10 Steps for Starting a BusinessApr 13, 2021
There’s been an idea bouncing around in your head for a while. You think of it as you commute to a job you hate, during boring meetings, and at night before you go to bed. In time, it becomes more than an idea. It’s a dream. A dream of starting your own business. But how do you turn that dream into a reality? And do you have what it takes to succeed? And what are the steps for starting a business?
Millions of people have asked themselves that question and answered yes. In fact, business creation was booming across the United States in 2020. More than 4.4 million new businesses were created last year. That’s about a 25-percent increase from the number of applications submitted in 2019.
If you’ve been thinking about starting a business but keep finding yourself frozen and unable to move forward with your idea because you don't know what are the steps for starting a business! This is your moment. There will never be a perfect time to launch a business, so it’s up to you to push forward and make it happen when you can.
Before diving into the steps you’ll have to take to get your business up and running, it’s worth exploring exactly why you want to be a business owner. Escaping that job you hate might be part of it. Maybe you’re the daring type who always wants to start new things and take risks. Or maybe those big business-owner paychecks will finally give you the financial freedom and security you’ve always craved.
No matter the reason, you should take a step back and really consider what is motivating you to be your own boss and get ready to hear some hard truths. The first of those truths is about the money you can expect to make—or not make.
The dream of being a business owner often includes visions of being a millionaire. If those are your expectations, you may want to dial them back. That’s because the median income of a self-employed person is $34,751, according to a report published by Gallup and Intuit. Compare that to the $40,800 median income for a person employed by someone else. The national average income for self-employed people is higher at about $80,000—but still not quite millionaire status. And those numbers represent more than a paycheck. They also represent the reward for the risks associated with putting everything on the line to start a business. Are you still OK with being a business owner for potentially that small of a salary?
Another item to consider is that the business you start won't look the same a few years down the road. Do you plan to stay solo or do you envision your business growing with a team? When you’re first starting your venture, it can be overwhelming because you’re doing everything yourself from bookkeeping to marketing to selling. It might feel like you’re buried under a pile of never-ending tasks. It’s OK to experience those feelings. Even the smallest business has some complexity to its nature, but as an owner, you have the power to structure your business in a way that’ll help it thrive—with or without you present. Because if your business relies on you to operate, you don’t have a business to run, you have a job—the very thing you may have been trying to escape.
So how do you keep yourself working on your business and not in it? It’s all about systems. Right from the start, you should build a business that is systems-dependent and not people-dependent. You want to create systems that allow anyone to step into your business and have it still function properly.
Lastly, it’s important to reflect on the type of worker you're. Are you a true entrepreneur looking to build a company around the next big business idea? Are you a manager who excels at developing successful teams and delivering results? Or are you a technician, someone who drills down into the details and sets the standards? No matter which category (or categories) you fall into, you need all three types to have a successful business.
So with all those points in mind, it’s time to move on to the main event: 10 steps to starting your own business.
Step 1: Complete a Self-Assessment
It all starts with you. Your potential business will be shaped by your ideas, skills, and experience. So step number one is doing a self-assessment of all the things that you have, the things you need, and the things you want. Obviously, you want to start a business but are you set on how? Do you want to build an enterprise from the ground up or are you interested in purchasing an existing business?
Right now, experts say the world is going to witness one of the biggest shifts in the business environment as Baby Boomers enter retirement and sell off businesses they own. It’s a great time to look into purchasing a business if that’s the route you want to take.
Rather start a business? Then there are some questions you need to answer as part of your self-assessment.
- Time commitment: Do you want to start a business part-time as a side hustle at first until it brings in enough revenue that you feel comfortable leaving your 9 to 5 job or are you all in right away?
- Let’s talk finances: How much money have you saved? Looking to keep your up-front, out-of-pocket expenses low? If the latter is important, it's really going to impact the type of business model that you're going to choose.
- Service vs. product: One of the best ways to start a business with the least out-of-pocket costs is to found a service-based business. What is something that you're really good at? What is something that you know you can offer?
- Know yourself: What are your strengths and weaknesses? Think beyond the job you have now and really dig deep to evaluate what you would bring to a business as its leader and what are some growth areas you can identify for yourself.
