How to Start a Small Business in 10 Steps
If you're seriously thinking about starting your own business, here is a step-by-step guide for doing it the right way. No matter what type of business you have in mind, you have to balance ambition with prudence, scale up methodically, and always be thinking about what comes next.
- Determine your reason for being. You don’t necessarily need the slickest marketing plan or the greatest access to venture capital to create a successful company. The best entrepreneurs have a vision and know their purpose. Strive to create the kind of business you believe is constructive. If you do it right, then yes, you stand to make money. But more importantly, you'll be offering something valuable to society.
- Draft a business plan. Behind every successful business is a solid business plan. Start small and employ a business model that lets you gradually build from a small business entity to a larger one. In particular, plan for your startup costs, from labor to office space to state and federal tax. You'll also need to identify your target market. Then think about where you want to be after your first year. What business opportunities do you see yourself pursuing in five years? Strike the balance between ambitious and achievable.
- Incorporate your business. If you want to start your business the right way, you'll want to formally organize it as a limited liability company, an S-Corp, a C-Corp, or a sole proprietorship. You may need to employ a small business lawyer to help you craft a legal structure, particularly if you have co-founders who will own the company equally. You'll also need to pick a name for your corporation, but it doesn't have to be the same as your brand name. Companies can be incorporated under one name while doing business as a different brand name.
- Get your paperwork in order. When you own your own business, you're responsible for a lot of workaday minutia. You'll need to set up a business bank account and get an employer identification number from the federal government. Depending on your business location, states and municipalities may require business licenses, and they typically charge annual business taxes. You'll also have to handle bookkeeping, which may mean purchasing accounting software. If the clerical work involved doesn't fit your skillset (or if you simply don't have time to handle it), you'll want to hire some qualified help—whether full-time, part-time, or temporary.
- Assemble a team. There aren't many types of businesses that can thrive on the work of just one person. Great ideas and sweat equity tend to come from teams of people. If you co-own your company with other business partners, you're already part of a collaborative effort. But if you have a business structure that makes you the only legal owner of the business (such as a sole proprietorship), you'll need to search for exemplary employees to help make your ideas a reality. You may have to offer lucrative compensation to get the best people, but it will be worth it if they can truly help your business reach the next level.
- Seek funding. In order to grow, a new business needs money. Unless you're independently wealthy, you will likely have to take out a small business loan (including a line of credit) or reach out to angel investors (either via crowdfunding or via personal connections). Make sure your risk isn't so great that you risk financial ruin if things don't work out. Play it safe to the point that you have enough cash flow and you’re able to pay your rent and eat, but and have a reliable safety net and a backup plan in place.
- Conduct market research. If you know who your potential customers are, you must be sure you know how to reach them and how to deliver products and services they actually want to buy. If you have enough funding, you can hire a professional market research company to help you with this. Remember that what's more important than how your product makes you feel is how it makes your potential customers feel.
- Stay on brand. If you plan to stock your product in stores, devote some real time to thinking about how your brand appears to consumers. What emotions should it conjure up? How will its packaging and typeface communicate the right message? These questions aren’t limited to physical retail; an online business must also stand out from the crowd. From your domain name to your graphic layout, your online branding requires as much time as you put into the appearance of the product itself. If you're crowdfunding, you'll be communicating with people who are simultaneously your customers and your funding base. Make sure your message to those people is particularly clear and consistent.
- Embrace change in both your company and the market. Go into your venture understanding that many of your initial business ideas may change over the course of your company's existence. Most notably, you may have to readjust and adapt to competition and a changing marketplace. You may have to change your product offerings or even your business name.
- Prepare to improvise. You don’t need to go to business school to start a business. And you don't have to be an expert in any one thing to run a great brand. Remember that successful small business owners don't have a special degree of genius that the rest of us don't. What they do tend to have is an ability to think on their toes and adjust to unforeseen problems as they arise. If you work hard, you too can expand your customer base and bring your small business to the next level.
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