Are you getting tired of your corporate job and dreaming of running your own business? Perhaps you already have an idea, but you’re not sure where to start. Don’t worry, I’ve got you covered.
I’ve prepared a guide that will lead you through all the steps necessary to start your own business. We’ll go through everything from validating your business idea and choosing a business structure, to obtaining licenses and setting up a business location.
Before we go into more detail, here’s a quick infographic that shows an overview of everything you’ll need to do to start a business.
Doesn’t look that hard, does it? Let’s talk about the first step – the research.
Perform Thorough Research
You probably already have an idea for a business. However, it’s crucial that you perform thorough research to validate your idea before starting a business.
A successful business needs to solve a problem or fulfill a need that’s present in the market. You’ll need to conduct research to explore the market further and find out the answers to the following questions:
- Is there a need for your products or services?
- What kind of people or businesses need your product or service? You can use a combination of online advertising, focus groups, and surveys to find out who your potential customers are and what they really need.
- Are there other companies that currently offer the same or similar products or services? If there are, how can you differentiate yourself?
- How big of an investment will you need to make before getting started? How long will it take you to start selling your products or services? Can you estimate how much time you’ll need before you start turning a profit?
Don’t rush this research phase. You need to make sure that your new business will be profitable and sustainable over the long run.
Choose Your Business Structure
You’ll need to choose a structure for your business entity. The structure of your business will affect your liability, the way you file your taxes, and your record-keeping.
Note that you’ll be able to change the structure of your business later on if necessary.
If you’re starting a business in the US, you’ll most likely be looking at these structures:
A sole proprietorship is a type of business which is owned and run by a single person. With a sole proprietorship, no legal distinction exists between the business and the business owner. This is the easiest and most affordable type of business to create.
However, there are a few disadvantages that come with running a sole proprietorship, the main one being that the owner will personally be liable for any obligations or debts incurred by the business.
Limited Liability Company (LLC)
While an LLC is a bit more complicated than a sole proprietorship, it allows you to protect yourself from liability.
The owner of an LLC cannot be held personally accountable for financial or legal faults of his or her business. This protection is why an LLC is the structure most small business owners opt for when starting their business.
While providing greater legal and financial protection for its owner, starting an LLC usually involves higher costs compared to starting a sole proprietorship.
A corporation is a legal entity that is completely separate from its owner(s) while also having most of the rights that an individual usually has such as entering into contracts, owning assets, and loaning and borrowing money.
If you’re thinking of seeking venture financing, this is the structure you’ll want to use for your business. Corporations are usually best suited for large companies with multiple employees.
This type of business structure involves higher administrative fees and more complicated legal and tax requirements.
Write a Business Plan
The next step in turning your business idea into reality is to write a business plan. Creating a business plan will ensure that you have a roadmap for starting, establishing, and growing your business.
A business plan allows you to prove to yourself (as well as to others) that your idea is feasible and worth pursuing. Creating a business plan will also enable you to seek funding from investors and financial institutions.
At the very least, your business plan should answer the following questions:
- What purpose does your business serve?
- Who are your customers?
- What problems do your products or services solve?
- Who are your competitors?
- How are you going to position, price, and market your products or services?
Apart from answers to the above questions, include any other details you deem relevant.
While starting a small business usually doesn’t require a significant investment, you’ll still need initial funding and enough money to keep your business running until you start turning a profit.
Before seeking funding, figure out how big of an investment you really need. Take into account the one-time costs of starting your business (e.g., licenses, permits, equipment, inventory, etc.) as well as any other expenses that will be necessary to keep your business running for the next twelve months.
Once you’ve calculated how much money you need, it’s time to seek funding. There are a number of ways you can do this, including
- Family and friends – If your family or friends are supportive of your business idea, you can ask them to invest in your business.
- Small business loans – Frequently used by entrepreneurs, small business loans allow you to finance your business by borrowing money from a bank or another, alternative type of lender.
- Angel investors – You can also secure financing for your business by gaining the attention of well-off individuals who are looking to invest in a new business.
- Crowdfunding – If you think your idea has mass appeal, you can try securing funding on platforms such as Kickstarter or IndieGoGo.
Register a Business Name
Seemingly trivial, your business name can affect your business in many ways, so you need to make sure to choose the right one. The name of your business will often be the first thing your prospects and customers will learn about your business, so it’s important that you’re able to leave a good impression straight away.
Brainstorm a list of different names and then single out the best one. Check if the name you want to use is trademarked or used by another business. If it isn’t, go ahead and register it. If you’re a sole proprietor, you’ll need to register your business name with the state or county clerk.
If you’re forming an LLC or corporation, you’ll be registering your business name once you file the formation paperwork.
Are you also planning on doing business under another name? In that case, you’ll need to register a DBA (Doing Business As) name.
Get a Business Location
You’ll need to set up a business location for your newly founded business. Depending on your needs, this location can either be a home office, a private office space, or a retail location. When choosing a location, you should take into consideration factors such as price, visibility, access to parking and public transportation, as well as competitor proximity.
You’ll also need to decide if you’re going to lease or buy a commercial space. While both leasing and buying have their advantages, your final decision will most likely depend on how much funding you’ve secured.
Apart from setting up a physical business location, you should also make sure to create a website and social media pages for your business.
Obtain Permits and Licenses
Depending on what kind of business you’re starting, you’ll most likely need to obtain multiple licenses and permits to run your business legally.
A business license will give you the permission to run your business in a particular area while a business permit is a document that proves that your business complies with various city or state laws regarding safety, appearance, and the selling of products or services.
If you’re not sure what kind of licenses or permits you’re going to need, make sure to consult an attorney.
Start Your Own Business Today
If you’re looking to start a business, you’ll first need to validate your business idea by performing adequate research. Take advantage of online surveys, focus groups, and online advertising to validate your business idea.
Once you’re sure that your idea is profitable, you’ll need to decide on a business structure and write a business plan. Depending on your needs, you’ll most likely be choosing between a sole proprietorship, an LLC, or a corporation.
If you plan on trying to secure funding, you’ll have to make sure that your business plan explains your business’ value proposition, products, services, and potential customers in full detail. You’ll need to explain how you plan on making a profit, and what kind of profit and revenue numbers you expect to achieve.
After preparing your business plan, you’ll be ready to seek funding from family and friends, banks, angel investors or through crowdfunding websites such as Kickstarter. Apart from seeking outside funding, you might also want to consider bootstrapping your business.
You’ll also need to register a business name and set up a physical location as well as establish an online presence. Finally, you’ll have to obtain all the necessary licenses and permits to run your business legally.
Disclaimer: I am not a business or financial advisor, take your time to weigh your options independently. That being said, I hope this information was helpful for your journey to start your business.