If you’re wondering how to start a business this year, you are not alone. More people than ever are supplementing their 9-to-5 jobs with small businesses.
However, between business plans, structuring, licensing and more, starting a company can be a complex task.
To help simplify the process, we’ve compiled everything you need to know about starting your own business.
Table of Contents
Before You Start Your Business
Any successful business starts with a period of analysis.
Whether you’ve intentionally set aside regular time to design your business or simply entertained random ideas throughout your day, you need to have your company’s purpose well thought out.
Understand Your Purpose
As you begin your planning strategy for your business, it’s important to ask yourself two vital questions.
Why Start A Business?
The first question is, “Why do I want to start a business?”
What is your motivation for starting a company? Do you need extra cash in order to reach your financial goals or improve your finances?
Are you looking to utilize a specific passion in a way that allows you to earn money? Are you hoping to replace your current day job?
Finding your “why” is key to success in any journey. This holds true whether it’s starting a business, making a life change or paying off debt.
For that reason, it’s important to start your new business adventure by discovering the “why” behind your proposed business idea.
What Goals Do You Have For Your Business?
Next, you’ll want to make a list of goals for your business. Be sure to include short, mid and long-term goals.
For instance, a short-term business goal might be to create a mission statement. It could also be to set up your business structure or open a business checking account.
A mid-term business goal can be achieved in one to three years. An idea of a mid-term goal might include adding more employees to your business. It could also include gaining a certain number of clients.
Long-term goals for your business will take over three years to achieve. For example, you might want to achieve a certain income level. Or, you might want to complete a plan to go from a sole proprietorship to a corporation.
As you work on setting and understanding your business goals, be sure to keep your “why” in mind.
Understand the Market
After you’ve defined your “why” and created a list of business goals, you’ll want to understand your market.
Doing this will require two basic actions.
Research
You’ll need to research the field your business will serve and get the data about your company’s field. This information will help you determine your market.
Find the answers to questions such as:
- Who will our business serve?
- Is there a need for the product or service we are marketing?
- What is the best way to reach our main target customer base?
- How will our business implement growth?
- What sales numbers can we expect to see in year one? Year two?
In short, know what you’re getting into as well as how you’ll establish your customer base and your product or service offerings right from the start.
SWOT Analysis
Completing a SWOT analysis is another important step you should complete before you start your business.
SWOT stands for:
- Strengths
- Weaknesses
- Opportunities
- Threats
When completing your company’s SWOT analysis, you’ll want to write down what each of your business’s strengths, weaknesses, opportunities and threats are.
From there, you’ll create a plan for managing each answer.
Starting Your Business
Starting your business works best if you take each step in a specified order. Doing so will help you stay organized and on track.
Have A Business Plan
A business plan is a well-organized document describing a business’s activities, the timeline for starting and running the business, startup and operational costs and more.
If this is your first business, consider having a business mentor review your business plan before you share it with potential investors or partners. This can help ensure your plan includes all the necessary information.
Why You Should Have A Business Plan
Creating a business plan is a vital step in starting your business. Your business plan will show investors, business partners and other connections that you are serious about ensuring your business is successful.
Your business plan proves that you’ve considered every aspect of your business, including potential setbacks. It demonstrates that you are prepared to handle the startup as well as the operation of a business.
What Should a Business Plan Include?
Here is a more detailed list of what you’ll want to consider including as you draft your business plan.
Executive Summary
An executive summary is a starting summary of your business. It is often the last section written when drafting a business plan.
This summary includes items such as your company’s mission statement, company name, startup date and key personnel.
It will also include a description of your company’s products and services, as well as a summary of financial information. Financial data can include how much money is currently available for the business and who the investors are.
Business/Industry Overview
This part of your business plan shares a description of your industry, how your company will find a place within that industry and how your company will stand out from the competition.
Make sure the overview includes the following.
Business Market Analysis
This section will identify your company’s target market, information about competing businesses, barriers to your company’s success and any market research information you’ve completed.
Sales and Marketing Plan
Your sales and marketing plan will share a more in-depth description of the products and/or services your company plans to offer. It will also discuss how you plan to market your company, including advertising plans.
Management/Ownership
It’s important to outline key players in your business within the management/ownership section. This includes owners and upper-level management.
Descriptions will include names, biographies, business experience and leadership experience.
Operating Plan
This section will contain detailed information about your business operations. You’ll include everything from staff positions to expected expenses, cost of equipment, research/development information and more.
Financial Plan
Your financial plan will include expected revenue from your business, projected income and expenses, any debt liabilities, cash flow and balance sheet information and more.
Be sure you include a break-even analysis here as well.
Appendix
The appendix will include all of the supporting documentation for the information you’ve shared in your business plan. Make sure you include any documentation that backs up the numbers, research and information you’ve included in your plan.
Set Up Your Business Structure
Your business structure determines how your business will be organized from a legal standpoint.
You have several business structures you can choose from, including:
- Sole proprietorship
- LLC
- Corporation (or non-profit corporation)
While these are the most common business structures, there are additional structure types and subtypes you can choose from as well. Each option has different parameters for business owners.
