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How to Start a Small Business: A 10-Step Guide for Entrepreneurs
In the United States, small businesses are more than just the backbone of the economy. They are the heart and soul of communities and a driving force for innovation. According to the U.S. Small Business Administration, small businesses comprise 99.9% of all U.S. businesses and employ nearly half the private-sector workforce. However, starting a small business is no small feat.
While initially researching how to start a small business, the process can seem daunting. The path from conceptualization to launch is often full of challenges. That said, the process becomes more manageable when you break it down into smaller steps.
Are you an aspiring entrepreneur? Are you finding the prospect of starting a small business exciting yet nerve-racking? If this is you, don’t worry!
This article breaks down starting a small business into 10 simple, actionable steps. From initial brainstorming and market research to securing finances, it covers the maze of decisions and tasks that lie ahead. By following this roadmap, you’ll be better equipped to launch your small business and more likely to build a lasting venture.
Starting a Small Business in 10 Steps
If you have been wondering how to start a small business, now is the time to familiarize yourself with the anticipated steps. Knowing the process will help you navigate it more easily and confidently.
1. Identify Your Business Idea
A solid business idea is the foundation of your enterprise. It should solve a problem, fulfill a need, or offer something the market wants. To do this, identify gaps in the market, consider your passions and skills, examine trends and market needs, and seek feedback from potential customers.
Tip: Market research about consumer needs and trends is vital. But so is choosing a business concept that aligns with your interests or skills. Focus on what you enjoy, combining that interest with market research to find a viable opportunity.
2. Write a Business Plan
A business plan outlines your objectives, target market, revenue projections, marketing strategies, and operational plan. As you write your plan, you can gain clarity, identify potential roadblocks, and determine necessary resources.
A business plan typically includes the following:
- Executive summary: Briefly describe your business.
- Business description: Explain the problem your business solves.
- Market analysis: Provide research on your market and competition.
- Organization and management: Describe your business structure and team.
- Service or product: Detail what you’re offering.
- Marketing and sales: Outline your strategies.
- Funding requests: Specify your financial needs.
- Financial projections: Offer projections for the next five years.
Tip: Review some templates and examples to write your first draft. You can continue to add sections and make changes as your business plan evolves.
3. Secure Funding
Wondering how to get money to start a small business?
You’ll likely need to secure funding to start your small business. When approaching investors, prepare a pitch and offer a comprehensive business plan. Be prepared to discuss or negotiate equity or interest rates.
Here are a few ways you can obtain financing for your business venture:
- Bootstrapping: Use your savings or revenue.
- Venture capital: Investors provide large sums for equity.
- Small business loans: Traditional bank loans.
- Grants: Government grants are available for specific projects or initiatives.
- Crowdfunding: Use platforms like Kickstarter.
Tip: The amount of money you’ll need will significantly vary based on the business type. However, having three to six months of operating expenses is ideal. Knowing a rough figure matters since nearly half of all small businesses fail within the first five years. Cash flow issues are a significant concern. So, a lean operating budget is a good starting point.
4. Choose a Business Location
Choosing the right location for your business is critical. Consider the visibility and accessibility of your storefront, customer demographics, competition in the area, rent and utility costs, and any legal or zoning requirements.
Tip: Conduct research and seek industry-specific expertise. Focus on anticipated industry growth and pay close attention to the location’s potential.
5. Form a Legal Entity and Register With the State
Follow these steps to officially form a legal entity and register your business with the State.
- Choose and register your business name (“Doing Business As”)
- File the necessary paperwork with your Secretary of State
- Acquire federal and state Employee Identification Numbers (EINs)
Tip: Choose your business structure (sole proprietorship, partnership, LLC, or corporation). Then, move on to the registration process. The necessary forms will vary depending on your chosen structure. For example, you’ll file Articles of Incorporation for corporations and Articles of Organization for LLCs.
6. Get Necessary Licenses and Permits
Before you can begin operating your business, you must obtain the necessary licenses and permits. Research federal, state, and local requirements and apply early. Also, consider what insurance coverage you need. This coverage could include, but is not limited to, general liability insurance, property insurance, workers’ compensation insurance, and business interruption insurance.
Tip: Many consider this step an afterthought. However, it should be included within the financial planning phase (some fees will become an ongoing expense). Learn more information based on your business activity to plan ahead.