- What matters: Starting a business means freedom for some people, including freedom from a strict work schedule. As an owner, it’s up to you to figure out what you’re willing to compromise on and what is non-negotiable when it comes to your work-life balance.
- Helping hand: Do you have a mentor? Someone you can go to if you have questions? Or can you find that support through some other means, like a Facebook group for small business owners?
- Teamwork: Do you have a system and a process in mind for hiring people? Do you know how to train people? Is it just going to be you and how will you juggle the business and your personal responsibilities?
There are probably a thousand more questions you can ask yourself, but these are a good starting spot for your self-assessment. Asking yourself these questions will help bring your business idea into focus and identify where you know you can make the biggest impact.
Step 2: Do Your Research and Gather Feedback
You’ve had a good, long think about yourself and your business. Now, it’s time to start doing research and reaching out to others for feedback.
You should have an idea of what your business is and what industry it falls into. What does that industry look like? Is it growing? Is it stagnant? Are there trends that you can capitalize on?
One helpful website for this kind of research is ExplodingTopics.com.
So why does all this matter? Because if you’re opening a business then you want to make sure that there are people out there who want what you’re going to be offering. Starting a business centered around a product or service no one wants won’t end well.
You also can conduct this type of research with your social circles. Start asking people questions like “Hey would you use this service?” or “Would you use my company if I offered this service or product?”
Asking people for feedback on ideas and the things that you’re thinking will give you some of the best—and most honest—feedback.
Step 3: Decide if Your Business Will Be Full Time or Part-Time
Your business idea is starting to take shape. Let’s take it a step further by figuring out the amount of time you can commit to your business.
Traditionally, people think of starting a business as a full-time venture. The kind of thing people quit an awful job to dive into. For a growing number of people, though, that is no longer the case.
More people are starting businesses as side gigs. The gig economy itself has exploded, with more and more workers opting to take on part-time opportunities that may provide more scheduling flexibility, a creative outlet, or supplemental income. Maybe you don’t mind your day job but are looking for another opportunity to make money or follow a passion. Start that side hustle!
And just because you start part-time doesn’t mean your business has to stay that way. Side businesses have the potential to grow into your main form of employment. Conversely, just because you’ve started a full-time business doesn’t mean you have to stick with it full time. As mentioned earlier, you can build systems that'll allow your team to run your business and allow you to take a step back. You can enjoy that free time—or even use it to start another business.
Step 4: Create a Business Plan
Everything's coming together. It’s time to put all the work you’ve done so far down on paper.
It’s time to create your business plan.
Yes, the idea of creating a business plan can be overwhelming but DO NOT SKIP THIS STEP.
This plan will serve as the foundation of your venture and will help you define your mission, operations, brand, financial outlook, and more. No two businesses will have the same plan. If you need help getting started, the U.S. Small Business Administration has free resources and templates you can use to shape your plan.
If you're going to need money upfront for your business, think of your business plan as your pitch. It’ll spell out for investors what the purpose of your business is, how you plan to run it, where the money you’re asking for will go, and much more. In this situation, having a plan will help you gain the trust of investors and other potential supporters or partners.
Again, this step is essential. It could be the difference between success and failure for your business.
Step 5: Assemble Your Advisory Team
You might be starting a business alone, but having the right people behind you can prove vital to your success. It’s time to pick your advisory team.
There are three types of advisors that you should have right from the start—it’ll save you some major headaches down the road. Those people are a certified public accountant (CPA), an attorney, and a mentor. Let’s break them down:
CPA: This person is going to be the one who is really going to listen to you and tell you if you can be or should be a sole proprietor. They also can advise you on what type of business you should establish, such as a partnership, corporation, or limited liability corporation. Your CPA will provide much-needed guidance so that you set the business up correctly and will help you avoid common financial mistakes that new businesses often make.
Attorney: Hiring an attorney is vital to protecting you and your business. One of the most important items an attorney can tackle early on in the process of building your new business is drafting or reviewing your operating agreement. That agreement is a document that outlines your company's ownership, management, and each member’s rights and responsibilities. In general, an attorney can offer advice that'll help you ensure you’re starting on the right foot.