Sole Proprietorship
A sole proprietorship is a business that operates under one person and has no employees. It’s the most basic business structure.
In conjunction with being a sole proprietor, you might file a DBA when you want your business to operate under a name different from your own.
For instance, let’s say your name is Mike Smith and you run a heating and air conditioning business. You might file your DBA paperwork so that you can operate as Mike’s Heating and Air.
Corporation
A corporation is a business that operates as a separate entity from its owners and leadership personnel. It can be created by a group or an individual.
Corporations often have the legal right to sell shares of stock in the company. Owners and shareholders are not personally responsible for company debts or mismanagement.
LLC
An LLC designation stands for Limited Liability Company. The LLC designation is, in a way, a hybrid of a sole proprietorship and a corporation.
This designation helps a company operate as a smaller business but with the legal protections of a corporation. In short, an LLC designation helps protect business owners from legal action against the business.
If you’re having trouble deciding on a business structure, go here to learn more about how you should format your small business.
Make Sure Your Business Is Compliant
Making sure your business is compliant is another important aspect of starting a business.
There are compliance items you may need to consider that can help you legally run and protect your business.
Licensing
Depending on the type of business you’re operating, you might need to be licensed in your state.
A business license helps you operate legally and professionally. It shows your clients that you are serious about your business. Plus, in many states, having a business license is the law.
Visit your state’s Secretary of State website to find out more information about the licensing you may need.
Hint: Your company will need to designate a registered agent. Find out more about registered agents here.
Insurance
Your business may also need insurance. There are several types of insurance options you can obtain.
For instance, liability insurance protects your company against false advertising, bodily injury and property damage claims.
Product liability insurance is a specific type of liability insurance. It protects your company against claims that your products caused bodily injury or property damage.
Additionally, property insurance protects your company’s business property. This includes products, equipment and buildings.
Talk to an insurance agent in your area to get more information about business insurance at a company like Next Insurance.
Bonds
Bonds are akin to insurance, with the exception that a bond protects the customer instead of the company.
When a business is bonded, it offers financial protection for customers from a business’s harmful, neglectful or unethical practices.
Bonding is common in businesses such as home construction, remodeling and home repair.
Get A Solid Marketing Plan
Having a solid marketing plan is also important for business success. In today’s online age, there are several marketing tools you can use for very little money.
However, in-person advertising is important as well.
Here are some marketing ideas you may want to consider to get your business started.
Get a Website
Websites are vital to many businesses. The good news is that they are fairly inexpensive and easy to start.
In fact, you can start a website, including a blog, in about 10 minutes.
Having a website for your business will help it appear professional. Plus, it can be a one-stop shop for potential clients to learn about what your company offers.
Open Social Media Accounts
Knowing how to start a business includes knowing a bit about social media.
Having social media accounts for your company is important. You can set up Facebook, Instagram, Twitter and other accounts under your business name.
Use these accounts to share information about what your business does. You can publish examples of your work and advertise sales, discounts and new products or services.
If you don’t want to run your company’s social media accounts on your own, you can hire a Social Media Manager or a virtual assistant.
Market in Your Community
Marketing in your community is important as well. This can be done primarily by networking. A great way to get started is to get involved with your area’s Chamber of Commerce.
You can even take out ads in local newspapers, get to know people in your area and attend charitable or other community events.
When people know who you are and what you do, they can spread the word to people who may need your services or products.
Determine How You Will Finance Your Business
Knowing how you will finance your business is a critical consideration.
Do you have a cash reserve that will cover your expenses until profits start rolling in?
Will you need to take out a business loan at a bank that serves businesses? Will you seek out investors that can invest money in your business?
Determining what you need for startup and operational funds will help you decide how much money you need to finance your business. From there, you can determine where you’ll get that money.
Running Day-to-Day Business Operations
Determining who will run your company’s day-to-day operations is important. Aside from choosing personnel, there are other factors that come into play when operating your business.
Operating Business Tools
Which tools will you need to operate your business? Will you use CRM (Customer Relationship Management) software?
Good customer relationship management tools and processes will help you market your business correctly and stay on top of customer needs.
Also, having the right accounting software for your business is important. Accounting software will help you properly keep track of income, expenses and profits.
Use other operating tools for your business as well. These can include credit card processors, merchant services and the right email provider for your business.
Staying Compliant
Staying compliant with state and local laws is important for business success. Companies like LegalZoom can help you to do that.
Learn more about how to help your business stay compliant to ensure you don’t run into any legal trouble.
Grow Your Business
Last but not least, establish a plan for growing your business. Growing your business involves several steps, including staying compliant, marketing and more.
LegalZoom and LegalZoom partners can help you grow your business properly and ethically.
Check out LegalZoom to get started.
Summary
Knowing how to launch a business is essential to ensure success. There are many steps to properly kick starting and running a business.
Remember to build a team around you that can help ensure your business is everything that you want it to be.
