How to start a business in 10 steps: A guide for 2024

Embarking on the journey of starting a business is both thrilling and fulfilling, but it can also be overwhelming with various approaches and crucial factors to consider. To streamline the process and enhance your chances of success, our detailed guide on starting a business provides step-by-step assistance. From conceptualizing your business idea to completing registrations, launching, and fostering growth, we cover every aspect of the journey.

Before you start: Adopting the right mindset

The media often highlights overnight success stories because they grab attention, but the reality is far more complex. What isn't often portrayed are the years of planning, hard work, and preparation that precede a major breakthrough. Therefore, it's crucial to concentrate on your own business journey and avoid comparing your progress to others'.

The importance of being consistent

New entrepreneurs often rely on their initial motivation, but they may become frustrated when that motivation fades. Therefore, it's crucial to establish habits and routines that sustain you even when motivation diminishes.

Take the next step

Some entrepreneurs plunge into endeavors without much forethought, improvising as they proceed, while others become immobilized by overthinking and never take action. Perhaps you find yourself embodying aspects of both approaches—and that's actually the optimal position to be in. To effectively pursue any business or personal objective, it's essential to meticulously outline all the necessary steps to reach the goal and then prioritize them based on sequence. These steps might vary in duration, from quick tasks to more time-consuming ones, but the key is to consistently move forward by tackling the next step in the progression.

1. Explore your competitors and Market

Many entrepreneurs dedicate more time to refining their products than to understanding their competition. However, when seeking external funding or partnerships, it's crucial to highlight what sets your business or idea apart. If market analysis reveals saturation in your niche, consider alternative approaches. For instance, in the realm of housekeeping, specialization in pet-friendly homes or garage cleanups could differentiate your services.

Primary research

The initial step in analyzing competition involves primary research, which involves gathering firsthand data from potential customers through methods like surveys, questionnaires, and interviews. Relying solely on feedback from friends and family is discouraged unless they represent your target market, as intentions may differ from actual purchasing behavior.

Secondary research

Secondary research involves leveraging existing data sources, such as census data, to supplement your analysis. While this data can offer insights, it may lack the depth of primary research.

Conducting a SWOT analysis:

Performing a SWOT analysis—assessing strengths, weaknesses, opportunities, and threats—provides a structured approach to evaluating your product or idea's viability in the market. This analysis not only sheds light on potential weaknesses but also identifies opportunities for improvement and areas where you can outperform competitors.

Much of the business advice out there emphasizes monetizing your passion, but it overlooks two crucial factors: profitability and expertise. Simply loving something isn't enough if it doesn't translate into a viable and profitable venture, especially if it's not something you excel at. For instance, while you may adore music, the feasibility of a business centered around it diminishes if you lack skill as a singer or songwriter. Similarly, opening a soap shop in a small town already saturated with similar establishments poses challenges in carving out a unique market niche.

2. Define your Business concept

Conventional business advice often emphasizes monetizing one's passions, yet it overlooks two critical factors: profitability and proficiency. For instance, while you may adore music, the viability of a business centered on it diminishes if you lack prowess as a singer or songwriter. Similarly, envisioning a soap shop in a locale already saturated with similar establishments presents challenges in market differentiation.

In the absence of a concrete business concept, consider the following inquiries:

• What activities do you genuinely enjoy?
• What tasks do you find burdensome?
• Can you conceive of solutions to streamline these tasks?
• What are your areas of expertise?
• What subjects do others seek your advice on?
• If given a brief opportunity to speak on any topic, what would you choose?
• What aspirations have you harbored but lacked resources to pursue?

These questions can guide you toward a business idea or broaden an existing one. Once you have an idea, assess its alignment with your skills and its potential for profitability.

Moreover, remember that your business idea need not emulate the success of renowned products like Scrub Daddy or Squatty Potty. Enhancing an existing product or offering a digital product with minimal overhead are also viable options.

Determining the type of Business to start

Prior to selecting the type of business to embark on, consider several key factors:

• What level of funding is available?
• How much time can be dedicated to the business?
• Are you inclined towards a home-based or office/workshop setup?
• What are your interests and passions?
• Is there potential to monetize information, such as through a course?
• What skills or expertise do you possess?
• What speed of business expansion is desired?
• What support resources are accessible for launching the business?
• Is there potential for collaboration with others?
• Does the franchise model align with your preferences and circumstances?

