10 Steps to Start a Small Business
Want to start a small business? You're in good company. There are more than 30 million small businesses in the U.S., which account for 99.9% of the total number of businesses in the nation.1
While becoming your own boss can be a dream come true, starting a business involves a lot more than thinking up a great idea and finding your first customers. Start your business off on the right foot by following these 10 steps:
1. Research your idea
You're probably eager to start a business because you have a great idea. But a great idea alone doesn't guarantee success. Before doing anything else, you should confirm that your great idea is also a viable idea.
The first place to start is by researching your target market. These are the people you think will be the most likely to buy the product or service you're offering. You'll want to answer these questions:
- What problem are you solving?
- Does your potential customer want your solution?
- Are there enough customers who would potentially want to buy this?
- What are they doing now to solve their problem?
To find answers, try using surveys,2 focus groups,3 or interviews of people4 within your target market. Once you do this research, you'll have a better understanding of whether your business idea solves a real problem — and whether enough people are willing to pay for your solution.
2. Write your business plan
A business plan serves as a road map to take your business from idea to fully operational.
Whether it's a one-page plan or a longer, formal document, you should take the time to go over the most important pieces of your plan. Some topics your business plan should cover include:
- Value proposition: Use your target market research to clearly state what problem you are solving, for whom, and how.
- Key partners: Who else do you need to work with to bring your business idea to life?
- Financial plan: How will you fund your business, and what does your budget look like? How much will it cost you to provide the products or services you'll be selling — and how much can you charge your customers?
- Marketing plan: How will you reach your target customers and drive sales?
If you're interested in writing a short, one-page plan, the Strategyzer has a helpful worksheet called the Business Model Canvas that you can download for free.5
Did you know it's possible to write a short, one-page business plan to get you started? A free downloadable template can help.
3. Choose a business structure
There's no one right business structure for every small business. You can choose to operate as a sole-proprietor, a partnership, an LLC, or a corporation. Each comes with benefits and drawbacks, so take the time to research what's best for your business. It may be a good idea to consult with a CPA or an attorney to help you make the best decision.
4. Choose your business name
Take your time coming up with a good name for your business. There's not one formula to create a good name, but there are a few things you want to consider. For example, you may want a name that clearly conveys the benefit your company delivers. In contrast, a name that's too generic or vague won't help customers recognize what you do. You'll also want to find a name that is easy to remember and isn't too difficult to say out loud.
Once you settle on a name, take these steps to register it:
- Register your business name with your state. You can do this when you register your business itself with your state.
- If possible, register your business name with the U.S. Patent and Trademark Office.6 This may prevent other businesses in the same industry from using the name. But note that not every name can be trademarked. You won't be able to trademark names that are too generic or that are too similar to another trademarked name in your industry. For more information and examples, you'll want to read this article.7
- Register a domain name for your business. This will ensure you can create a website with the domain name that is best for your business, making it easier for people to find you online.
5. Get your tax IDs
Once you've registered your business name, you should apply for your tax IDs. You'll likely want to register for a federal and state Employer Identification Number (EIN). Think of the EIN as a Social Security number for your business. You'll use it to do things like open up a business checking account, apply for business licenses and permits, and hire employees.
You can apply for your EIN with the IRS by using this tool.8
6. Register your business
While many small businesses don't need to register anything with the federal government (besides applying for an EIN number), you will likely need to register in the state you do business in. State registration rules can be tricky, so consult with a lawyer or an accountant to see if you need to register in other states in addition to your home state.
As part of the registration process, you'll need to name a registered agent – someone who receives official papers and legal documents for you. You could name yourself as the registered agent, but most business owners choose to hire a registered agent service.9 As an extra service they may also be able to help you file the necessary registration documents with your state.
7. Apply for licenses and permits
There are a number of licenses and permits you may be required to apply for, depending on where your business is located and what type of business it is. If your business is regulated by a federal agency (like agriculture or mining), you'll need to apply for a permit with that federal agency.
You may also be required to apply for state and local permits depending on where you live and what type of business you run. Visit your state, county, and city websites to see what licenses and permits you're required to have.
8. Open a business checking account
It's important to make sure you don't mix your personal and business finances together. One of the best ways to keep things separate is by opening up a business checking account. By opting for a business account, you'll receive limited personal liability protection and you'll look more professional to your customers and your vendors. Explore different options for business checking accounts to find the one that best suits your needs.
9. Set up your accounting system
Finances can be a source of stress for small businesses, especially at the beginning. Ease this stress by getting your accounting system in place early. If you choose to go the do-it-yourself route, research bookkeeping software that's easy to use.
If you know that you won't have time to keep up with the books and the rest of the business, contract with an accountant or bookkeeper to get things set up. Making sure that you have accurate books means you can make better financial decisions, quickly.
10. Get business insurance
Before you open your doors for business, there's one last thing you'll want to get out of the way: insurance. Business insurance can help make sure that your personal and business assets are protected.
Some businesses are required to have insurance and others will want to have it, just in case. There are many different types of insurances businesses should seriously consider getting — even if they are not strictly mandatory. It's a good idea to find a reputable commercial insurance agent and shop around for the best price on a policy.
While it may take a bit of extra legwork, following these 10 steps will help you get your business started on the right foot.
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- Small Business Association, "2018 Small Business Profile," accessed August 12, 2019. Back
- Meghan Lockwood, "How to Design a Marketing Survey That Yields Legitimate Results," Hubspot. Accessed August 11, 2019. Back
- Community Toolbox, "Section 6. Conducting Focus Groups," accessed August 11, 2019. Back
- Nikki Elbaz, "Customer Interviews: Voice of the Customer and Jobs-to-Be-Done," CXL, published April 17, 2019. Accessed August 11, 2019. Back
- Strategyzer, "Business Model Canvas."Accessed August 12, 2019. Back
- United States Patent and Trademark Office, "Apply Online," accessed August 13, 2019. Back
- Leigh Thompson, "What Phrases Can't Be Trademarked?" Chron. Accessed August 11, 2019. Back
- Internal Revenue Service, "Apply for an Employer Identification Number (EIN) Online," accessed August 11, 2019. Back
- Drake Forester, "Should You Hire a Registered Agent or Be Your Own?" Score, published May 17, 2019. Accessed August 11, 2019. Back
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