Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on January 15, 2022 Updated on November 23, 2023
Owning a successful business is one of the most rewarding things you can do with your life. It’s empowering and liberating, and allows you to produce something of value and build a legacy — all while making good money!
You’ll be in control, answering to no one but your customers, working when you want, creating jobs, and making a living. And who knows how big your business could become. Bill Gates started tinkering with computers in his garage, and today Microsoft is worth $310 billion. Sam Walton started out with a little five-and-dime store in Bentonville, Arkansas, and today Walmart is worth $145 billion.
Do you have what it takes to be the next Sam Walton or Bill Gates? Being a successful entrepreneur is not easy. To achieve your dreams, you’ll have to eat, breathe, and sleep your business. Your road to entrepreneurial independence begins with learning. This step-by-step guide will provide the foundation of information that you need to put you and your new business on the path to success.
Key Small Business Statistics, Trends and Predictions
But don’t let this discourage you, because these hurdes can be overcome if you educate yourself thoroughly before starting your business. Of course, some things you will learn as you go, but the more you know going in, the more mistakes you’ll avoid.
Among the most profitable types of small businesses are:
Green companies with eco-friendly products and services will also do well
Technology that enables and improves remote work will expand
Custom, personalized products are in greater demand of late
Freelancers and gig workers are expected to dominate new businesses
Social media is now a sales channel, expanding opportunities for businesses
It’s also important to be aware of the challenges small business owners face. Lack of funds is often a problem, so strong financial management is crucial. Business owners should be careful to avoid investing too much in inventory and loading themselves down without access to adequate cash. At the same time, it’s also wise to not try to grow too fast when you might not have the capital to manage that growth.
Other challenges include:
Finding good employees is a constant challenge. High employee turnover can erode performance and productivity.
Having an appealing and popular online presence is difficult considering the stiff competition.
Time can be an issue for entrepreneurs since they often have to wear many hats and put out many fires.
Keeping up with licensing and permits and other government regulations can be challenging. It’s often advisable to have professional help to stay in compliance.
Economic fluctuations are something that can’t be controlled, but affect many industries.
Business owners need to expect the unexpected, particularly in light of the pandemic struggles everyone has faced. It’s important to have contingency plans for when disaster strikes.
It’s helpful to have a diverse customer base and not sell just to one group or demographic. Because if that group switches to a competitor, you’ll be in real trouble.
Finally, it is critical that you examine and consider relevant market forecasts. As a business owner, you’ll need to have a long-term strategy and be aware of coming economic changes and turmoil. Some key predictions to pay attention to include:
Consumers are demanding better quality and better service. It’s important to have a unique idea and execute it precisely — and keep customer demand in mind.
Engaging content and marketing is key to success. When you create content for your website or within your marketing, it must be appealing and intriguing to your target market.
Telecommuting and remote work is increasingly popular, so be wise about the space you’ll need for your business, and whether you need an office at all.
Personalization in marketing is important. Consumer demands are higher, and they want to be communicated with as individuals, not a group.
Touchless payments and tech shopping options are here to stay.
Visual content in marketing (photo and video) is overtaking written content.
Adaptability is critical to overcoming unexpected hurdles.
Digital communication is becoming more common than in-person communication, both employee to employee, and business to customer. Strong written communication skills will become even more important.
Step 1: Choose a Business Idea
Choosing a business idea is the first step. You may have several ideas already that you can choose from, or you may not have gotten that far.
If you’re starting from scratch, there are many ways to generate business ideas:
Look for a problem that needs to be solved in the market.
Follow your passion. What do you love, or what are you good at that could become a business? Focus on your skills, experience, and something that you’re passionate about, such as a hobby. What business suits your personality, plans, preferences?
Look for market gaps. For example, maybe your area needs a cool third-wave coffee shop or a reliable electrician.
Online businesses have seen huge growth in recent years, as have home-based businesses. Maybe building a strong e-commerce site from home could be your route to success.
Brainstorm. Go to a high-traffic spot — maybe a popular cafe or a mall — and be observant. Watch what people wear, do, buy, and where they go to spend their money. Many great businesses started out as “napkin ideas”.
