The idea of starting a small business is undoubtedly daunting and challenging for the first-time business owners or entrepreneurs – but if you have passion and determination along with a good idea/concept, a strong work ethic, and a good set of reliable resources, anything is possible.
“Pursue your passion, and everything else will fall into place. This is not being romantic. This is the highest order of pragmatism.” – Gabby Giffords.
Even though there are tons of guides, processes, tutorials, blogs, videos, podcasts, courses, etc., on the internet for starting a business, there is no sure-shot recipe for starting a profitable business. Remember you are starting a business to attain financial freedom – not to go broke.
If you have a correct mindset and a good foundation from the beginning, you will be able to create opportunities and overcome challenges to reach a step closer and closer to where you want.
To help you get started, follow this simple 8-step guide for starting a small business from scratch:
1. Think Of A Business Idea & Do Market Research
Generating and validating an idea is one of the foremost and crucial steps in starting a business. You need to decide whether you want to sell products or provide services. Jot down all the ideas that come to your mind and validate them with the following questions:
1. Who will be your target customers? Just to give you a head start – If I have to start web designing services, my target customers will be local stores and businesses. Just think on similar lines.
2. Who will be your competitors? Ride around your neighborhood or search online, and list down all the similar businesses or companies who will be your competitors. Keeping tabs on competitors will help you stay alert and productive all along your entrepreneurial journey.
3. What is your Unique Selling Proposition? Ask yourself a question – Why people will purchase your products or hire your services? In order to succeed, you need to think of innovative ways of providing immense value to your customers – better than your competitors in a way or two. Having a good USP for your small business is the only way to stand out from the crowd and generate profit from day one.
If you are struggling to generate any ideas, here are some of the easy ways to get started:
- Analyze your skills, talent, and passion
- Ask your family, friends, and relatives
- Search online – Amazon, Walmart, etc.
- Tap your interest and hobbies
- Invent a new product or service
- Add value to an already existing product or service
- Start a popular franchise
Here is an article that shows you how to actually generate business ideas in 10 great ways.
If you have successfully generated a handful of ideas, now is the billion dollar question – Is there a market for your idea?
Market research helps you in finding potential customers. Competitor analysis will differentiate your business from others. Combining both of them will help you find a competitive advantage over other businesses.
With so much competition and saturation in the market, if you stumble upon an idea which no one is doing, there are possible chances that there is no market for it. Even if there is a market for it, you need to have a solid business plan to reach and convince your target audience that your product or service will solve their problems.
“Research is to see what everybody else has seen, and to think what nobody else has thought.” – Albert Szent-Gyorgyi
Market research will help you turn your idea into a successful and profitable business. You need to gather information about your target customers, their age, income, behavior, interests, spending habits, etc. so that you have a solid competitive advantage in the market.
You can gather primary market data by:
- Conducting interviews with potential customers
- Online surveys and questionnaires
- Starting focus groups
- Fly-on-the-wall observation technique
You can also research secondary market data by exploring studies, statistics, reports, journals, niche-specific magazines and other relevant data on the internet and libraries.
Here is an interesting article that will help you do market research properly by defining your buyer persona, finding research participants, preparing a research questionnaire, listing competitors and summarizing your findings.
Having a validated idea and a community of potential buyers is proof that your product or service will sell in the market. But you need to have a solid business plan to get your idea off to a successful start.
2. Write Your Business Plan
Whether you agree or not, you need a written business plan to succeed in this competitive and distracted world. A business plan is vital for your success and it’s a roadmap that provides you direction and helps attract investors to fund your business.
“Going into business without a business plan is like going on a mountain trek without a map or GPS support – you’ll eventually get lost and starve!” – Kevin J. Donaldson
But, how do you write a business plan?
SBA.gov recommends that every business plan should have the following nine sections:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
You can also utilize the 1-page business plan (lean startup methodology) to help you deconstruct your idea into its key assumptions. Created by Ash Maurya, this single page business plans is a perfect alternative to traditional business plans.