7. Apply for Your EIN or Tax ID
Be sure to apply online for your EIN or Tax ID. To do this:
- Visit the IRS website
- Complete the online EIN application (use this free tool to assist you)
- Review and submit your form
- Receive your EIN instantly
Tip: There are cases when you don’t need an EIN. For example, if you’re a sole proprietor or single-member LLC. However, you can still obtain an EIN in these cases, and there are benefits to doing so. Look into when an EIN is required and the benefits of getting one when it is not.
8. Open a Business Bank Account
You can open a business bank account now that you have all the necessary documentation. Do your research and choose a bank that meets your needs. Bring the required documents to the appointment, including your EIN and business license. If you plan to apply for financing, you’ll need to have a few additional requirements prepared, including:
- Personal credit history review
- Business plan submission
- Financial projections
Tip: Understand what types of accounts are available, and at the beginning, opt for a basic account and upgrade later. While planning with growth in mind is great, start with an affordable business account. Consider the transaction limits, online banking support, etc.
9. Set Up Your Business Infrastructure
Now you’re ready to set up your business for operation! Whether leasing a storefront or operating a home-based business, you must get a designated space ready for work. This stage also includes purchasing inventory or equipment, obtaining training or education, and implementing other systems and processes. If you hire immediately, you’ll also want to post job openings and interview candidates.
Tip: A solid infrastructure is crucial for future growth and scalability. Starting to build a great internal team early on can be a game-changer. Focus on implementing systems that help you improve efficiency concerning automated tasks so that you can focus on more complex or customer-focused needs.
10. Market Your Business
Finally, you’ll need to market your business to get the word out that you’re open for business. Effective marketing is key to attracting and retaining customers, so it’s paramount that you don’t skip this step. Consider these strategies to help you get started:
- Advertise on social media
- Invest in SEO
- Try out pay-per-click (PPC) advertising
- Create a professional website
- Stay active on social media platforms
- Implement email marketing
Tip: Conducting thorough market research helps you build a solid foundation.
Test a few channels to see where you’re getting the most traction so that you can actively improve your marketing ROI.
- Define your target audience
- Clarify your value proposition
- Establish a strong brand identity.
» Also Read: 5 Most Business-Friendly States in the United States
Guiding You Through the Above Ten Steps
Here is some additional information to help you navigate the steps above.
Types of Small Businesses
Small businesses come in various shapes and sizes, each with unique challenges and opportunities. Here are some of the most common types of small businesses.
- Sole Proprietorships: This is the simplest form of business, owned and operated by a single individual with no distinction between the owner and the business. The owner is responsible for all debts, but all profits go directly to him or her.
- Partnerships: Two or more individuals form a partnership to run a business. Profits and liabilities are shared according to the terms laid out in a partnership agreement.
- Corporations: A corporation is a separate legal entity from its owners and is subject to more complex regulations and tax requirements. Small corporations are typically known as “S corporations,” which allows income to flow through to the owner’s personal income without being subject to corporate tax rates.
- Limited Liability Companies (LLCs): An LLC blends aspects of partnerships and corporations, providing the liability protection of a corporation with the tax benefits and simplicity of a partnership.
- Franchises: Franchising allows entrepreneurs to operate their businesses under the banner of an existing brand. While this comes with certain rules and a share of profits going to the parent company, it also offers the advantage of a recognized name and support in operations and advertising.
- Online Businesses: In today’s digital age, many small businesses operate entirely online. These can include e-commerce stores, service providers, and digital product businesses.
- Home-Based Businesses: Home-based businesses are run from the owner’s home and can be any of the abovementioned types. With low overhead costs, they are an appealing option for many entrepreneurs.
- Service Businesses: These enterprises provide services rather than goods. Examples include salons, repair shops, home services, and consulting firms.
- Retail: These businesses sell products directly to consumers and can exist in various formats, such as brick-and-mortar stores, online shops, or both.
- B2B (Business-to-Business): These companies offer products or services directly to other businesses. These businesses include manufacturers, wholesalers, and various types of consultancies.
Understanding the type of small business you’re interested in starting will dictate many of your future decisions, from licensing requirements to your business model to the size and scope of your operation. Remember that the type of business you start should align not just with your business objectives, but also with your personal goals and lifestyle.
