How To Start a Business in 11 Strategic Steps

To begin your entrepreneurial journey on the right foot, it’s crucial to adopt the proper mindset. While overnight success stories often grab headlines, it’s important to recognize that they are rarely as simple as they seem. Behind every triumphant public launch, there are years of dreaming, building, and positioning. Therefore, instead of comparing your success to someone else’s, it’s essential to focus on your unique business journey.

Consistency is a key factor in the early stages of starting a business. Many new business owners rely on their initial motivation, but they often become frustrated when that motivation fades. To overcome this hurdle, it is essential to establish habits and follow routines that can sustain you even when motivation wanes.

Taking the next step is vital for progress in your business venture. Some entrepreneurs dive headfirst into their endeavors without much planning, while others find themselves stuck in a cycle of overanalyzing and never starting. If you find yourself somewhere in between these two extremes, you’re right where you need to be. The best approach to achieve any business or personal goal is to outline every possible step required to reach that goal. Then, prioritize these steps based on what needs to happen first. Some steps may be quick and easy, while others may take considerable time and effort. The key is to always move forward by taking the next logical step.

1. Determine Your Business Concept

Common business advice often suggests monetizing your passion, but it overlooks two crucial elements: profitability and expertise. For instance, you might have a deep love for music, but if you lack singing or songwriting skills, your business idea may not be viable. Similarly, imagine wanting to open a soap shop in a small town already saturated with three similar establishments. Cornering the market with the same product becomes a challenging task.

To develop a solid business concept, start by asking yourself the following questions:

• What activities do you genuinely enjoy?
• What tasks do you dislike?
• Can you think of any solutions to make those tasks easier?
• What are your areas of expertise?
• What do people often seek your advice about?
• If given ten minutes to deliver a five-minute speech on any topic, what would it be?
• Is there something you’ve always wanted to do but lacked the resources for?

These questions can lead you to an idea for your business or help expand an existing one. Once you have an idea, evaluate it based on your skills and its potential profitability. Remember, your business concept doesn’t necessarily have to be the next groundbreaking invention. You can also improve upon existing products or offer digital products with minimal overhead.

What Kind of Business Should You Start?

Before choosing a specific business type, several factors require careful consideration:

• What funding options are available to you?
• How much time can you invest in your business?
• Do you prefer a home-based, office-based, or workshop-based setup?
• What are your interests and passions?
• Can you offer information-based products like courses rather than physical goods?
• What skills or expertise do you possess?
• How quickly do you need to scale your business?
• What kind of support do you have to launch your business?
• Are you considering a partnership?
• Does the franchise model align with your goals?

Consider Popular Business Ideas

If you’re uncertain about which business to start, here are some popular ideas worth considering:

• Starting a franchise
• Starting a blog
• Starting an online store
• Starting a dropshipping business
• Starting a cleaning business
• Starting a bookkeeping business
• Starting a clothing business
• Starting a landscaping business
• Starting a consulting business
• Starting a photography business
• Starting a vending machine business

2. Research Your Competitors and Market

While many entrepreneurs invest significant time in developing their products, they often overlook the importance of understanding their competition. If you ever seek external funding, potential lenders or partners will want to know what sets your business or idea apart. If market analysis reveals that your product or service is saturated in your area, consider adopting a different approach. For example, in the housekeeping industry, specializing in homes with pets or focusing on garage cleanups can set you apart from general cleaning services.

Primary Research

Primary research involves gathering data directly from potential customers rather than relying solely on historical data. Questionnaires, surveys, and interviews are effective methods for understanding consumer preferences. However, it’s important to avoid surveying friends and family unless they represent your target market. People’s statements of intent and actual purchasing behavior often differ. You don’t want to base your product or service on unreliable feedback that doesn’t align with actual market demand.

Secondary Research

Secondary research involves utilizing existing sources of information, such as census data, to gather relevant insights. While this type of research can provide valuable data, it may not be as detailed as primary research.

Conduct a SWOT Analysis

Performing a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) allows you to objectively evaluate your product or idea’s market potential. By examining the facts, you can make informed decisions about the direction of your business. A SWOT analysis can reveal previously unconsidered weaknesses or identify opportunities for improvement in relation to your competitors’ offerings.