3. Craft your Business blueprint

A business plan serves as a dynamic roadmap for launching a new venture. This comprehensive document simplifies comprehension for potential investors, financial institutions, and internal company stakeholders. Even if self-financing is the plan, a well-structured business plan aids in fleshing out ideas and identifying potential challenges. When composing a comprehensive business plan, ensure to incorporate the following sections:

• Executive Summary: Positioned as the foremost component, the executive summary encapsulates the proposed venture, highlighting its objectives and the strategies to attain them. Despite its placement, it is typically written last.
• Company Description: This segment outlines the issues addressed by your product or service and articulates why your business or idea holds a competitive edge. For instance, leveraging a background in molecular engineering to innovate athletic wear demonstrates relevant expertise.
• Market Analysis: Evaluate the company's competitive positioning, encompassing target market, segmentation analysis, market size, growth trends, and an assessment of the competitive landscape.
• Organization and Structure: Discuss the anticipated business structure, proposed risk management strategies, and the qualifications of the management team. Specify whether the business will adopt a single-member limited liability company (LLC) or a corporate structure.
• Mission and Goals: Present a concise mission statement and delineate the business's objectives and the actionable steps to accomplish them. Ensure goals adhere to the SMART criteria (specific, measurable, action-oriented, realistic, and time-bound).
• Products or Services: Detail the operational aspects of your business, including initial product offerings, competitive comparisons, pricing strategies, production responsibilities, material sourcing, and production costs.
• Background Summary: Compile and summarize relevant data, articles, and research studies concerning industry trends that could positively or negatively impact your business.
• Marketing Plan: Identify product/service characteristics, summarize the SWOT analysis, and analyze competitors. Discuss marketing strategies, allocated marketing budgets, and the expected duration of marketing campaigns.
• Financial Plan: This section forms the core of the business plan, detailing proposed budgets and projecting financial statements such as income statements, balance sheets, and cash flow statements. Typically, five years of projected financial statements are included, along with any funding requests if seeking external financing.

Formulate an exit strategy

Crafting an exit strategy is imperative for any business, particularly those seeking funding, as it delineates the process for selling the company or transferring ownership in the event of retirement or pursuing other endeavors. Additionally, an exit strategy enables you to maximize the value of your business when the time comes to divest. Several exit options exist, and the most suitable one depends on your specific goals and circumstances.

Common exit strategies include:

• Selling the business to a third party
• Transferring ownership to family members
• Liquidating business assets
• Ceasing operations and discontinuing the business

Develop a scalable business model

As your small business expands, adopting a scalable business model becomes essential to accommodate increased customer demand without incurring additional costs. A scalable business model is one that can be easily replicated to serve more customers without a significant increase in expenses.

Common scalable business models include:

• Subscription-based services
• Businesses that sell digital products
• Franchise operations
• Network marketing enterprises

Initiate tax planning

Initiating tax planning is a critical step when starting a small business. Taxes can be intricate, and understanding the various types of taxes for which you may be liable is essential. These may include income tax, self-employment tax, sales tax, and property tax, among others. Depending on the nature of your business, additional taxes such as payroll tax or unemployment tax may also apply.

4. Select your Business structure

When establishing your business, it's crucial to weigh the impact of each structure on tax obligations, daily operations, and the protection of personal assets.

Limited Liability Company (LLC)

An LLC shields your personal assets from business debts, allowing for ownership by individuals or entities, referred to as members. A registered agent is required for an LLC.

Pros:

• Provides liability protection for owners
• Relatively simple to establish
• Option for single-member LLCs

Cons:

• Potential requirement for regular state filings
• Inability to issue stock
• Annual state filing fees are necessary

Limited Liability Partnership (LLP)

Similar to an LLC, an LLP is often preferred by licensed professionals such as lawyers or accountants, requiring a partnership agreement.

Pros:

• Partners enjoy limited liability
• Formation involves minimal paperwork
• No limit on the number of partners

Cons:

• Active participation of partners is obligatory
• Inability to issue stock
• All partners bear personal liability for malpractice claims

Sole Proprietorship

For solo ventures, a sole proprietorship may be considered, where the business and owner are legally and fiscally indistinguishable, thus exposing the owner to full liability for business debts.

Pros:

• Simple formation process
• No additional state paperwork required
• Full control over business operations

Cons:

• Personal liability for all business debts
• Difficulty in raising capital
• Limited longevity potential for the business

Corporate Entity

A corporation, akin to an LLC, safeguards your personal assets from business debts. It can be classified for taxation purposes as either a C corporation (C-corp) or an S corporation (S-corp), with the latter offering pass-through taxation for qualifying small corporations per IRS regulations. Typically, larger enterprises and startups aiming for venture capital opt for C-corp status.

Pros:

• Provides owners with liability protection
• The longevity of a corporation is not restricted
• Corporations can accommodate an unlimited number of shareholders

Cons:

• Subject to potential double taxation
• Establishment entails higher costs and complexity compared to other business structures
• Shareholders may face limited liability

Before finalizing your business structure, it's prudent to consult a small business accountant and potentially a legal advisor. Each business type entails distinct tax treatments that could impact your financial outcomes.

