According to the Small Business Administration, there are more than 28 million small businesses in the United States. Small businesses also make up 99.7 percent of all U.S. businesses.
When you consider some of the most popular reasons to start a business, it’s no wonder that we’re starting more and more small businesses are everyday.
But not every small business will be successful. Statistics tell us that only about two-thirds of businesses with employees survive at least two years, and only half survive five years.
You could be in for a surprise if you decide to start that business, and say goodbye to your day job. Making sure you follow all of the proper steps when starting your business can give you the best odds for success.
Here are 10 steps that will help you start a small business successfully. Take one step at a time, and you’ll be on your way to having a successful small business in no time.
Step 1: Do Your Research
You’ve probably already come up with a business idea, so now it’s time to inject a little reality into your plans. Could your idea realistically succeed?
It can be difficult to objectively evaluate your own business idea, so you might think about running it through a validation process before you do anything else.
Does it solve a problem?
For a small business to be successful, it should solve a problem, fulfill a need or give the market something it wants.
There are a few ways that you can identify a need, including doing research, using focus groups, and even using good old trial and error.
As you search the market, some of the questions you should answer include:
- Is there a need for your upcoming products or services?
- Who would use it?
- Are there other companies offering similar products/services now?
- Who is your competition?
- How will your new business fit into the market?
Don’t forget to ask yourself these questions about starting a business before you dive in.
Step 2: Make a Plan
You need to put together a business plan to make your business idea a reality.
Your business plan is the blueprint that will take your business from start-up through establishment, and eventually through the phases of growth. The business plan is a must-have for all new businesses.
There are different types of business plans for different types of businesses.
If you intend to search out financial support from an investor or financial institution, you must have a traditional business plan. This type of business plan is usually in long form, and has a specific set of criteria that investors and banks look for when they consider your idea and application.
If you don’t need to borrow money from external sources, a simple one-page business plan can at least give you some guidance about what you want to achieve, and how you’re going to do it.
You can create your own brief business plan and improve it over time.
Any kind of plan is better than no plan at all.
Step 3: Plan Your Finances
You don’t have to spend a lot of money to start a small business, but it will probably take a even a small investment on your part to get it up and running. You should also have access to enough money to cover ongoing expenses until you start making a profit.
Do a Simple Spreadsheet
Doing a simple spreadsheet listing the startup costs for your business can help you figure out how much it’s going to cost to get started. These first expenses can include licenses and permits, equipment, legal fees, insurance, branding, market research, inventory, trademarking, grand opening events, property leases, etc.
Your startup estimate should also take into consideration any money that you anticipate you will need to keep your business running for at least the first 12 months. These additional costs can include; rent, utilities, marketing and advertising, production, supplies, travel expenses, any employee salaries, your own salary, etc.
Adding up those numbers gives you the amount of startup money you will need.
Now that you have a rough number in mind, there are a a few other of ways you can fund your small business, including:
- Small business loans
- Small business grants
- Angel investors
You can also finance your business by bootstrapping, using as little money as possible to start your business. You’ll probably find that a combination of the resources listed above works best.
The goal here is to work through the different options, and work out a plan for getting the capital you need to get your business off the ground.
Step 4: Choose a Business Structure
Your small business can be a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation. The business entity you choose will affect factors from your business name, to your liability, to how you file your taxes.
You can also choose an initial business structure, and then you can change your structure as your business grows and needs to change.
Depending on how complex your business is, it might be worth investing in a consultation from an attorney or CPA to ensure you are making the right structure choice for your business.
Step 5: Pick and Register Your Business Name
Your business name plays a role in almost every aspect of your business, so you want it to be a good one. Make sure you think through all of the potential implications as you explore your options and choose your business name.
Once you have chosen a name for your business, you will need to check if it’s trademarked or currently in use. Then, you will need to register it.
A sole proprietor must register their business name with either their state or county clerk. Corporations, LLCs, or limited partnerships typically register their business name when the formation paperwork is filed.
Don’t forget to register your domain name once you have selected your business name.
Step 6: Get Licenses and Permits
Paperwork is a necessary evil when you start your own business.
There are any number of small business licenses and permits that your small business should apply for, depending on the type of business you are starting and where you live. Do your research and find out which licenses and permits your business will require during the start-up phase.
Step 7: Choose Your Accounting System
Like anything else, small businesses are best run when there are systems in place. One of the most important systems you’ll need for your small business is an accounting system.
The accounting system or software you choose will create and manage your budget, set your rates and prices, conduct business with others, and collect and file your taxes.
You can set up the accounting system yourself, or you can hire an accountant to take some of that work off your hands. If you decide to do your own accounting, make sure you think about these questions that are extremely important when choosing accounting software.
Step 8: Set Up Your Business Location
Deciding where you’re going to do business is important, whether you have a home office, a shared or private office space, or a retail location.
You should think about your location, equipment, and overall setup. You will also need to think about whether or not it makes more sense to buy or lease your commercial space, and which you can afford.
Step 9: Get Your Team Ready
If you will be hiring employees, this is the time to start that process.
Make sure you figure out which positions you need to fill, and the responsibilities that make up each position. The Small Business Administration has an excellent guide to hiring your first employee that is useful for new small business owners.
The Small Business Administration also has a free information guide on where you can find local small business assistance. You can access that guide here.
If you are not hiring employees, but instead outsourcing work to independent contractors, now is the time to work with an attorney to get your independent contractor agreement in place and start your search.
Lastly, if you are embarking on the small business road alone, you probably don’t need employees or contractors, but you will still need a support team. This team can be made up of a mentor, small business coach, or even your family members, and serves as your go-to resource for advice and motivation if or when you have small business doubts.
Step 10: Promote Your Small Business
Once your small business is up and running, you making sales. Start with the basics by writing your USP, or your unique selling proposition, and create a marketing plan. Explore as many small business marketing ideas as possible so you can decide how to promote your business to attract customers and clients.
Once you have completed these business start-up steps, you will have most of the important tasks covered.
Remember that success doesn’t happen overnight. Don’t get discouraged if things don’t look the way you imagined, but follow the plan you created to move your business forward, and your chances of success will drastically increase.