Here are a few business plan templates from popular industries:
- Restaurant business plan template
- Startup business plan template
- Software company business plan template
- Retail store business plan template
- E-commerce store business plan template
- Real estate business plan template
- Manufacturing business plan template
- Consulting business plan template
- Nonprofit business plan template
3. Figure Out Your Finances
Since you already have an idea and market to sell your product or service, now is the time to figure out how you will fund your startup. There are tons of ways to secure the funds for starting a small business, but the funding option you choose should align with your success goals and it should be instrumental to your business growth.
Money is the lifeblood of any business.
Studies say that more than half of new businesses fail during the first year of their operation and yes, lack of funding is one of the most common reasons.
To start a business, you need money. You can either bootstrap or seek a bank loan. Here is a list of funding options you can consider for raising capital for your business:
- Bootstrap or fund your business with your own money
- Ask your family, friends, and relatives
- Join a startup incubator
- Get an angel investment
- Get venture capital
- Request a small business grant from SBA
- Start a crowdfunding campaign
- Get P2P loan
Selecting a lending option is the most crucial decision as an entrepreneur. Every option has its own pros and cons. Bootstrapping helps you start small and have total control of your business but the growth will be slow and you will most likely miss tapping key opportunities in the market.
In addition, you can obtain capital from multiple options based on your business model and structure. Don’t limit yourself to only one option. As your business starts and grows, assess other options and reach out.
4. Register & Insure Your Business
Having a business registered with your state helps in expediting funding process and provides credibility with your customers, vendors and business partners when you launch.
1. Choose a Legal Structure
To get started, you need to choose the legal structure that suits your business.
There are several ways to register your business, but it’s wise to consult your attorney who will help you understand the pros and cons of each structure and their personal asset protection, tax, and operational implications.
Some of the options are:
- Sole Proprietorship
- Limited Liability Company
2. Name Your Business
Choosing a business name is hard and stressful. It may look simple and easy from the outset, but once you start digging, your head will start to spin.
A business name is one of the most important aspects of your business. Don’t undervalue it. It will be attached to your business for years and help you build the brand in the market. It’s crucial to get it right from the beginning.
3. Obtain Your Federal & State Tax ID
An Employer ID Number (EIN) or Federal Tax ID is a unique nine-digit number (12-3456789) assigned by the IRS to a business. It helps in identifying a business the same way a Social Security number identifies an individual. It is important for employment tax identification and filing purpose.
You can apply for an EIN in one of four ways:
Learn how to apply for the EIN online here. You should also obtain a state tax ID to pay state taxes.
4. Get the Necessary Licenses & Permits
It’s important to obtain the necessary trade licenses and permits from Federal, state and local government agencies that are required to run your business smoothly.
5. File Applications for Patents, Trademarks, Copyrights
If you have a brilliant new concept that will make you a fortune, then it’s wise to protect it with a patent, trademark or copyright from the government.
Being a creator, maker or an artist, you should know the fundamental differences between the three and ensure you obtain the right registrations to protect your intellectual property.
6. Open a Bank Account
Having a separate bank account for your business helps you in separating business finances from personal ones. It also helps you in organizing your accounting records and paying your employees.
Visit your nearest bank to know the requirements and applying process.
7. Purchase Business Insurance
Having insurance for your business helps you in dealing with property damage, theft, injuries, and incidents at your workplace. Consult your insurance agent or broker to get the right type of insurance that covers employees, equipment, real property and buildings, inventories, and other important business assets.
Together with Federal, State, and local tax, you should also know other types of government tax and insurance that applies to your business such as :
- Unemployment insurance
- Workers’ compensation
- OSHA requirements
- Payroll tax requirements (such as FICA, federal unemployment tax, and state unemployment tax)
5. Build a Team & Develop Your Product/Service
Now when you have everything ready to start your business, it’s important to build a core team that will help you develop/manufacture the product or start a service business.
