Being a business owner may have a profound effect on both your life and the lives of others around you. However, you must understand how to start a business before you can manage one.
Whether it’s your first or tenth business, these 11 tried-and-true stages will help you with everything from researching and confirming your profit-generating idea to devising your shipping strategy to eventually releasing your good or service.
Steps to Start Your Business
1. Make a Business Plan
Choosing what you want your business to be is the first step in beginning an online business. You can approach the challenge of finding small business ideas methodically by relying on tried-and-true strategies that have produced positive results for other business owners.
Pro Tips: Here are some resources to help you get more small business concept inspiration:
2. Create a business plan
By forcing you to sit down and think things through methodically, writing a business plan can streamline the process of creating a business and help formalize your idea.
Yes, plans are (often) useless, but preparation is the key.
It’s crucial to have a solid understanding of your “known unknowns” because all it means is that you’re actively prioritizing finding a solution at the moment; this is preferable to being unprepared or caught off guard, especially if you find it difficult to respond to these questions while looking for funding.
Your business plan should at the very least include the following information:
- Name and description of the business
- market research
- Organization and management
- Services and goods
- segmenting customers
- Plan for marketing, logistics, and operations
- fiscal strategy
Pro Tips: To get things started, looking at several sample business plans for ideas can be useful. We’ve created a free business plan template that you’ll actually use if you want to write a business plan but are put off by cumbersome paperwork.
Name your business
To begin with, your company name appears wherever you go in all aspects of your marketing. Keep things straightforward and concentrated; choose a name for your company that expresses what you do, is short and memorable, and is consistent with your mission and vision. Although not simple, this activity is fairly doable with a little creativity.
Pro Tips: You can use a business name generator to help you generate a starting list of suggestions; the rest is up to you. A few tried-and-true methods might also serve as a guide if you’re starting from scratch.
Analyze the Market
Conducting a market analysis is one of the greatest strategies to launch a business. To create a successful business plan, market research aims to provide a deeper understanding of your target market and rivals.
How big is the potential opportunity?
Entrepreneurs frequently need to treat small markets with more contempt. Yes, the market size should be in line with your business goals, but there are a few additional factors that affect the size of an opportunity in a given sector. For instance, founders who are focused on market size may overlook a lucrative opportunity if a product category has relatively few active users but the price of the product is quite high and necessitates repurchase.
What is your competition?
What does the market’s competitive environment look like? Are there many or few competitors? It’s frequently a sign that the market is established if there are several rival companies in your niche. That’s excellent news for guaranteeing there is a market, but it also means that you will need to (somewhat) differentiate what you have to offer in order to draw in customers and increase your market share.
Pro Tips: Utilize our how-to guide and free SWOT Analysis form to identify your competitive advantage.
What is your target audience?
A group of people you intend to market your goods and services to is known as a target audience. It is simpler to find new consumers and attract interested shoppers to your website when you know your target demographic. Creating your buyer personas in advance will help you achieve, more social media engagement to a higher return on investment for your advertising.
3. Obtain Funding for Your Business
How much money you’ll need to start your firm will be determined in part by your business plan. There are several options for financing your company, however, these are the most typical ones:
- Business loans. A company loan from a lender might make sense if you require beginning funding and have an excellent personal credit history.
- Business grants. Grants are frequently awarded to targeted companies depending on a number of criteria, including veteran-owned businesses, minority-owned businesses, particularly for-profit companies, women-run companies, and more.
- Crowdfunding. You may always crowdsource donations from a group of individuals online if you don’t want to pursue the regular funding route.
- Personal investors. In the beginning, startups may also raise money from friends, family, or VC or angel investors.
4. Select a business structure
The proper structure is one that strikes a balance between the flexibility provided by several possibilities and the legal and financial protection you require. Before starting your firm, you should carefully evaluate this choice because it is crucial.
The types of business structures vary depending on your country and region, but the most prevalent ones are corporations, limited liability companies (LLCs), and sole proprietorships, which may have various names in your nation.
The sole proprietorship
A sole proprietorship is excellent if you’re the only person working for the company, and it’s typically the least work to pursue, but it makes you personally responsible for the company’s actions. As a sole owner, you are able to employ workers, but you must register your business to obtain an employer identification number.
Limited liability corporation (LLC)
In the US, a limited liability corporation (LLC) is a typical corporate structure for small firms. It offers liability protection for the business owner(s), ensuring that you are not held liable in the event that legal claims are made against your company. One or more proprietors can create an LLC.
The business structure known as a C corporation allows for the taxation of owners independently from the company. The corporation is owned by its shareholders, who each possess a small portion of the ownership. Normally, major, international firms like Walmart and Apple benefit from being C corp. However, tiny enterprises that seek to raise capital by issuing shares can use them.
There are a few things you should take into account while choosing the best legal structure for your company:
- What’s your business address? The various business structures you can set up and if you require a company license to get started will be outlined by the laws of your nation.
- What type of business do you operate? Some business models or sectors of the economy are better suited to specific structures. You might need to restructure your company at some point in order to collaborate with new partners. Large corporations frequently request that their partners or suppliers incorporate, for instance.
- Who are the participants? If you’re a single founder going it alone, you might be able to choose solutions that are simplified. You’ll need to look at more sophisticated choices if you have a business partner or numerous shareholders to make sure everything is set up and divided fairly.
