If you have an idea, but you don’t know how to start a business, you’re not alone. Fortunately, breaking the process down into smaller steps will make it more manageable and significantly increase your chances for success. Here are 12 steps you can take to get your business up and running in 2021.
1. Determine Your Business Type
The first place to start when creating a business is having a clear vision of the type of company you would like to invest your time in. Consider, for example, whether you want to open a franchise of a preexisting company or whether you would prefer to start your business from scratch. The process of opening a franchise is much simpler, as the target audience, branding, and concept have already been determined. You will just need funding and a place to open your shop.
However, you may have an original idea you would like to build from the ground up. In this case, you will have more work ahead of you and enjoy the satisfaction of seeing your vision come to life. You can take two very important steps at this stage to set yourself up for success as you continue solidifying your business plan.
Perform Preliminary Research
Although we will further discuss in-depth marketing research, it is important to simply do preliminary research on companies and brand leaders in the industry you are planning to enter at this phase in the process.
This will enable you to spot any openings in the market, get a sense of how your business will stand out compared to others, and determine a potential niche that will make your business appealing to your customers.
Identify Your Target Audience
Customers are one of the most vital parts of any company. It is critical to have a clear conception of your target audience as you begin solidifying your business plan. Knowing who your audience is and why you want to connect with them will make it much easier to tap into your passion, clarify your business mission, and articulate the value you will bring to your customer base.
2. Define Your Business Goals
Once you have established a preliminary idea of what you want your business to look like, you can begin articulating your ideas in a more structured fashion by writing a business plan. Just as there are a vast array of different types of businesses, there are also many ways to write a business plan. At its core, a business plan is a roadmap that will help you stay organized as you figure out how to start your business. A well-written plan can attract potential investors and business partners, as it indicates that you have a clear sense of where you want your business to go.
Although there is no wrong way to write a business plan, you will typically encounter two common categories:
- Lean startup
As the name implies, traditional business plans are the most widely used. These plants can be many pages long, with multiple sections that describe each part of your business in considerable detail. Lean startup business plans, on the other hand, are more like a summary of your business. They will consist of your strategy’s key points and will often be just one page long.
A lean startup plan is a good choice for the early planning stages when you are trying to quickly articulate your business ideas and get a sense of how you would like to proceed. This type of plan may include the following information:
- An elevator pitch
- A description of your target audience
- Basic marketing and financial plans
- Financial projections
However, when in doubt, it is better to opt for a traditional business plan, as this is the option that most investors will prefer. Traditional business plans typically consist of nine sections, although it is unnecessary to include every section if some are less relevant to your needs. The nine possible sections are:
- Executive summary: Includes mission statement, basic company information, and, if you are planning to speak to investors, financial information, and growth plans.
- Company description: Detailed information regarding the problems your business will solve, the customers you plan to serve, and any competitive advantages you would like to highlight.
- Market analysis: A space to discuss any market research you have done, including information on trends in your chosen industry.
- Organization and management: The details on who will run your company and how you will structure the business. This section may include an organizational chart.
- Service or product line: A description of the services or products you intend to provide your customers, as well as any plans you have for copyright or patent filings.
- Marketing and sales: A plan on how you will attract new customers and make sales. This section will help you in the future when you make financial projections.
- Funding request: This section is only required if you are requesting funding. It will explain the amount of funding you need for the next five years, what you plan to use it for, and whether you want debt or equity.
- Financial projections: As a supplement to your funding request, you can include a financial projections section where you will project income statements, cash flow statements, and balance sheets for the next five years.
- Appendix: A space to provide any additional supporting documents such as resumes, permits, or credit histories.
3. Understand the Legal Structure of Your Business
Before you will be able to register your business or file for any necessary licenses or permits, you will need to understand the different business legal structures and which one applies to you. The business structure you choose will determine your personal liability, what types of paperwork you will need to file, and how much you will pay in taxes. The following are a few of the more common business structures.
This type of business is solely operated for the benefit of members, who will have voting power that will enable them to influence the business’s direction. With a cooperative business structure, any profits will be distributed equally among each member.
As a very informal legal structure, sole proprietorships give you complete control over your business but make it challenging to raise money or acquire loans. Sole proprietors will not have a separate business entity, meaning they will be held personally responsible for any business debts. As such, the sole proprietorship is best suited for low-risk businesses.
If you are working with one or more people as you start your business, a partnership is one of the simplest structures you can opt for. With a Limited Partnership (LP), you will have one partner with unlimited liability and one or more others with limited liability and limited control over the business. If you would like every partner to have limited liability, you can opt for a Limited Liability Partnership (LLP). This option ensures that no partner will be responsible for any other partner’s actions, and it protects every partner from any threats against the partnership.