Mentor: There is no better way to ensure the success of your business than to have someone on your team who has done what you're trying to do. That’s where mentors come in. Find someone who has started a similar business and can offer advice from their experience. And mentoring doesn’t have to be a one-on-one relationship. For example, you could tap into the collective experience of a Facebook group of people who have started businesses. At its heart, mentorship is about having someone that you feel comfortable asking questions. Someone who can give you useful bits of information that'll help make decisions quickly and keep your business-building process from stalling out.
Step 6: Get Your Business on File
It’s time to make it official. It’s time to get your business on file.
You can do the filing on your own. Depending on what type of business you’re starting and where you live, it’s likely you’ll need to apply for a business operation license with city hall and your state’s Secretary of State office.
The process can be complex, which is why attorneys or CPAs offer filing services. For $1,000-$1,5000, they can pull together all the paperwork you need and get the application properly filed.
To put in an application, you’re going to need the name that you've chosen for your business and your operating agreement, among other forms of documentation. If approved, you’ll be assigned an empower identification number (EIN). You might recognize that phrase from filling out your W-2 information for your tax return. That number is very important because it’s required to open a business bank account, get a business loan, hire employees, and more.
If you’d rather do the filing yourself, you can use websites such as MyCorporation.com to get everything in order and submitted. It’s a step-by-step process, and you can always correct your business information later.
Step 7: Open Your Business Bank Accounts
With your shiny new EIN in hand, you’re ready to open your bank accounts.
First up, you’re going to need money. It could be yours or from an investor. But once you have funds in hand, it’s time to pick a bank. Do you want a local branch or a national chain? Do you anticipate conducting most of your business locally or do you envision yourself traveling across the country for your business? Answers to these questions will help you determine what bank is the best fit for you.
Even if you’re starting your business alone, you’re going to want to open up a business checking account instead of using your personal account. Through your business checking account, you can deposit revenues and payout bills.
There are two more account types you can open that’ll prove helpful to your business. The first is a savings account that you can use to slowly build up a financial cushion for yourself. The other is a tax account, which is where you'll set aside money from your earnings to pay any taxes associated with running your business. You’ll want to figure out your tax rate and then transfer that percentage of your revenues to your tax account. That way, when it’s time to file your business tax return, you already have a pile of money saved up to pay it.
Step 8: Define Your Branding
At this stage in the process of starting your business, you probably feel like you’ve established an identity for your company. This step builds on that identity by asking you to define your branding. Your branding is the look and feels of your business that you’re putting out there to potential customers. So logos, colors, voice, really anything that makes your business unique.
It’s an important aspect of your business, but it can also become expensive if you’re not developing it yourself. If you don’t have a lot in your budget for this, there are web services that can help. One site is 99designs.com. Through this platform, you can work with freelancers directly to craft your branding. Another option this site offers is to create a design contest, which will invite the freelance community to submit their designs to you, giving you dozens of options to choose from.
One thing to keep in mind is that your business’s graphic identity isn’t set in stone. Instead of getting caught up in making everything perfect—and potentially halting progress on the rest of your business—pick a logo to get the ball rolling. You can always change things later.
Step 9: Develop and Implement Systems
Remember those systems that were mentioned in the intro. They’re back! These systems will keep your business running smoothly, so it’s important to pick the right tools and resources to make that happen.
For example, do you know what email client you’d like to use for business emails? Do they have cloud storage if you need it for your files (Be sure to read this blog post for more tips on taking your business digital)? Do you need a task management tool to keep your projects on track? It’s important to keep yourself organized and to remind yourself when things are due. That way, you’re not accidentally blowing off customers and other business partners because you’re forgetting what you need to provide to them.
Step 10: Get Out There and Start Selling
Yes, this is very obvious, but for many people, this is the hardest step to take. It’s scary to put yourself out there and face rejection, but it’s the only way that people are going to find out how amazing you are, what a great service you’ve put together, or the product that you have to go make the world a better place. Business ownership is about taking risks. Once you can put yourself out there, you can turn all those risks into rewards. Good luck!
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