It’s good to start small but it requires a lot of skills to simultaneously cover all the bases of running a business – manufacturing, finance, marketing, development, sales, customer services, and operations. You need people aka employees.
Along with capital, employees are also the lifeblood of business. Having a strong and skilled team help your business succeed at a much faster pace.
Check out these top 10 qualities while hiring your core team:
- Long Term Potential
- Enthusiasm, Interest, and Passion
- Decision Making Skills
- Multitasking Abilities
- Leadership Qualities
- Ambition & Drive
- Problem Solving Ability
- Team Player
- Dedication & Loyalty
Hiring your core team may take time and effort, but they will become the backbone of your business for a long period of time.
6. Setup Payroll & Accounting System
Payroll and accounting are two most crucial systems that will help you to manage and operate your business effectively.
Setting up a payroll system may look easy, but there are many essential steps involved that you need to know from the beginning. One wrong step and you can end up attracting heavy fines and penalties from the IRS.
To get the burden off your shoulders, we have put together a simple guide to help you understand how to do payroll and identify an intuitive payroll software for your small business.
Instead of running your business if you have to spend time on maintaining ledgers or balancing the books, it could really get on the nerves.
Investing some time and effort into choosing the best accounting software for your business will help you in growing your business and revenue. Learn the difference between assets vs. liabilities in a balance sheet to take informed decisions about your business.
Having good accounting software will help you streamline daily tasks such as recording payments, tracking expenses, invoicing customers, paying vendors, and reconciling transactions. It also provides you up-to-date reports that will help you assess your business’s financial health.
7. Find Location & Set Up Your Website
Whether it is a store or an office, assessing and choosing the right location is an important factor for your business success. The following tips may help you in deciding the right location for your business:
- Your location should be surrounded by your business’ target audience.
- It should be close to your suppliers, vendors, warehouse, manufacturing plant or storage facility.
- There should be ample talent and workforce nearby.
- It should be a business-friendly area.
- It should be easily accessible by customers as well as employees.
If you want to reach to a wider audience and targeted customers, you should have a professional website that helps you in digital marketing efforts. A website will enable your customers to learn about your products/services. It also helps in increasing visibility and building a brand in the market.
There are a ton of different ways to design your website, but here are four simple steps to get started:
- Register a domain name & choose a hosting provider.
- Hire a graphic designer to design an attractive logo.
- Hire an agency or use a website builder to design a responsive website.
- Hire a copywriter or write the content yourself.
- Set up lead generation and nurturing system.
8. Build Brand and Grow Your Business
You have done a lot of hard work to reach this stage, now it’s time to generate traffic, sales, and revenue. To get started, it’s important to build a brand to stay ahead of the competition and these tips will help you in building the brand from scratch:
- Define who you are and what you do using an attractive name, logo, and tagline.
- Define how you will communicate with your customers by developing a messaging strategy.
- Make your products/services shine through your brand positioning.
- Design professional marketing collateral to educate prospects and customers.
- Develop a content marketing strategy.
You can start spreading the word using social media channels like Facebook, Twitter, LinkedIn, Instagram, etc. You can also advertise your business in local newspapers, magazines, billboards, etc.
To generate traffic to your website, use the following methods:
- Add a lead generation form on your website to acquire customer email addresses.
- Run a contest or promotion.
- Optimized your website using SEO techniques to generate organic and free traffic.
- Make use of Google Ads and Bing Ads to advertise in search engines and websites.
- Advertise and promote your business on social media.
- Start an affiliate or referral program.
- Add your business in listing directories like Google My Business, Bing Places for Business, etc.
Starting and Growing your business doesn’t happen overnight. All the major companies like Walmart, KFC, etc. started small and took years to grow their business. It’s all about hard work, persistence, hustle, motivation, and passion.
“A dream doesn’t become reality through magic; it takes sweat, determination, and hard work.” – Colin Powell
Hope this simple 8-step guide helps you in starting a small business.