Are you wondering how to start a business? Did you know that according to the Small Business Administration, small business owners make up an incredible 99.7% of all U.S. businesses? If you are thinking, “What kind of business should I start?” you should take into consideration whether there is a demand for certain products and services. Starting a business also requires you to consider your motivates whether it is to gain financial independence, become your own boss, or take part in something that you are passionate about.
Starting a small business that is actually successful is often easier said than done. In fact, one-third of businesses fail within the first two years and a full have are gone within five. So if you want to start a business, you should understand that it requires great sacrifice and the realization that most profitable small businesses succeed due to luck. But if you carefully follow the steps to starting a business, nothing is impossible.
Steps to Starting a Business
With that in mind, if you want to know how to start a small business that can succeed, take a look at these 10 steps. Focus each step one at a time and you will be prepared for success.
Step 1: Do Your Research
Thinking about a good business to start requires you to have a proper understanding of the market and what consumers need. Those who know how to start a business will tell you that it requires a lot of planning. Like with any kind of investment, you must be willing to incur financial risk. There are also several questions to ask before starting a business. For instance, why start a business? Are you providing a product or service that does not yet exist in your community? Or perhaps it does exist, but you intend to differentiate yourself in some way. Who are you targeting as potential clients? How have other related businesses faired? Which potential competitors are most successful and what would you attribute this to?
Step 2: Plan Well
If you know how to start a business, then you are keenly aware that proper planning is essential. It serves as a blueprint that guides you from the moment you launch the company all the way through the period of growth and maturation. There is no one-size-fits-all business plan; you must choose the one that is most logical for your particular business. If you are starting a company that produces a good, you will likely need some startup capital, something that can be gained through investors or a bank loan. On the other hand, if your small business is service-oriented and does not require much overhead, you might be able to self-finance. Even if you only have a vague plan at this stage, it is better than nothing. At the very least, it can help you determine how realistic your idea is.
Step 3: Plan Your Finances
As noted, not all small businesses require a significant upfront investment. However, you should be aware that few businesses succeed right away. In fact, you are likely to generate a net loss, perhaps even for a year or two before you finally achieve success. As long as you are able to absorb these costs, your business can remain viable. For starters, you will need money to obtain whatever appropriate licenses and permits are necessary, as well as any equipment, legal fees, market research, trademarking, and other one-time startup costs. Also think about the costs associated with keeping the business going for the year, such as rent, your wages as well as any that you would pay to any employees, supplies, your marketing budget, etc.
Once you have an idea about these total costs, you will need to determine how you will obtain the funds. By applying for small business grants? Obtaining credit from a bank? Through crowd funding websites such as Go Fund Me?
Depending on the business you are planning, you might consider taking a barebones approach in which you spend as little capital as necessary to get the business started. Ultimately, you should choose a strategy that works best for you.
Step 4: Determine How You Will Structure Your Business
When it comes to creating a small business, there are plenty of ways to structure it. For instance, if you are planning the business by yourself, structuring it as a sole proprietorship is a good option. If you are creating it with another individual, a partnership could be the way to go. You can also structure it as a limited liability company or a corporation. Your decision on which route to choose will determine many things such as what you name the business, your legal liability, and of course, how your taxes will be filed. It is perfectly acceptable to begin as a sole proprietorship and then convert it to something else as the business finds success and expands. If you are unsure about which structure to choose, consult with a lawyer or CPA.
Step 5: Choose and Register Your Business Name
It goes without saying that the name you give your business will make a big difference. Therefore, spend some time thinking about a name that is appropriate based on the particular industry you are planning to enter. Once you come up with potential ideas for a name, you will need to check and make sure it is not already trademarked by another business. After picking the right name, you will need to register it. Who you register it with depends on the structure of your business. Finally, make sure to choose an appropriate web domain.
Step 6: Get Licenses and Permits
Unfortunately, filling out paperwork is one of those bureaucratic realities whenever you are starting a business. But they are also intended to safeguard you and your clients. For instance, if you are starting a restaurant you will need to make sure your facility is in compliance with health inspection regulations. It will also be necessary to ensure that the property is handicap-accessible if the business involves clients coming to the office. Do the appropriate research to find out which licenses and permits are required for your business.
Step 7: Select a Proper Accounting System
If you want your small business to operate effectively, it is important that you a proper accounting system in place. This will allow you to keep tabs on your revenues and expenditures, be able to determine what to pay your staff, set your prices, keep track of your inventory, and of course figure out how all of this affects your tax situation. If your small business is fairly basic, you can probably do this on your own or with some accounting software. But if you have an ambitious idea, you might want to hire a CPA to figure the details out for you.
Step 8: Decide Where to Set Up Your Business
This is an important step since it determines how your business will operate. For instance, will you work from home? Will you rent out a shared office space or choose a private office? What equipment and supplies will you need? Taking into consideration your type of business, does it make more sense to buy a building and invest in renovations or should you lease it?
Step 9: Hire Staff
If your small business involves hiring a workforce, get the ball rolling. You should develop a list of positions that will be necessary for your business, as well as well-defined duties for each one. If you were not planning to hire staff, you would still benefit from building a support team. This could include a business consultant or coach for their expertise, or even just family and friends when the stress becomes too much.
Step 10: Market Your Small Business
Now that you have officially launched the company, you will obviously need to find a way to generate business. This involves creating a marketing plan to promote your business. Do some research and determine how to most effectively get your business’s name out there.
Now that you are familiar with all of the important steps, you are ready to get things going. Just remember that starting any business requires some patience and the ability to be flexible. You might not succeed right away, but if you keep trying, you could be one of those small business owners who everybody else wishes they could.