Learn how to start a small business with this guide’s ideas, advice, and lists of resources.
You must navigate uncharted waters when you learn how to start a small business. It’s easy to feel intimidated. But remember: Every big business once started small. We’ve compiled some tried-and-true ways to turn your entrepreneurial dream into a profitable, successful business.
First on your “to-do” list is taking a self-inventory of your interests and ideas. What do you love to do? What skills do you have? Your dream may be selling a product or service, but it could also involve starting a nonprofit. It’s all about finding a way to build an organization and career that brings meaning to your life. A wise friend once told me, “If you can’t find your seat at the table, it’s time to start building your own table and invite people who share your vision to sit with you.”
But there’s a crucial question to ask before you grab your hammer, nails, and lumber for your “table”: What kind of gaps exist in the market that your small business could fill? In other words, what problems could be uniquely solved by your company? This is the make-it-or-break-it point for every small business idea because no matter how big you dream, the market has to need you (and your table). You also must be passionate enough to commit most of your time, money, and energy to making it a reality.
If you’re already set on your idea for a small business, it’s time to buckle down and do some market research. This helps you determine whether enough people will benefit from your idea to make it successful. It also helps you evaluate whether the current economic conditions are ripe for a small business like yours. Your best tool will be a search engine. But social media also offers valuable tools like polls to get free feedback from consumers. Keep these questions in mind as you search:
The next step is to perform a competitive analysis. In other words, you need to know precisely what kind of competition your business will be up against. This will also help determine potential unique selling points that can set your product or service apart.
You’ll want to get extensive details regarding your competitors’ market share, strengths, weaknesses, and customer base in your research. Look for windows of opportunity or barriers to entry into your preferred market.
Now that you’ve determined that your business idea is well-worth pursuing, it’s time to build a blueprint.
Every business needs a business plan. Business plans can help you determine if your vision is viable or if you need to go back to the drawing board. It also will keep you on track after you start your business. These are some key elements your plan should include:
Appendix. Provide supporting documents and other material, such as credit histories, resumes, product pictures, letters of reference, licenses, permits, patents, legal documents, and other contracts.
As you develop your business plan, you will have to develop a list of the startup costs you will face. According to the Minority Business Development Agency (MBDA), the average business will need $30,000 in startup funds. That’s no small number. However, it all depends on the nature of the industry and business.
The costs to start a business typically fall into 2 categories: ongoing expenses and assets that are one-time purchases. To determine the total financing needed, you must compare the startup costs against your current capital. Most experts recommend having at least 6 months of expenses on hand, plus initial start-up expenses. It’s also important to keep in mind that most businesses aren’t profitable for 4 years.
Potential expenses may include:
Overhead. A brick-and-mortar business will require renting a space to sell goods or conduct your business and services. The following items apply to almost any business, whether or not it also requires commercial space.
Before you can start your own company, you’ll probably need financing. The reason that many businesses fail in their first few years is that they develop cash flow problems. The good news is that small business have many options, including:
All small businesses and their owners should have an exit strategy. While this isn’t necessarily included in your business plan, it’s a good idea to keep it in mind. It will help you make decisions about structure, taxes, estate planning, and other important matters as the business grows. Some questions to ask yourself include:
While this may seem like the “fun” part of starting a business, you shouldn’t take it lightly. The name will represent your small business and your future business growth. You’ll be known for it and have to stand behind it, so choose wisely.
Understanding organizational structure from the beginning sets a startup up for success. If you haven’t determined your official structure yet, here’s what to consider.
There are several choices, and each offers unique benefits. Not all states require filing official business structure documentation. Some documents are recommended for protection, whether required or not. Check your state’s commerce website for more information about registration requirements. Meanwhile, here’s a brief overview of your options:
Corporation. There’s more than 1 way to structure a corporation, which includes C- and S-corps. They typically have a board of directors, officers, and shareholders. A corporation structure offers advantages to the owner. These include limited liability, flexibility in transferring ownership, and potential tax benefits. The 2 documents required to file as any corporation are the articles of incorporation (required) and the bylaws — or resolutions for nonprofits — (recommended).
The necessary business licenses and permits will allow you to operate at the city, county, state, and federal government levels. But they also add to your credibility and legitimacy as a professional entity performing business activities. Licenses and permits also help protect the company and personal assets.
The process to get a business license or permit varies by the type and the agency involved. Your city, county, or state website is the best place to start the search for information. You should find the requirements, where to apply, and what information you’ll need to provide. A business attorney can also guide you through the process.