3. Create Your Business Plan

A business plan serves as a dynamic document that acts as a roadmap for establishing a new business. It helps potential investors, financial institutions, and company management understand and absorb crucial information. Even if you plan to self-finance your venture, a business plan can help you refine your idea, identify potential issues, and make informed decisions. When developing a comprehensive business plan, include the following sections:

• Executive summary: Although it should be the first item in the plan, write the executive summary last. It describes your proposed business, highlights the company’s goals, and outlines the methods for achieving them.
• Company description: The company description should convey the problems your product or service solves and explain why your business or idea is superior. For instance, if you have a background in molecular engineering and have used that knowledge to create innovative athletic wear, emphasize your unique qualifications.
• Market analysis: This section analyzes your company’s positioning against competitors. It should include target market analysis, segmentation analysis, market size, growth rate, trends, and a competitive environment assessment.
• Organization and structure: Describe the type of business organization you plan to establish, outline risk management strategies, and provide details about your management team’s qualifications. Clarify whether your business will be a single-member limited liability company (LLC) or a corporation.
• Mission and goals: Briefly state your mission and specify the business objectives along with the steps necessary to achieve them. Ensure that your goals are SMART (specific, measurable, action-oriented, realistic, and time-bound).
• Products or services: Describe your business operations, including the products or services you’ll offer, how they compare to competitors, their pricing, the responsible parties for product creation, material sourcing, and production costs.
• Background summary: This section requires substantial effort as it involves summarizing relevant data, articles, and research studies on industry trends that could impact your business positively or negatively.
• Marketing plan: The marketing plan outlines the characteristics of your product or service, incorporates the SWOT analysis, and assesses competitors. It also explains your marketing strategies, budget allocation, and the duration of planned campaigns.
• Financial Plan: The financial plan serves as the foundation of the business plan since it determines the business’s ability to progress. It is essential to include a comprehensive budget and projected financial statements, including an income statement, a balance sheet, and a statement of cash flows. Typically, providing five years of projected financial statements is considered sufficient. Additionally, if seeking external funding, this section is where you should outline your funding request.

Plan your exit Strategy

Having an exit strategy in place is crucial for any business seeking funding or planning for the future. An exit strategy outlines how you will sell your company or transfer ownership when you decide to retire or pursue other ventures. It is also a way to ensure that you get the maximum value out of your business when the time comes to sell. The choice of the best exit strategy for your business depends on your goals and circumstances. Here are some common options to consider:

• Selling the Business to Another Party: One of the most common exit strategies is selling the business to another party. This can be an individual buyer, a competitor, or even a larger company interested in acquiring your business. Selling your business allows you to transfer ownership while realizing the value you have built over time.
• Passing the Business Down to Family Member: Another option is to pass the business down to family members. This is a popular choice for family-owned businesses, where the owner wants to keep the business within the family. Succession planning and proper legal arrangements are crucial to ensure a smooth transition.
• Liquidating the Business Assets: In some cases, liquidating the business assets may be the best exit strategy. This involves selling off all the assets of the business, such as equipment, inventory, and property, to convert them into cash. It is often used when there are no interested buyers or when the business is no longer viable.
• Closing the Doors and Walking Away: In certain situations, closing the business and walking away may be the only option. This could be due to financial difficulties, market changes, or personal reasons. While it may not provide a return on investment, it allows the business owner to move on and avoid further losses.

Developing a Scalable Business Model

As your business grows, it’s essential to have a scalable business model that can accommodate additional customers without incurring significant costs. A scalable business model is one that can be easily replicated to serve more customers without a proportional increase in expenses. Some common scalable business models include subscription-based businesses, those that sell digital products, franchise businesses, and network marketing businesses. By adopting a scalable model, you can efficiently handle growth and maximize your business’s potential.

Planning for Taxes

Planning for taxes is a crucial aspect of starting a small business. Taxes can be complex, and it’s essential to understand the types of taxes you may be liable for, such as income tax, self-employment tax, sales tax, and property tax. Depending on your business type, there may be additional taxes, like payroll tax or unemployment tax. Consulting with a small business accountant or tax professional can help you navigate the tax landscape and ensure compliance.

