7 important steps for starting a small business successfully
Starting a business is no small feat. Whether you already have a brilliant idea or just want to explore the possibility of entrepreneurship, figuring out how to start a business requires diligence, strategy, and persistence.
Along with developing a business concept, you also need to determine whether there’s a market for your products or services and, if there is, how you can bring your idea to life. Fortunately, our handy guide can help you navigate the process of starting a small business — from ideation to financing.
Keep reading for seven crucial steps to starting a business.
1. Fine-tune your idea before starting a business
Businesses are built on good ideas. Before you assemble a team or make plans, the first step to start a business is to establish your business concept. That includes figuring out the types of services or products you plan to offer, as well as identifying the niche you hope to fill.
If you don’t already have an idea when starting a small business, try working backwards. Smart ideas lie at the intersection of your talents and resources, so consider how you can pull from your background, skills, and interests to develop something interesting. If you can have a passion for travel and loose-leaf tea, for example, maybe you can use your computer science degree to build an ecommerce store that sells international teas. There are infinite possibilities.
There are infinite possibilities, but it’s not enough just to have a clever concept — you also need to brainstorm concrete ways of how to start a business that differentiates your business from similar operations. Will you offer stellar customer service, create personalized products, or develop an intriguing brand identity? Figuring out your business’ unique angle as you’re starting out now can set you up for success later on.
2. Conduct market research
Market research is the process of gathering information on customers’ needs and preferences. Conducting market research helps you understand how to start a small business in two key ways: 1) whether or not your idea is viable and 2) how to best position your brand or products to win sales.
Start by identifying your target market, taking into account the age, occupation, interests, income, and lifestyle of these potential customers. You can learn more about their buying habits and decision-making processes by doing primary research — in other words, talking directly with potential customers. Sending out online surveys, scheduling phone interviews, or assembling focus groups as you’re starting a business lets you ask potential customers what issues they face when shopping and what they’d like to see in a product or company.
Secondary research, on the other hand, will include any data sources or public records you can analyze. Think: industry trend reports, market statistics, and information on your competitors.
3. Create a business plan
Writing a business plan is essential to learning how to start a small business. Outlining your business concept and strategy doesn’t just provide a game plan for reaching your goals, but it also forces you to think critically about your company’s mission, structure, and growth. Plus, you’ll likely need a business plan if you want to apply for grants or other funding opportunities.
Make sure your business plan includes the following:
- Your mission
- An overview of the business
- Market research and competitor information
- Marketing and sales strategy
- Product pricing and positioning
- Financial information
- Business needs, like equipment or funding
- One-year and five-year goals
Keep in mind that the length of your business plan isn’t as important as the content. Depending on your industry and particular growth goals, your business plan could be anywhere from three to 30 pages long. If you’re not sure where to start, look into Bplans, a site that provides business plan templates and sample business plans, and LivePlan, a software program that helps you write a good business plan.
4. How to start a business by making it official
The next step to starting a small business is registering it. Visit the Small Business Administration (SBA) website for tools and links. Before you register, you need to choose your business structure: sole proprietor, LLC, C corp, S corp, partnership, or something else. Depending on your structure and where you’ll be located, you may need to register your business name with only your state and local governments, or with the federal government as well.
The next step is filing for a federal tax ID (EIN) and looking into whether or not you need any licenses and permits to operate your business. If you’re opening a taco stand, for example, you’ll need a local or state permit to make and serve food. Keep in mind that some state agencies have 60-day follow-ups or require additional paperwork after registering, so be sure your business is complying with regulations.
5. Organize your team
Starting a small business requires the right help. You may not have the budget to hire employees right away, but it’s important to think about who can support you in your endeavors. Maybe you have a business partner, for example, a vendor to buy supplies from, or an accountant you consult on financial decisions.
To figure out where you might need help in the process of starting a business, think about the different steps involved in your production process, as well as the tasks and responsibilities you’ll have on a daily basis. You might need to hire a freelance graphic designer to design your logo or find a virtual assistant to handle contract orders.
Setting yourself up with a strong support system before starting a small business can save you time and stress later on. Take the time now to do your research, schedule consultation calls, and figure out how much you can afford to spend on contractors or vendors.
6. Set up your finances
Good finances are the framework of a successful business. Start by opening a separate bank account for your business funds, so you can organize expenses and purchases more easily. The next steps to starting a business on the right foot financially are to set up a balance sheet, cash flow statement, and income statement.
A balance sheet lists your company’s assets, liabilities, and capital at a given point in time. A cash flow statement shows how much money you have coming in and out of the business, and an income statement lists your company’s expenses and revenue over a specific period of time. These statements may have minimal information when you’re just starting a small business, but they’ll serve as a good jumping off point for your business finances.
It’s also important to figure out what to do for accounting. If you have a good understanding of finance and your business is small, you may feel comfortable handling accounting tasks on your own. However, if you already have a few employees and want to free yourself up to focus on other things, you can outsource your accounting or use payroll software. Systems like Gusto and Wave can automate your business’ payroll and taxes.
7. Get funding to start a business
Unless you have substantial savings or financial help from loved ones, you’ll probably need extra capital when starting a business. There are plenty of financing solutions for new business owners, but here are some of the most common options:
- Equipment financing: If you need expensive equipment for your business, like a truck or wood-fired oven, you can get a loan or lease to help finance the purchase.
- Business credit card: Signing up for a business credit card can give you the freedom to pay for larger purchases or monthly expenses like bills and supplies.
- SBA microloan: If you qualify, you can borrow up to $50,000 to help start your business. You can use the funds for working capital, inventory, supplies, equipment, or furniture.
- Crowdfunding: This option lets you start a campaign to source money from your personal or professional network.
Figuring out how to start a business can be overwhelming, but with careful preparation and a healthy dose of patience, you can get your operation up and running in no time. Keep in mind, though, that it takes a lot of trial and error to build a successful business. Make sure to stay persistent, rely on the support of family and friends, and continually reassess your strategies to find what works.