5. Get your federal and state tax IDs
Federal tax ID (EIN)
An employer identification number, often known as an EIN, is a nine-digit number that the IRS issues to corporations and organizations for tax-related purposes. Imagine it as the Social Security number for your company.
You’ll need an EIN if:
- If your company employs anyone except you
- Your company has been incorporated.
- Do you have any business partners? (i.e., it is a multi-member LLC)
- You either buy or inherit an established firm to take over.
- You want to open a bank account for your company (Not all banks require an EIN, but most do.)
- You make a bankruptcy filing
Having an EIN will:
- Help you file your taxes.
- Legally protect you.
- Keep your info safe.
- Set up your business credit.
Pro Tips: The procedure for applying for an EIN is straightforward. You can simply complete an application online at the IRS website. Once you have been approved, the IRS will undertake a compliance review and send you your EIN papers, either by mail or as a PDF to your email inbox.
State tax ID
Your EIN is distinct from your state tax ID. While your state issues a state tax ID, the federal IRS issues an EIN.
Similar to an EIN, a state tax ID aids your company in adhering to local business regulations. However, the rules, laws, and even taxes vary from state to state. In order to determine whether your company needs a state tax ID, you will need to examine the legislation of your specific state.
States have different laws. Your state’s taxation, treasury, or secretary of state offices are ideal places to start. To learn about any state tax ID requirements you might need when launching your firm, get in touch with them.
6. Obtain business licenses and permits
After learning how to launch a business, research the permits and laws that will allow you to operate legally. Nobody wants to run into legal issues. Your company is subject to local business laws as well as laws and rules that are unique to your industry. For instance, a food service company must adhere to specific licensing requirements and legal guidelines when handling the products it sells, as well as legal considerations regarding its marketing strategies, including trademark and copyright laws.
It is wise to seek legal counsel before starting your business because there is so much to learn, much of it unique to your region and sector. Spending time and money upfront to get legal guidance can prevent a lot of hassles in the future.
7. Open a business bank account
Open a company bank account and get a business credit card to make handling your finances much simpler. Separating your personal and business finances makes filing your taxes for your business much easier, and it can also assist you in automating some of the financial tasks involved in beginning a business. This will be very useful if you want to learn how to launch a small business on a shoestring budget.
8. Insure your business
Your personal and corporate assets are protected from potential threats by business insurance. Even though your state does not mandate business insurance, it is always a good idea to provide yourself and your company with additional security. Each state has distinct rules and requirements for business insurance.
There are many different types of business insurance, so the first step is to determine which insurance your company requires. Here are some prevalent forms of insurance:
You must be aware of the hazards associated with the business you are in order to select what insurance you may require. A North Carolina-based t-shirt printing shop will have wholly different needs than a California-based dog grooming business. Assess the hazards associated with the business you’re establishing by doing some research.
As an illustration, the Californian dog-grooming industry ought to, at the very least, take into account:
- Errors and omissions insurance for any pets that might get hurt while in their care liability insurance in case a client slips and falls on some soap or water on the floor
- Any groomers who might be bitten by furry clients are covered by workers’ compensation.
- If they have any mobile grooming vans, they have commercial auto insurance.
- If they accept any electronic payments, they should have cyber liability insurance.
Shop around once you’ve determined what kinds of insurance your company needs. There are numerous businesses that offer various types of company insurance. Going through a reputed licensed agent is a fantastic choice if you find it daunting. You may obtain coverage that fit your budget and the needs of your company with the aid of a commercial insurance professional.
Find an insurance agent who is genuinely interested in assisting you in finding the coverage you require because these representatives are paid commissions by the insurance companies when they sell products.
Once you’ve signed up for the necessary coverage, fantastic! Just remember to reevaluate as your company expands. You’ll probably need to update your policies as well as your business’s needs alter.
9. Tools and software you’ll need
There is more work involved in starting an online business than is reasonably possible. Small business owners shouldn’t undervalue the value of good software because it’s one of the finest ways to lessen the labor-intensive aspects of running a company.
Does that list include any routine jobs that don’t need much decision-making? Software is ideal for automating or simplifying that kind of task. In order to support some of your marketing and sales efforts, you can also install software early. A chunk of marketing will benefit from automation right now, despite the real danger of getting sidetracked by too many technologies.
10. Create a team
Now that you know how to open your own business, it’s time to dive into building your team.
How much work will you need to do, and what skills will be required to launch your business? These are fundamental questions you’ll need to answer because they’ll guide both your timeline and your level of investment in your launch.
If you plan to do all of the work yourself, you’re limited by the time you have available to invest. If you plan on hiring help, you’ll need to account for those costs—as well as the time involved in finding and onboarding freelancers or employees.
11. Promote your business
Brand your business
Building a brand from scratch is a difficult undertaking, but it’s essential to stand out in a crowded market. A brand is more than simply your name and logo; it’s how customers and clients connect with you and your company.
Common elements of branding include:
- Brand logo.
- Company colors and fonts.
- Voice, tone, and messaging.
- Brand positioning.
Make an online store or website
When done properly, opening an online store or website may be satisfying and successful. In contrast to visiting a physical store, having an online presence will give your business credibility with potential clients and make it simple for them to access it.
The quickest and most reliable approach to creating an online store is with Wise Business Plans. You can launch an eCommerce platform without having to have a lot of money or technical know-how. Select from more than 100 built-in template options.