EIN. The United States government requires anyone opening a U.S. business to acquire an employer identification number (EIN). You can apply for an employer identification number through the official Internal Revenue Service (IRS) website.
Register with state and local agencies. Corporate, LLC, partnership, and nonprofit structures require you to file documents and register your business with your city and state. You can search by state at the Small Business Administration (SBA)’s website for the appropriate state office with which to register. Visit your city or county website for local registration, licensing, and permitting requirements.
Register your business name. Choose a name that is not already in use, and follow the business registration requirements for your city and state. If you plan to conduct business under a name other than the business’s legal name, register your trade name, also called your DBA, with your state.
Some states may require a specific license or permit, while others don’t. The type of business license required will depend on the business’s operation and location. Here are some of the most common necessary licenses companies may need.
First, we would recommend keeping your business and personal finances separate. When you’re ready to file taxes, it can help you maximize your business tax return and avoid costly fees from the IRS. A separate bank account can also help you maintain your company’s cash flow without dipping into your personal assets.
Here are the steps you need to take when establishing separate business finances:
Setting up a business account can seem like a whole beast of its own, so we’ll break it down:
First, you’ll have to choose a bank. Establishing a good relationship with a bank could make securing that all-important small business loan easier. And a good bank, with the right services, can be a natural ally to a business owner.
While you may be focusing on what you want from a basic business checking account, banks offer other products and services you might also need. Here are some business banking products to consider when you’re trying to choose a lender:
Other important attributes to look for in a bank may be unique to your business’s needs. These include accessibility, reputation, customer service, and the institution’s ability to scale with you as you grow. Choose a bank that meets your standards and will make managing your business finances a smooth, cost-effective process.
So, you’ve chosen a bank for your business. Now it is time to gather the documentation you’ll need to open an account. This will depend on the structure of your business. At a minimum, you’ll need:
Once you have opened the account, check to make sure everything is correct. If you’ve opened a checking account for your business, make sure that the name on your checks is the company’s name. You want to avoid having it read as “your name DBA (doing business as) the company name.” Also, verify that deposits and withdrawals are working correctly. You can often check this using your bank’s online banking feature.
Business insurance protects businesses by mitigating the risks of adverse events. Small business owners need to invest in insurance coverage to insulate them from the effects of unfortunate situations. Here’s a look at some common types of business insurance.
Workers compensation insurance. Companies pay for this policy to protect themselves when employees file a workers comp claim against them.
Marketing has seen incredible growth with the proliferation of the internet. There are seemingly endless opportunities to get your brand and messaging to the eyes, ears, and hands of consumers. But as a small business, you’re likely looking for the most effective marketing strategy at the lowest possible price point. Here are some potential low-cost ideas to keep in mind as you develop a marketing strategy:
Once your business grows, you’ll be able to expand your marketing efforts and potentially even hire 1 or more people to form a marketing team.
Websites are a great way to brand your business, reach your target audience, and get qualified leads to turn into customers. While it may cost you some extra time and expense, the return on your investment could be well worth it. A good website demonstrates professionalism, credibility, and legitimacy in the digital age. Not only that, it immediately expands your business’s footprint on a national and global level.
Customer testimonials featured on your website can be a great way to involve your best salespeople: satisfied customers. Satisfied customers and their subsequent word-of-mouth advertising can be more effective than many paid marketing options. Let customers engage with your website with reviews, comments, feedback, or an effective “contact us” feature.
While having a website is essential, what’s more important is that your website is well-designed, intuitive to use, and running smoothly. Making a website from companies that provide generic templates may seem convenient. But this can monopolize your time and energy and ultimately prove ineffective if you ever plan on scaling your business.
To create and manage your website, you can outsource website development and management services or hire an employee who wears multiple hats. The right person will consider your unique business needs and be able to build and manage a multi-faceted marketing machine. This would include site-related tools and integrations that help generate traffic and streamline customer relationship management (CRM).
To get enough financial support to start a business, you may need to go beyond your initial investment, bank loans, and small business grants and consider attracting investors. These individuals or groups supply money to small businesses and startups seeking funding:
Investors will want to see your current profits (if you have any), anticipated future revenue and growth strategies, your market report, and your funding request. In other words, you must show that they will receive a return on their investment. Keep them informed and involved in how you’re using their funds wisely; they’ll have higher stakes in seeing you succeed.
Choosing the right employees is critical when you’re just starting. These people will not only be the backbone of your company but will also help you forge ahead as you plan to expand. They should share your company’s values and vision and be prepared to wear different hats until the company can grow.