Limited Liability Company (LLC)
LLCs will typically protect you from personal liability in the case of your business filing for bankruptcy. All members of LLCs are classified as self-employed, and therefore must pay self-employment taxes. This structure is a good option if you are starting a higher risk business and want to protect your personal assets.
Unlike sole proprietors and partnerships, corporations are legal entities separate from their owners. This means that the corporation itself is taxed and legally liable for any debts the owner takes on. Corporations are an excellent choice for higher-risk businesses or businesses you plan to take public or sell eventually. Corporations can also raise money more easily, as it is possible to sell stock in the company. Distinct types of corporations include:
- S corp
- B corp
- Close corporation
- Nonprofit corporation
4. Conduct Marketing Research
It isn’t easy to know how to set up a successful business without a clear understanding of the market you intend to enter and the audience you hope to reach. Marketing research is a critical step in learning about consumer trends and how you can best proceed to optimize your chances of success when starting your small business. When conducting research, there are two areas where you should focus your attention: customers and competing businesses.
Gathering information about your customer base is an excellent way to begin crafting an accurate target audience, which will allow you to set up your business more effectively. There are many ways that you can gain information from your target audience, both directly and indirectly.
Indirect research can help you gather more general information, such as industry trends in your consumer base’s household incomes.
However, it is also highly beneficial to take the time to do direct research by reaching out to your target audience and asking them questions that are specific to your business, such as how they feel about the location, the branding, and the overall shopping experience. You can do direct research in many ways, including focus groups, surveys, and questionnaires.
It is also worth taking the time to do SEO and keyword research to understand your customer base’s browsing habits better. Examine the keywords that your target audience typically searches for so that you can get a better sense of how to help them find you. You can also take a look at the keywords used in different regions to help you choose a location where there is a high demand for your services.
By looking closely at your competitors, you can learn from both their successes and their failures. Take some time to study their social media and websites, try to get a sense of their pricing habits, the quality of the products or services, and how they interact with their audience. The more you understand about your competition, the better you will be able to make yourself stand out from the crowd.
5. Choose a Business Location
Your business’s location will determine the taxes you pay, the licenses and permits you will need, and the government restrictions you may encounter. When you decide how best to start a business, location is a vital aspect that deserves considerable thought.
One significant consideration is the fact that business expenses may cost more in certain regions. It is important to account for this when calculating startup costs, and it is a good idea to choose an area where costs will be lower. A few expenses that may vary by region include:
- Minimum wage
- Standard salaries
- Rental rates
- Government licenses
Additionally, certain states and regions may offer government incentives, such as tax credits, for people who start small businesses. Certain federal programs, such as the Historically Underutilized Business Zones Program, provide incentives for business owners to open a small business in certain qualified underutilized areas.
It is also important to take into account local zoning ordinances and taxes. Certain states will be more tax-friendly for small businesses and could be more well suited for certain types of companies. Zoning laws can also vary significantly from city to city, with certain areas potentially having stricter guidelines than others.
6. Consider Your Finances
Before determining what types of investments you need, it is highly beneficial to take the time to examine your own finances and the projected costs of starting your business. It is better to overestimate the funding you may need to avoid running out of money before you can begin turning a profit. A break-even analysis is an excellent way to start assessing your finances and predicting when you can expect to start earning money from your company. This analysis consists of the following formula:
Fixed Costs / (Average Price – Variable Costs) = Break-Even Point
Once you have conducted a break-even analysis, you should have a better sense of how to turn a profit, the best way to price your product competitively, and how much of your product or service you need to sell to turn a profit and reduce your variable costs. With this in mind, you will be better able to avoid overspending as you start your business. With a clear financial forecast in mind, you will focus on spending your money on the essentials. You will be more likely to attract investors thanks to your careful planning and detailed financial projections.
7. Establish Funding
Although some business owners can finance their own startup or rely on friends and family for financial support, this is not always possible. If you need external financing, there are numerous options for you to consider. The following are just a few popular options you may encounter.
Small Business Loan
This option is best for those who have a strong business plan in place. As taking out a small business loan requires you to demonstrate to a bank or other lender that they will be making a sound investment, you will need to be able to clearly explain how you plan to spend your loan over the next five years.