5. Establish your Business and acquire permits

When embarking on the establishment of your business, addressing various legal matters becomes essential, particularly after determining the business structure. Below is a comprehensive checklist to consider when laying the groundwork for your business:

Select your Business name

Opt for a memorable yet easily recognizable business name. If feasible, secure the corresponding domain name to solidify your online presence. Ensure that your chosen name does not duplicate that of another registered company in your state, nor does it infringe upon any existing trademarks or service marks registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

Distinguish between your business's legal name and any fictitious business names, commonly referred to as "Doing Business As" or DBA. You may need to file for a DBA if you operate under a name differing from your business's legal name. For instance, if your business is legally registered as "Mike's Bike Shop," but you operate under the name "Mike's Bikes," you'll need to register "Mike's Bikes" as a DBA.

Register your Business and Obtain an EIN

Formally establish your corporation, LLC, or other business entity by completing the requisite forms with your state's business agency, typically the Secretary of State. During this process, designate a registered agent to accept legal documents on behalf of your business and remit the necessary filing fee. Upon completion, the state will issue a certificate enabling you to apply for licenses, a tax identification number (TIN), and business bank accounts.

Subsequently, apply for an employer identification number (EIN), mandatory for all businesses except sole proprietorships without employees. Submit your application to the IRS, and your EIN is typically issued within minutes.

Secure appropriate licenses and permits

Licensing prerequisites vary based on your industry and jurisdiction. Most businesses necessitate a combination of local, state, and federal licenses to operate lawfully. Consult your local government office, and consider seeking legal counsel for tailored licensing information pertinent to your area.

Organize your financial affairs

6. Establish a Business bank account

Maintain a clear demarcation between your personal and business finances by opening a dedicated business bank account. Selecting an appropriate business checking account is crucial, as separate business accounts are indispensable. During the account setup process, furnish your business name and tax identification number (EIN). This dedicated business bank account facilitates seamless business transactions, including supplier payments and customer invoicing. Moreover, many banks mandate a separate business account for extending business loans or lines of credit.

Engage a Bookkeeper or utilize accounting software

For businesses dealing with products, integrating inventory management functionality into accounting software becomes imperative to effectively oversee and monitor inventory. Essential features of accounting software include ledger and journal entries, as well as the capability to generate comprehensive financial statements. Some software packages also encompass bookkeeping functionalities, incorporating tasks such as check issuance and receivables/payables management. Additionally, they enable income and expense tracking, invoice generation, report generation, and tax computation. Alternatively, numerous online bookkeeping services offer comprehensive solutions, including bank reconciliation and invoicing. Assess your preferences to decide whether to opt for accounting software tailored to small businesses or manage bookkeeping independently.

Calculate your break-even point

Before injecting funds into your business, ascertain your startup expenses by compiling a comprehensive list of required physical supplies, estimating professional service costs, evaluating licensing or permit fees, and computing real estate expenses, including office space. Factor in payroll and benefits costs if applicable. Given that profitability may take several years to materialize, it's prudent to overestimate startup expenses to ensure adequate funding. Financial experts often advocate maintaining reserves equivalent to six months' worth of operating expenses. Additionally, determine your break-even point, which denotes the threshold at which your business begins to generate profits, providing essential insights into your business's financial viability.

7. Secure financing for your Business

Various avenues exist for financing your business, ranging from options that necessitate substantial effort to those that are comparatively more accessible. Fund acquisition falls into two broad categories: internal and external.

Internal funding encompasses:

• Personal savings
• Utilization of credit cards
• Capital contributions from friends and family

Should you opt to finance the business through personal funds or credit cards, you assume the responsibility of repaying the debt on the cards, potentially depleting a significant portion of your wealth in the event of business failure. Similarly, involving family members or friends in your business carries the risk of straining relationships and creating interpersonal conflicts if the venture encounters setbacks. Business owners aiming to mitigate these risks often explore external funding avenues.

External funding options include:

• Securing small business loans
• Exploring small business grants
• Attracting angel investors
• Venture capital investments
• Utilizing crowdfunding platforms

Small businesses may need to combine multiple sources of capital to meet their financial requirements. Assess the amount of funding needed, the anticipated repayment period, and your risk tolerance. Regardless of the funding source, prioritize profitability. It's preferable to generate a substantial income rather than achieving high revenue figures but retaining only a fraction of it.

Potential funding mechanisms encompass:

• Invoice factoring: This involves selling unpaid invoices to a third party at a discounted rate.
• Business lines of credit: Similar to personal lines of credit, business lines of credit are contingent upon factors such as revenue, credit score, and financial history.
• Equipment financing: Loans or leases can facilitate the acquisition of costly equipment essential for business operations.
• Small Business Administration (SBA) microloans: These loans, up to $50,000, can be utilized for various purposes, including working capital and equipment procurement.
• Grants: Governments and regional organizations provide grants to businesses fostering innovation, promoting export growth, or operating in historically disadvantaged areas.
• Crowdfunding: Solicit donations or offer equity in your company to a large pool of individuals via crowdfunding platforms.