It may be time to hire if you’re turning down work, missing deadlines, tanking customer service, or can’t act on expansion opportunities. But hiring comes with plenty of challenges. You’re competing for talent with larger, more established companies who may be able to offer better employee pay or benefits. In your job postings, highlight the benefits of working with your small business, whether offering employees stronger levels of autonomy, better creative freedom, or a more personable work environment.
Now that you know what you need and can offer an employee, you’re ready to write an excellent job description and post it in the right places. Yes, a listing on your website is a place to start. But using only this tactic will leave you with a minimal pool of applicants.
To combat this challenge, small business owners can look to online recruiting platforms that provide them with an ability to easily manage hiring processes. These include posting job listings, accessing resumes, tracking applications, and scheduling interviews. Some platforms even provide employers with the tools to syndicate their job listings to cast a wider net for finding great candidates.
Now that you’ve hired employees, you want to establish a precedent for how they engage with your company. Employee handbooks aren’t legally required, but they help outline your business policies and procedures. For employers, employee handbooks can help you avoid legal trouble by explaining compliance procedures and outlining all policies uniformly for all employees. They can also reduce compliance risk with federal, state, and local employment laws, including wages and the Fair Labor Standards Act (FLSA).
For employees, a handbook can help:
If you’re a small business owner ready to write a company handbook, you’re in luck. Zenefits’ How to Create an Effective Employee Handbook guides small businesses through the process and includes an employee handbook template.
Once your employee handbook is complete, distribute it to established and new employees. Update it as your company grows and policies change, and notify employees to review the changes. Finally, have your employees sign a page that states they’ve read the employee handbook and understand workplace and HR policies.
A common question for both employers and employees is, “Do small businesses have to provide health insurance?” The short answer to this question is no. Under the Affordable Care Act (ACA), small businesses don’t have to offer group health insurance unless they meet specific criteria — employing 50 or more full-time equivalent employees for 6 months or longer.
That being said, small business owners who are also full-time employers might benefit greatly from offering health insurance benefits. First, it’ll give you a competitive hiring advantage over other small businesses that don’t provide benefits. But more importantly, it may increase employee productivity and retention and create a healthier corporate culture.
Establishing a system for payroll is crucial, especially if you plan on expanding your business. As the CEO, you’ll be wearing many other hats. Payroll and finances are areas where you don’t want to make critical errors, as they can land you in hot water with the IRS. It’s a hat you can easily pass on to some other person or program.
Bookkeeping software can save you time, sync all your financial data, and simplify payroll and tax filing. You’ll also reduce the risk of making costly financial mistakes, avoid compliance mistakes, and be able to see the financial metrics of your business with a few simple clicks. Fortunately, Zenefits has payroll outsourcing services that can get all those vital functions done correctly while letting your company focus on people and business, not paperwork.
As a small business, one of your primary concerns is keeping costs low. This is where free resources are going to be your secret weapon. Tools like trade publications, training, apps, and software can provide low-cost or even free ways to establish and manage certain aspects of your small business.
Today’s business apps and software packages can help boost productivity organization-wide. Many include mobile apps for on-the-go access. Those explicitly designed as small business apps often scale with you, leaving room for growth and eliminating wasted time and money. Consider apps for help managing the following:
Project management. Google, Trello.
The following resources can be beneficial for getting clear, quality business advice:
Good legal advice, even when it’s costly, can protect you from expensive issues later on. Fortunately, there are affordable places to go for general legal advice and even specific guidance for your own business.
Nobody will quite understand your business needs as well as people with experience in your industry. This is why you need to reach out for networking opportunities, online forums, and other resources related to your industry.
Marketing is an essential part of growing your small business. Understanding how to manage traditional marketing with social media marketing, content marketing, and other channels takes time.
Many previously listed organizations and forums (like SCORE and the SBA) will provide advice on all facets of marketing. But YouTube can also be a valuable resource where successful entrepreneurs share valuable insights for free. Here are some channels to check out:
Once you start hiring employees, you’ll have all kinds of documents, legal issues, and payroll issues to address to keep employees happy and engaged and keep you legally compliant. The following forums’ HR-specific advice resources are worth checking out as well:
Are you ready to start a small business? With the right mindset, planning, strategy, and follow-through, you have the potential to not only create a small business but also see it succeed beyond your wildest dreams. For more resources and advice, check out the full-length articles at Workest by Zenefits. In these pieces, you’ll find extensive tips, further resources, and highly detailed guides on how to approach all aspects of starting and running a small business. Even better, Workest will be there for the long term with advice and resources as you continue to develop and prosper. Stay the course, stay focused, and use every available resource. You’ve got this!