Once you have a few ideas in mind, you’ll need to do some homework to decide if your ideas are feasible based on your situation and what you want to achieve. Here are some things to consider when choosing a business idea:
Investment required – How much will you need to start the business? Do you have access to funds?
Time needed to build the business – How long will it take for you to actually start selling and making money?
Industry trends (growing, stable or declining) – If the industry is declining, is it really a good idea to enter the market?
Revenue potential – How much do you realistically think you can sell?
Profit potential – How much will you make after expenses?
Time required & lifestyle factors – Having your own business is hard work. Consider how it’s going to affect your daily life.
It’s very important to do some market research via market research tools for a new business. Google your industry to see if it’s growing or declining, which segments are doing best and likeliest customer groups.
The best market research, however, is direct market research. Ask people what they think of your idea, whether they would buy from you, and for how much. You can ask people you know, or conduct focus groups, bringing potential customers together online and asking for their feedback.
You can also test the market by offering an early version of your product to see if people will actually buy it.
How much does it cost to start a business?
According to the SBA, the average startup costs about $3,000 to get up and running. Startup costs can vary greatly, however, based on the type of business. Before you take the leap, it’s wise to consider all costs, including licenses and permits, building a website, insurance, marketing, and producing your product or service.
How much can you earn from a business?
The average salary for a small business owner is about $65,000. This is not the same as profit, however. Your salary is an expense of the business that is paid from profits. Your profit is what is left after you deduct expenses from revenue. Your company may have a profit even after your salary is paid.
What barriers to entry are there?
Every sector and segment presents barriers to entry. Your type of business may face high startup costs, significant knowledge and training requirements, or a highly competitive marketplace. It’s important to be aware of these barriers, and prepare for them, before you start your business.
Step 2: Choose Your Business Location
Many businesses can be run from home, particularly online businesses. This helps keep costs low and boosts your profit margin.
If you’re starting a business that needs a storefront or production facility, consider what you need for that location to be successful, such as easy access and adequate parking. If you will have a retail store, it’s preferable to be in an area with a lot of foot traffic and little direct competition.
Many businesses, particularly online businesses, are not location-dependent. You can run an ecommerce business, for example, from anywhere and reach a global audience. This is true for any business that is conducted only online.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office or production facility. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed
To find out the requirements for starting a business in your state, choose your state from the list below. You will find all the specifics and information you need and other resources you need to start a business in your state.
Now that you know what’s involved in starting a business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Why? Identify an opportunity
Research similar businesses in your area to examine their products or services, price points, customer reviews, and what sells best. You’re looking for a market gap to fill. For instance, if you want to open a restaurant, maybe the local market is missing a vegan restaurant.
You might consider targeting a niche market by specializing in a certain aspect of your industry. This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
You’ll need to make a list of all the products and services you will offer. Maybe you have one product idea, but you could also offer related products. For example, if you’re going to open a bookstore, you could also offer literary-related T-shirts, mugs, and gifts.
How much should you charge for products or services?
You’ll need to research the market to see what prices are for similar products and services. You want to be competitive, and there are a few different pricing strategies you could use.
If you choose to be a value-based brand, like Walmart, your prices should be slightly lower than the competition. If you choose to position your company as a high-quality luxury label, your prices will likely be a little higher than your competitors.
Of course, you need to make sure your prices are high enough to make a profit. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market depends on your products and services – who is most likely to buy what you’re offering. You may have a product that will appeal to young women, in which case you can find them on sites like Instagram and TikTok. Alternatively, maybe your customers will be business owners, so you’ll want to market to them on business-related sites like LinkedIn.
Step 4: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “meats” for a butcher, boosts SEO
Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
Avoid location-based names that might hinder future expansion
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
Product and Services: Describe your offerings in detail.
Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider finding and hiring a business plan specialist to create a top-notch business plan for you.
Step 6: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to your type of business.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Step 9: Apply for Licenses/Permits
Starting a business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 11: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 12: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
New businesses need to have the right tools and software in place to help them manage their operations effectively.