4. Choosing Your Business Structure

Selecting the right business structure is essential, as it impacts factors such as taxes, daily operations, and personal liability. Here are some common business structures to consider:

• Limited Liability Company (LLC): An LLC offers personal liability protection for owners and is relatively easy to set up. It allows for flexibility in management and tax treatment.
• Limited Liability Partnership (LLP): LLPs are similar to LLCs but are typically used for licensed professionals. They offer limited liability for partners but require active participation in the business.
• Sole Proprietorship: A sole proprietorship is the simplest business structure, where the owner and the business are considered the same entity. It offers complete control but also makes the owner personally liable for business debts.
• Corporation: Corporations provide personal liability protection and have a separate legal entity. They can be taxed as C-corporations or S-corporations, each with its own advantages and considerations.

Before deciding on a business structure, it is recommended to consult with a small business accountant and possibly an attorney to understand the tax implications and legal requirements associated with each option.

5. Registering Your Business and Obtaining Licenses

When starting a business and selecting the appropriate business structure, there are important legal considerations to address. To guide you through this process, here is a helpful checklist to establish your business:

Choose Your Business Name

Select a memorable name that is not overly complicated. If possible, secure the corresponding domain name to establish your online presence. Keep in mind that your business name must not be identical to another registered company within your state and should not infringe upon existing trademarks or service marks registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

Distinguish between your business name and a fictitious business name, known as a “Doing Business As” or DBA. If you operate under a name different from your legal business name, you may need to file a DBA. For instance, if your legal business name is “Mike’s Bike Shop,” but you do business as “Mike’s Bikes,” you would register the DBA. Depending on your location, you may need to file the DBA with your state, county, or city government offices. The benefits of having a DBA include:

• Facilitating the opening of a business bank account under your business name.
• Utilizing the DBA as a “trade name” to brand your products or services.
• Using the DBA to obtain a business license.

Register Your Business and Obtain an EIN

Formally establish your business entity, whether it’s a corporation, LLC, or another type, by submitting the necessary forms to your state’s business agency, usually the Secretary of State. As part of this process, you will be required to choose a registered agent who will accept legal documents on behalf of your business. Additionally, you will need to pay a filing fee. Once approved, the state will issue a certificate that you can use to apply for licenses, a tax identification number (TIN), and business bank accounts.

Ensure Compliance with Licensing and Permit Requirements

Finally, ensure that your business complies with all licensing and permit requirements. These requirements vary based on your industry and location. Local, state, and federal licenses may be necessary, so it’s important to research and understand the specific licensing obligations for your business.

By following these steps and seeking professional guidance when needed, you can develop a solid exit strategy, establish a scalable business model, plan for taxes, choose an appropriate business structure, and ensure compliance with legal requirements. These actions set a strong foundation for your business’s success and future growth.

6. Get Your Ducks in a Row

Establishing financial stability is crucial for the success of your business. Here are some steps to take:

Open a Business Bank Account

It’s important to keep your personal and business finances separate. Choose a business checking account that suits your needs and provides the necessary features. Opening a separate business bank account will also be required for business loans or lines of credit.

Hire a Bookkeeper or Use Accounting Software

Managing your finances effectively is essential. Consider hiring a bookkeeper or utilizing accounting software to track income, expenses, inventory, and generate financial statements. These tools can streamline your financial management processes.

Determine Your Break-Even Point

Before funding your business, calculate your startup costs accurately. Include expenses like supplies, professional services, licenses/permits, office space, payroll, and benefits. Overestimating costs is wise to ensure sufficient funds for at least six to eighteen months of operation. Determine your break-even point by dividing fixed costs by the contribution margin.

So let’s say you sold food and your startup costs were $1000 (fixed costs). Your variable costs to make the food are $2.25 per plate and each plate sells for $10. $1000/($10-$2.25) = 129 plates. So you would need to sell 129 plates just to cover your costs and more than this to make a profit.

7. Secure Funding for Your Business

Obtaining adequate funding is crucial for business growth. Explore both internal and external funding options:

Internal Funding: Utilize personal savings, credit cards, or funds from friends and family. However, be cautious about the risks associated with personal debt and strained relationships.

External Funding: Consider small business loans, grants, angel investors, venture capital, or crowdfunding. Each option has its own requirements and considerations. Evaluate the amount needed, repayment time frame, and your risk tolerance to select the most suitable funding sources.