Crowdfunding differs from investment in that the people who provide funds for your small business do not receive any shares of ownership and will not receive any financial return. If a business owner chooses to crowdfund, they will typically compensate their crowd funders with some non-financial perks, such as public acknowledgment or a meeting with the owner.
This option is best for those who do not need a substantial sum to start their business. With seed financing, an investor will provide funds in exchange for preferred stock in your business. In the case of company liquidation, your investor will then be able to get their investment back with an additional return. Seed financing is ideal for those looking for funds to create prototypes, perform test runs, or conduct research.
8. Register Your Business Name
A business name serves two vital functions: it connects you to your audience and protects you legally. As such, it is important to spend a significant amount of time choosing a name that accurately portrays your brand identity.
Your name will ideally include your main keyword, although this is not always necessary—some businesses will choose to use a completely unique name with no keywords, which can help them stand out. It may be useful to confer with a partner when attempting to choose a business name or run multiple business name options past your audience when conducting marketing research.
Once you have settled on a name that accurately reflects your business, you will need to register it. There are multiple ways to register your business name, and depending on where you are located and what type of business you are starting, certain types of registration may be required by law. The four types of business name registration are:
- Entity name
- Domain name
- Doing Business As (DBA)
Entity names and trademarks protect your business name at the state and federal levels, respectively. Domain names are to protect your web address. DBA registration is occasionally a legal requirement and has the benefit of enabling you to open a business bank account. DBAs are less formal than the first three options, as they typically do not require you to have a unique business name. Entity names, trademarks, and domain names must all be unique, as you are generally not allowed to register a name that is already in use.
9. Acquire State and Federal Tax IDs
As soon as you’ve registered your business, you should apply for your federal tax ID, also known as an Employer Identification Number (EIN). You can complete this application online using the IRS assistance tool. Receiving an EIN is entirely free and is critical in allowing you to run your business smoothly. An EIN enables you to do the following:
- Apply for business permits and licenses
- Hire employees
- Open a business bank account
- Pay federal taxes
The information you will need to apply for an EIN includes:
- Your name
- Your address
- Your Social Security number
- Your DBA name
Once you have applied for a federal tax ID, you may also need to get a state tax ID number. These requirements differ from state to state, meaning that you must research the laws in your own state related to employment taxes and income taxes. There are seven states, including Florida, Texas, and Washington, that have no income tax requirements. To determine whether you will need a state tax ID number, you will need to research your state government’s requirements.
10. Build Your Team
Building a good team can be challenging, especially when starting a small business. Fortunately, there are many resources available that will enable you to recruit team members who will work well with your company and help make your new business a success.
If it is possible, it is excellent to hire employees referred to you by a trusted source. This can drastically cut down on search times, as referrals have already been screened and are more likely to fit in well in your work environment.
If you already have employees on staff, you might consider setting up a referral bonus program to encourage your current team members to refer others who they think might be a good fit.
You might also choose to post on various job sites to increase your chances of finding suitable candidates for your team. There is a wide range of sites to choose from, including traditional options such as LinkedIn and Indeed, and more niche options such as college job boards.
If you are searching for employees in a specific region, you might also choose to post job descriptions in local newspapers.
No matter how you choose to spread the word about your job openings, writing high-quality job descriptions is critical for attracting the right candidates. You will want to be sure the description is quick and to-the-point, with clear information about what the job will be like and what requirements you are looking for in a candidate. Take care to set reasonable expectations so that you do not miss out on qualified candidates. Additionally, offering good perks such as flexible hours, telecommuting options, and an emphasis on work-life balance will help you stand out and attract applicants who will love being part of your team.
11. Create an Online Presence
Even if you plan to run a physical storefront, having a strong online presence is very important in helping connect your small business with its audience. There are two main areas to focus on as you begin building up your online presence: a website and social media.
The design of your website will differ widely depending on the type of business you are starting. If you plan to sell your product online, you will likely focus more heavily on setting up an e-commerce webpage to make it easier for your customers to shop. However, even if you don’t plan on selling anything online, a website will still be beneficial. This is where your customers will be able to go to learn more about your company, find information about your store hours and location, and determine whether your business can meet their needs.
The website doesn’t need to be complex: Even a minimalist design can get your message across and help you connect with your audience. The key is to clearly state your business’s purpose and mission on your website’s homepage.
There are several steps you will need to take to set up your site:
- Choose a domain name
- Pick a web host
- Design one or more pages, such as a homepage, a contact page, and a blog
Fortunately, it is not necessary to be an expert in technology to design an effective website. There is a wide variety of website design software that streamlines these steps and makes it easy for anyone to craft a website, allowing you to focus on writing compelling website copy. When writing your webpages, be sure that each page has a clear call to action that is context-appropriate — for example, prompting the viewer to contact you at the end of your website’s About Us page.