One of the most important tools for a new business is an inventory management system, which allows them to track their inventory levels, monitor sales, and reorder products when necessary.
Another essential tool is a customer relationship management (CRM) system, which helps businesses manage their interactions with customers and prospects, and track sales leads.
Other useful software for new businesses might include payroll software, project management tools, and marketing automation software. By investing in the right tools and software, new businesses can streamline their operations, save time and money, and ultimately increase their chances of success.
You may be able to find industry-specific software that you can use to manage your business.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Some of your business will come from the casual passerby or online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
Instagram: Same benefits as Facebook but with different target audiences.
Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now”. This can sharply increase purchases.
Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as buy today and get 20% off.
Signage – Put up eye-catching signage at your store and website
Flyering – Distribute flyers in your neighborhood and at industry events
In-Person Sales – Offer your product or service at local markets, trade shows
Sponsor events – You can pay to be a sponsor at events that are relevant to your target market
Post a video – Post a video about your product or service. Use humor and maybe it will go viral!
Limited edition – Offer a one-time version of your product or service.
Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal.
Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
Seek out referrals – Offer incentives to generate customer referrals to new clients.
Press releases – Do press releases about new products, sales, etc.
Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
Influencer marketing – Pay people with large followings to promote your product or service. You can find micro-influencers with smaller followings and lower rates.
Make a podcast – This allows you to make a personal connection with your customers
Do a webinar – Share your product or service expertise online with a video seminar
Offer a free download – Offer something of value to download from your website to capture emails.
Case studies – Post case studies about how your product or service helped a customer
Create infographics – Post infographics and include them in your content
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a business similar to yours, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in your industry for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in your product or service. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your product or service meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.”
Step 13: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a business would include:
General Manager – scheduling, staff management, accounting
Marketing Lead – SEO strategies, social media, other marketing
Salesperson – direct sales of products or services
Customer Service Rep – service customers by phone or in person
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Start Making Money!
Starting a new business is one of the most exciting things you can do in your lifetime. It can seem daunting, but these simple steps can help guide you on your path. The rewards of entrepreneurship are potentially endless, including the cash you put in your pocket.
Beyond the money, though, you’ll be building something of value and establishing a legacy. Small businesses are the backbone of the US economy, and your business will contribute to national growth and create jobs while providing a product or service people need. Now that you’ve done your due diligence, you’re ready to start your adventure as a small business owner – and maybe a big business owner someday!
How can I start my own business with no money?
You can’t start a business without funds, but many businesses, particularly online businesses, can be started for as little as $2,000. There are also many funding options that can help you get started, such as SBA loans and crowdfunding.
Is it hard to be a business owner?
Yes, it is hard work! Successful business owners eat, breathe, and sleep their business, but the rewards outweigh the challenges. You’ll be in control of your own destiny and your income potential is unlimited! You’ll also be making a valuable contribution to the economy as a small business owner.
Which is the easiest business to start?
Online businesses that you can start from home are usually the least expensive and easiest to get into. Besides online businesses, a cleaning business or a photography business would be easy and inexpensive to start. Starting any business, however, has challenges, so you need to start with knowledge to be successful.
How can a kid start a business?
Kids as young as 7 or 8 can start businesses just like adults, but should probably have some adult assistance to make sure the business is compliant with laws and regulations. Kids should feel empowered to start businesses and understand the exciting opportunities that entrepreneurship offers.
What kind of business runs itself?
No business completely runs itself, but some can become well-oiled machines that run smoothly without much effort. Examples of businesses that are not very labor-intensive would include a rental property business or a solar farm.
How to Start a Small Business
Choose a Business Idea
Choose Your Business Location
Hone Your Idea
Brainstorm a Business Name
Create a Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Licenses/Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Start Making Money!
Subscribe to Our Newsletter
Join our exclusive community! Subscribe to our newsletter and gain insider access to cutting-edge business insights and trends.
Thank you for subscribing! We can't wait to share our latest news and updates with you. Get ready for exciting content in your inbox.