Starting A Small Business Checklist
Starting a small business involves more than a brilliant idea and a go-getter attitude. It requires thoughtful planning, resources, and key elements to transform your vision into a viable enterprise. To simplify the planning process based on the ten steps above, here is a checklist of essential items that aspiring entrepreneurs should consider:
Ensuring that these elements are in place or in progress will set the stage for a successful venture. If you decide to go the franchising route, you’ll likely have most of these elements included through the franchisor, making your day-to-day operations more seamless and allowing you to get your business off the ground faster.
How to Start Payroll for a Small Business
Once your small business is up and running and you’re ready to hire employees, payroll is one of the most crucial systems to set up. Here are some basic steps to start payroll.
- Apply for an Employer Identification Number (EIN): Before starting payroll, you’ll need an Employer Identification Number (EIN) from the IRS, if you haven’t already obtained one.
- Check State and Local Requirements: Each state has its own payroll tax requirements. Make sure to understand your state’s guidelines, as well as any local or municipal tax obligations.
- Choose a Payroll Schedule: Decide how often you’ll pay your employees — weekly, bi-weekly, or monthly. Different jobs and industries have different norms, and state laws may impose minimum pay periods.
- Create Employee Records: Gather necessary information from each employee, including W-4 forms for tax withholding.
- Calculate Gross Pay: Determine each employee’s gross pay based on hours worked, salary, and additional compensation, such as overtime, bonuses, or commissions.
- Calculate Deductions: Subtract federal, state, and local income taxes, along with Social Security, Medicare, and any other deductions like retirement contributions or health insurance.
- Issue Payments: You can pay your employees using direct deposit, check, or payroll cards.
- File and Pay Taxes: Report your payroll taxes to the IRS and your state’s tax department. This usually involves filing specific forms and making tax payments.
- Maintain Records: Keep accurate records of all payroll transactions, tax filings, and payments for a minimum period as required by law, usually four years.
- End-of-Year Reporting: At the end of the tax year, you must issue W-2 forms to your employees and file additional tax forms with the IRS.
Payroll for Self-Employed
If you’re self-employed, the payroll process is a bit different. Instead of receiving a regular salary, you’ll likely draw income from the business profits. However, you still have to pay self-employment taxes, including Social Security and Medicare.
Steps for Self-Employed Payroll
- Calculate Earnings: Keep track of your income and expenses.
- Pay Quarterly Taxes: Unlike employees who have taxes withheld, self-employed individuals generally need to make estimated tax payments to the IRS each quarter.
- Annual Tax Return: At the end of the year, you’ll file a Schedule C form along with your regular tax return to report your income and expenses.
- Form SE: Use this form to calculate your self-employment taxes, which you’ll also file with your annual tax return.
Managing payroll accurately is vital for your business’s success and the satisfaction of your employees. Whether you handle payroll yourself or use a payroll service, understanding the basics will help you navigate this essential business function efficiently.
Start a Home Inspection Business
Consider a home inspection business if you’re looking for a promising business idea and are interested in the real estate industry. This fast-growing industry offers excellent income potential and provides the flexibility many entrepreneurs crave. Here’s why:
- Constant Demand: As Americans continue to buy and sell homes, the need for reliable home inspections remains constant.
- Low Start-Up Costs: Unlike other businesses that require a sizable investment in inventory or a physical location, home inspection businesses can be operated with relatively low initial expenses.
- Flexibility: Being a home inspector means you can often set your hours and appointments, providing a work-life balance that’s hard to find in other industries.
WIN can help you get started with little experience.
Why WIN?
In addition to WIN’s 30+ year legacy, this nationally recognized brand is known for the following.
So, if you’re looking for a business opportunity that offers high demand, low start-up costs, and unparalleled support, WIN Home Inspection is an option worth exploring.
Get Started Today!
Now that you know how to start a small business, it’s time to hit the ground running.
We’ve walked you through the 10 key steps to launching your venture — from identifying your business idea to crafting a business plan to setting up payroll. While each step requires careful thought and execution, taking the first step is the most important. Your entrepreneurial dream can become a reality with the right plan, support, and tenacity.
Have questions about investing in a WIN Home Inspection franchise? Let’s talk!