8. Obtain Business Insurance

Protecting your business with the right insurance coverage is essential. Evaluate your business model and the risks involved to determine the necessary coverage. Consider these types of insurance:

• Liability Insurance: Protects against third-party claims for bodily injury, property damage, or personal injury.
• Property Insurance: Covers physical assets such as office space, equipment, and inventory.
• Business Interruption Insurance: Provides income replacement in the event of temporary business closure due to covered events.
• Product Liability Insurance: Protects against claims related to product-induced injuries or damages.
• Employee Practices Liability Insurance: Covers claims of discrimination, harassment, or wrongful termination made by employees.
• Workers’ Compensation Insurance: Required by law in most states if you have employees, it covers medical expenses and income replacement for work-related injuries.

Work with an insurance agent to identify the appropriate coverage for your business and find the best rates.

9. Utilize Essential Business Tools

Leveraging the right tools can enhance your business operations. Consider incorporating the following tools into your workflow:

• Accounting Software: Track income, expenses, and financial statements easily. Popular options include QuickBooks and FreshBooks.
• Customer Relationship Management (CRM) Software: Manage customer relationships, sales, and automate tasks. Examples include Zoho CRM and monday.com.
• Project Management Software: Plan, execute, and track projects efficiently. Tools like Airtable and ClickUp help manage tasks and allocate resources.
• Credit Card Processor: Accept credit card payments from customers. Options like Stripe and PayPal facilitate seamless transactions.
• Point of Sale (POS) System: Process customer payments in-store or online. Some accounting or CRM software may include built-in POS features.
• Virtual Private Network (VPN): Securely connect to the internet, protecting sensitive data. NordVPN and ExpressVPN are popular options.
• Merchant Services: Manage customer payments, including recurring billing or subscription payments. Square and Stripe are commonly used platforms.
• Email Hosting: Establish a professional email address with your own domain name. G Suite and Microsoft Office 365 are widely used services.

10. Develop an Effective Marketing Strategy

Marketing plays a vital role in attracting customers and growing your business. Consider the following strategies:

Create a Website

Establish an online presence, even for brick-and-mortar businesses. Create a website that provides information about your offerings and location details. Include essential pages like “About Us,” product or service pages, FAQs, a blog, and contact information.

Optimize for SEO

Improve your website’s visibility in search engine results by optimizing it for search engine optimization (SEO). Focus on using relevant keywords to drive organic traffic over time.

Produce Relevant Content

Provide valuable digital content that addresses your target audience’s needs and questions. Use videos, customer testimonials, blog posts, and demos to engage and educate your audience.

List in Online Directories

Increase your visibility by listing your business in relevant online directories like Yelp, Google My Business, and industry-specific directories. This helps customers find your business easily.

Develop a Social Media Strategy

Establish a presence on social media platforms like Facebook and Instagram. Post engaging content, drive traffic to your website, and leverage e-commerce features if applicable.

11. Scale Your Business

This is the most overlooked aspect when starting a business but for many it can prove to be a critical factor in determining long-term success in business. To expand your business, focus on growing your customer base and revenue. Consider the following steps:

Automate and Outsource

Streamline processes by automating repetitive tasks or outsourcing certain functions. This frees up time to concentrate on strategic growth.

Utilize Technology

Leverage technology to automate accounting, email marketing, lead generation, and other business processes. This increases efficiency and allows for better focus on business growth.

Monitor Finances: Keep a close eye on your finances to ensure profitability. Identify areas to reduce expenses or increase revenue if necessary.

Build a Team

As your business grows, delegate tasks and consider hiring additional staff, contractors, or freelancers. Utilize hiring platforms, job boards, and social media to find suitable candidates.

Seek Partnerships

Explore partnerships with other businesses in your industry to expand your reach and offer complementary products or services. This can benefit both parties by increasing exposure and customer base.

Best States to Start a Business

Forbes Advisor conducted a comprehensive analysis of 18 key metrics across five categories to determine the optimal and least favorable states for starting a business in 2023.The ranking process meticulously evaluates various factors that significantly influence business success, including business costs, business climate, economy, workforce, and financial accessibility within each state. By considering these crucial elements, we aim to provide valuable insights into the most conducive environments for entrepreneurial endeavors.

Brass Tax

By following these essential steps, you can establish a strong foundation for your business, ensure financial stability, secure funding, protect your business, leverage effective tools, market your offerings, and scale your operations successfully. Remember, starting and growing a business requires dedication and adaptability, so stay focused, stay organized, and continue striving for success.