Select the most suitable funding source for your business by evaluating the funding requirements, repayment timeline, and risk tolerance.

8. Apply for Business insurance

Securing insurance for your business is imperative, regardless of whether it operates from home or employs staff. The requisite insurance coverage hinges on your business model and the associated risks. As your business expands, you may require multiple policies and additional coverage. Notably, in most states, workers' compensation insurance is mandated by law for businesses with employees.

Engage an agent for insurance procurement

An insurance agent plays a pivotal role in assessing your business needs and sourcing policies from insurers offering competitive rates. Independent insurance agents represent various insurers, enabling them to explore diverse coverage options and secure favorable rates.

Primary types of business insurance coverage

• Liability Insurance: Safeguards your business against third-party claims of bodily injury, property damage, and personal injury such as defamation or false advertising.
• Property Insurance: Covers the physical assets of your business, encompassing office space, equipment, and inventory.
• Business Interruption Insurance: Provides compensation for income loss incurred if your business temporarily ceases operations due to a covered event, such as a natural disaster.
• Product Liability Insurance: Shields against claims alleging bodily injury or property damage caused by your products.
• Employee Practices Liability Insurance: Offers coverage against claims from employees alleging discrimination, sexual harassment, or wrongful termination.
• Workers' Compensation Insurance: Covers medical expenses and provides income replacement for employees injured while on the job.

9. Acquire essential Business tools

Employing suitable business tools can streamline operations and enhance efficiency, ultimately facilitating better decision-making and saving time. The following tools are invaluable assets for your business:

• Accounting Software: Manage business finances, track income and expenses, and facilitate tax preparation. Examples include QuickBooks and FreshBooks.
• Customer Relationship Management (CRM) Software: Effectively manage customer relationships, track sales and marketing data, and automate tasks such as customer service and follow-ups. Examples include Zoho CRM and monday.com.
• Project Management Software: Plan, execute, and monitor projects, as well as assign tasks and allocate resources. Examples include Airtable and ClickUp.
• Credit Card Processor: Enable seamless acceptance of credit card payments from customers. Examples include Stripe and PayPal.
• Point of Sale (POS) System: Facilitate customer payment processing; some accounting and CRM software incorporate POS features. Examples include Clover and Lightspeed.
• Virtual Private Network (VPN): Establish a secure, private connection between your computer and the internet, crucial for safeguarding sensitive data. Examples include NordVPN and ExpressVPN.
• Merchant Services: Manage customer payments, set up recurring billing, and handle subscription payments. Examples include Square and Stripe.
• Email Hosting: Establish professional email addresses using your own domain name. Examples include G Suite and Microsoft Office 365.

10. Promote your Business

Often, entrepreneurs allocate all their resources to product development, leaving little to no budget for marketing upon launch. Conversely, some focus extensively on product development, relegating marketing to an afterthought.

Establish an online presence

Even for brick-and-mortar businesses, having a website is indispensable. Crafting a website is swift—accomplishable in a weekend. Whether it's a standard informational site or an e-commerce platform, ensure customers can easily locate your physical stores and operating hours. Essential pages include "About Us," product/service pages, FAQs, a blog, and contact details.

Enhance SEO for your website

Optimize your site for search engines (SEO) to increase visibility when potential customers search for related keywords. Bear in mind, SEO is a gradual process; substantial traffic may not materialize immediately, even with appropriate keyword usage.

Produce relevant content

Supply valuable digital content on your website, aiding customers in finding answers to their inquiries effortlessly. Content options span videos, customer testimonials, blog entries, and demonstrations—consider content marketing a paramount daily task, coupled with social media posts.

List your Business in online directories

Customers rely on online directories such as Yelp, Google My Business, and Facebook for local business discovery. Some municipal authorities and chambers of commerce maintain business directories too. Ensure your business is listed across relevant directories, including industry-specific ones.

Craft a Social Media strategy

Given the ubiquity of social media usage among potential customers, maintaining a presence is imperative. Share engaging, pertinent content to captivate your audience and drive traffic to your website for further information and purchases.

While you need not be present on every social media platform, maintaining profiles on Facebook and Instagram is advisable, given their integrated e-commerce features. Both platforms offer free ad training to assist in business promotion.

In essence, launching a small business demands dedication, determination, and persistence. However, with diligence, it can serve as a pathway to realizing your aspirations and ambitions. Ensure thorough research, develop a robust business plan, and remain flexible as circumstances evolve. Once operational, maintain focus and organization to sustain and expand your business endeavors.