'll get the product or service in front of your target market. It contains your strategy on how and when to introduce new products, how to boost sales, potential markets your company can enter and what platforms (social media, newspapers, etc.) to use for advertising.
- Financial information: This section will discuss how your business is funded. Will you take out a small business loan, do you have private lenders, or will you be using a crowdfunding platform? Your financial information will also detail your estimated or current startup costs.
- Appendices: This is where you attach any supporting documents, such as product pictures, permits, patents or other relevant contracts you've already secured.
4. Assess Your Finances
Starting a business comes with costs - primarily time and money. Your business probably won't be profitable right away. If you created a business plan, you'll now have an idea of how much you'll need in capital and where that funding will come from.
So, you'll need a plan on how you're going to cover your cost of living if you'll be leaving your job to focus on your business. Maybe you have savings to fall back on, or you'll stay with your current job for a few months while you save. The important thing is to have a plan so that you can work on your business and not have to give up midway because you ran out of money.
5. Legally Establish the Business
Even though it might not be the most exciting step of entrepreneurship, you need to understand the licensing requirements and permits to legally operate your business. No matter how small your business operations are, you need to legally establish your business. You'll need to do the following:
- Decide on a legal structure: You can choose to register as a sole proprietor, a partnership if you have a co-owner, an LLC or a corporation. Your business structure will affect how you file taxes. If your company gets sued, whether your business is a separate entity also affects your personal liability protection.
- Employer identification number (EIN): You may need an EIN depending on the business structure you decide to register your company. Check the IRS requirements here.
- Federal, state, and local licenses and permits: You'll need various permits and licenses depending on your business structure and products or services. The Small Business Administration (SBA) database and Internal Revenue Services (IRS) are great resources to search for licensing requirements by state. Some permits you may need include a health permit for food handling, fire inspection and permit and professional licenses.
- Fictitious name/DBA name: If you intend to represent your company with any name other than your legal name or its registered business name, you'll need to apply for a "doing business as" (DBA) name. For instance, to use "Wendy's Wedding Creations" to market your services as a wedding planner, you'll need to apply for an assumed name to do that.
- Business tax licenses: Generally, only businesses that sell physical goods need a state tax ID or sales tax license. But some states require it for service-oriented businesses, as well. Verify with the licensing office in your county or the office of the Secretary of State if you need one. This permit will allow your business to collect sales tax.
6. Create and Execute a Marketing Strategy
Ultimately, your business's success depends on how much revenue you can generate from offering your products or services. This is why you'll need a sound marketing strategy. What should your marketing plan include?
- Your business goal: What do you want your business to achieve? For instance, do you want to help working parents take back more of their time by offering affordable cleaning services? Or do you want to get kids interested in science with your products?
- Your sales goal: How much revenue do you need to make a profit? And how many products do you need to sell to hit that target?
- Your marketing strategy: Plan how to build your brand. Do you need a website? How will you reach potential customers? Maybe through a social media platform - but which one? Are there community events or networking events you can attend to help you market your products or services?
- Execute marketing plan: The only way to find out if your marketing plan is working is to test it. Launch the website. Attend the networking events. Get feedback from customers that you can use to tweak the plan and execution.
7. Create Loyal Customers
Market your business and network continually to widen your reach. But remember that how you conduct business and how you treat your customers are the most important aspects of running and growing your company. Focus on providing an excellent customer experience, and you will have loyal customers recommending you to their friends and family.
Remember that even small gestures like personal notes can mean a lot. Show your appreciation and be ready to meet and adapt to your customers' needs. Make the ordering and buying process easy, and you might see an increase in sales.
You might even consider using Skynova's customizable invoice template to make it easier for clients to receive your invoices.
8. Receive Feedback
To understand how you can better conduct business and consequently grow your company, you should be actively seeking feedback from your customers. If you have a website, add a simple form where customers can leave comments or questions. You may also use social media to engage with your customers and ask for feedback on your products, services and customer service processes.
9. Grow Your Business
Remember that your goal is to stay in business, not just launch one. So, keep setting new goals and work toward growing your business. Become a problem-solver and be adaptable to changing situations and trends.
When you make providing an excellent customer experience a priority, you won't need to ask for referrals - customers will advocate for your brand freely. Always look for opportunities to get your brand out there through collaborating and partnering with other businesses or organizations.
Manage Your Small Business Finances With Skynova
Whether your small business idea is to start a plumbing, consulting or freelancing business, your ideal time depends on your individual situation. The important thing to remember is to plan accordingly. Start when you can commit the time and have secured the money needed for your business.
Make sure you confirm there's a need for your product or service. Do your due diligence and get the licenses and permits you need to operate your business in compliance with the law.
Lastly, make invoicing and getting paid for your work easier for you and your clients with Skynova's all-in-one invoicing and accounting software. Keep accurate records of your income, expenses, sales tax and more.
Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with a professional accountant to ensure you're getting the right advice.