Once you have a high-quality website up and running, you can begin promoting it on social media. Having a strong social media presence enables you to connect with your audience on a more personal level. It also can provide information on the ways that your customers are interacting with your brand.
However, not all social media is suited to every business. It is important to take some time to determine your brand voice and goals to choose the social media sites that will work best for you. For example, more creative and visually-focused brands may excel on Instagram. In contrast, brands that are more focused on having a consistent voice and connecting with their audience may prefer text-based platforms such as Twitter.
12. Promote Your Business
Once you have learned how to start your business and have taken all the necessary steps, it is time to promote and think about future expansion. As discussed previously, a strong web presence is an excellent way to promote your small business and connect with your audience. However, there is no shortage of additional ways to get creative with the promotion of your brand.
Focus on SEO
SEO best practices may change over time, but there are still plenty of areas you can focus on to help ensure that your business is connecting with the largest audience possible. For example, when writing your web copy, you can incorporate relevant keywords to help your customers find what they are looking for.
Depending on the type of business you are running, you may also choose to publish a blog regularly. This will indicate to search engines that you are an active business and help boost your search engine rankings. It may also help you connect with an audience interested in the topics you are writing about.
Prioritize Customer Experience
Strong branding, a clear business mission, and active social media will help your customers find your business; a high-quality customer experience will keep them coming back.
Word of mouth is one of the best ways to promote your business. In fact, while 75% of people do not trust advertisements, 90% of people trust recommendations from their friends and family. To ensure that your customers will be raving about your business, focus on listening to their reviews and requests, and adapt your business strategies in response.
This is where small businesses have an advantage, as they are better able to connect with their audience and rapidly react to their customers’ needs.
Participate in Networking Events
Finding networking events where you can connect with other business owners is an excellent way to build a support system and learn more about making your small business successful. It is invaluable to have strong connections with other entrepreneurs who can provide advice, new perspectives, and even employee referrals.
How to Start a Business
Starting your own business may seem overwhelming, but it doesn’t have to be. Breaking the process down into more manageable steps is an excellent way to learn how to set up a small business. First and foremost, it is imperative to choose a business idea that you are passionate about. Running a business is challenging: It will take up a significant amount of your time without providing an immediate profit. To successfully start your business and keep up your enthusiasm, identify a market that excites you and that you believe you can make a significant contribution to.
Once you have a clear business goal in mind, you can begin the process of making it official. Crafting a business plan, conducting marketing research, and identifying your business’s legal structure are the first concrete steps you can take when starting your company.
Starting with a clear business plan will help you formalize your ideas to set up your own small business correctly. If you are just getting started, you might consider writing out a lean startup business plan rather than a more in-depth traditional business plan. A lean startup plan is typically only one page. It offers you an excellent opportunity to spend some time articulating the key points of your ideas without getting too caught up in the small details.
Having a clear conception of your business plan will make it easier for you to perform in-depth research, connect with potential partners, and plan to get funding to set up your small business.
Although some people may fund their own business from the beginning, this is often not feasible. Luckily, there are many options for funding when you are starting your small business. One option could be to seek out investors. This can often be a complicated process where you may need to give up some equity in your company, thus running your investors’ risk trying to take a higher level of control than you would like to relinquish.
A particularly beneficial solution may be to take out a startup small business loan instead of investors to provide capital to a new business that will enable you to operate. You could also choose to use your loan to open a business line of credit to begin expanding your business.
If you are struggling to figure out how to start a business due to a lack of funds, you have many resources at your disposal to help you get the capital you need. One such resource is Lendio, an online marketplace with over 75 lenders in its network that will help you find the right business funding solution for your particular circumstances.
How To Get Started With Your Business
If you don’t count on the capital to fund the next stage of your small business, you can contact Lendio to assess the best option for you to get financing for your particular circumstances.
With over 75 lenders in its nationwide network, their business lending experts can help you with classic business term loans or startup loans. Or, if you are looking at buying a company or franchise, Lendio can also help you secure a business acquisition loan.
The beauty of using an online marketplace like Lendio is that you can save time since you fill out one single application in 15 minutes, provide all documentation required online to access multiple lenders.
Lendio’s team will support you through the process of choosing the right option for your case, and once you get approved, some of the loans can provide you with funds in as little as 24 hours.
Lendio is an excellent resource for streamlining the process of accessing the capital you need to start your business.