How to start your own business?
Following these steps can turn your business idea into a successful venture.
- Elaborate Market Research
- Craft the Business Plan
- Clarify Funding Needs
- Decide on the Business Structure
- Register the Business
- Apply for Licenses and Permits
- Protect Your Business
- Use the Right Business Tools
- Market and Brand Your Business
- Grow Your Business.
Let's dive in and explore the essential steps for starting a business. ↓
1. Elaborate Market Research
A great business idea comes with thorough market research. Before starting your business, you must clarify your market share, target audience, why people would buy your products or services, and what value you add to the market. At the same time, you need to know your competition and what makes you better than them. All these come with a name: market research.
You can do market research by yourself or hire a professional to do it for you. Many companies and freelancers are specializing in market research. They conduct focus groups, organize surveys, produce market statistics and reports, and describe your target audience. Market research clarifies the current market trends, people’s interest in your products or services, how much revenue you can expect, and how your competition interferes with your plans.
Only when you have this data can you proceed to the next step? If you do the market research on your own, focus on answering the following questions:
- What is your market share?
- Who is your target audience?
- Why are you better than the competition?
- Why would people buy your products/services?
- Where will your business make an impact? (local/regional/national/international)
- How much revenue can you expect over a given period of time? (monthly/6 months/1 year)
You can also use a SWOT analysis and list your strengths, weaknesses, opportunities, and threats. All this information will be precious in the following steps both for you as a business owner and your staff.
What kind of business should you start?
When deciding on what kind of business to start, it's essential to consider your skills, interests, and aptitude. Time constraints, expertise, capital, and partners are also extremely valuable. It's also crucial to identify a market demand and capitalize on it. Significant industries include technology, healthcare, retail, restaurant and hospitality, and education. Conducting thorough market research, analyzing your competition, and creating a business plan before launching are also essential. Franchising or starting a small business from home are also viable options. Ultimately, the best business for you will depend on your unique combination of strengths, weaknesses, opportunities, and threats.
Tip: Still not sure where to start? We do share 30 business ideas to explore and get inspired.
2. Craft the Business Plan
Once you know your market, it’s time to plan your business in detail. And what better tool to do that than a business plan? Like market research, a business plan is a roadmap, valuable information to help you and your team go from an idea to a sellable product or service. It includes relevant details, such as the company’s description, mission, goals, the products or services you intend to sell, a sketch of your future organization, and a summary.
The business plan is also the first step in tackling financial aspects. It includes a financial plan that helps investors understand how much money they need and how much revenue they will produce. Therefore, the business plan opens the door to finding people willing to invest in your idea and creating a budget.
At the same time, the business plan transforms the previous market research into a marketing plan, revealing how you intend to promote and sell your goods or services to your ideal audience and expand on the marketing campaigns you intend to do.
Tip: A business plan should cover the following elements:
- The executive summary
- Company overview
- Market analysis
- The product or service
- The operations plan
- Sales and marketing plan
- The financial plan
- The management plan
- The funding request
In our article on how to write a business plan, we do cover all these sections, plus examples and a template for help.
3. Clarify Funding Needs
You’ve started thinking about funding needs when writing the business plan. Now, it’s time to go into details. Funding needs refer to a cost estimate, meaning how much money you need to start your business. List all necessary expenses, such as the cost of registering your company and potential legal counseling, material costs, employee-related costs, the cost of renting an office space, and marketing costs. Some businesses require a larger initial budget than others. For example, starting an online business by yourself has lower costs than starting a manufacturing business with a small team.
Fixed costs and variable costs
Fixed costs are those expenses that remain constant regardless of the size of your business. They are essential for keeping your business up and running. Some common examples of fixed costs include:
- Rent: The cost of renting office space or other facilities needed to run your business.
- Insurance: This covers your business against financial or legal risks such as property damage, injuries, lawsuits, or defamation claims.
- Utilities: The cost of electricity, water, gas, and other utilities needed to operate your business.
- Depreciation: The reduction in value of your business assets such as equipment, machinery, and vehicles over time.
- Amortization: The cost of spreading large purchases over a specified period.
- Office supplies: referring to the items used in an office or for office work: Pencils, paper, notebooks, cartridges for your printer.
On the other hand, variable costs are expenses that fluctuate based on your sales volume. They increase when your sales go up and decrease when they go down. Some examples of variable costs include:
- Raw materials: The cost of materials needed to manufacture your products.
- Production supplies: The cost of supplies required to produce your products or services.
- Sales commissions and bonuses: The cost of compensating your sales team based on their performance.
- Shipping and delivery: The cost of shipping your products to customers.
- Labor: The costs related to your employees.
Tip: We expand on the costs to start your business in the FAQ section.
How to calculate break-even point?
Break-even analysis is a financial tool to determine when a new business will reach profitability. This analysis helps you calculate the average number of customers, sales, and costs required to achieve profitability. To calculate break-even analysis, you'll need first to identify your fixed costs and variable costs, then calculate your contribution margin by subtracting variable costs from revenue. Finally, you can determine the break-even point by dividing the fixed costs by the contribution margin.
The break-even point formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
Consider a hair care business named 'Silky Shampoos' that sells shampoo bottles online. The firm has a projected annual income of $20,000 based on selling 10,000 shampoo bottles for $2 per unit. The fixed expenses of the company are estimated to be $8,000 per year. The variable cost per unit (such as packaging and shipping) is $0.50.
To calculate the break-even point in units for Silky Shampoos, we can use the formula: Break-even point (BEP) = Fixed cost / (Price per unit - Variable cost per unit). Substituting the values, we get BEP = $8,000 / ($2 - $0.50) = 5,000 units. Therefore, Silky Shampoos needs to sell 5,000 shampoo bottles to break even and cover all its costs.
Tip: Being aware of the break even point will help you understand when you're profitable, and if the inital assumptions are different from the costs that you can handle.
Secure funding for your business
Once you know how much money you need, you can focus on how to secure funding. Consider the following funding methods:
- Self-funding. Using your own money, aka bootstrapping
- Raising money from investors, also known as venture capital
- Borrowing money from a bank, or a business loan
- Crowdfunding. Using money from anonymous people
- Microloans from the Small Business Administration (SBA). Microloans of up to $50,000 can be used for working capital, inventory or supplies, and machinery or equipment.
- Winning grants. Applying for a grant or government funds.
Remember that all funding methods come with risks and obligations. Ensure you can generate income as soon as possible and avoid paying interest or penalties.
4. Decide on the Business Structure
Business structure refers to what legal entity you choose for your company. Each state or country has its business legislation and provides several legal entities to choose from. For example, in the United States you can register for
- limited liability companies (LLC),
- limited liability partnerships (LLP),
- sole proprietorships,
- corporation (C Corp, B Corp or S Corp),
- non-profit, etc.
Each comes with its rules regarding the number of members, partnerships, fees, paperwork, and so on, and also with its taxation system.
If you intend to work independently, look for a legal entity that accepts having a single member. If you depend on a team, you should look for the best legal entity that fits your business structure (e.g., number of partners, number of employees, etc.). How your business will be taxed is also important. You need to find the legal entity that helps you sell your products/services, take care of your employees, and support you in making a profit and paying back your loans, interests, or investors.
Choosing a business location
The location of your business will have a significant impact concerning a set of financial, operational, human, and regulatory aspects. Let’s see them all:
- Human factors: After understanding the target market, you look for being as close as they are.
- Human capital - if skilled workers in your field are available, you must relocate or recruit remotely.
- Regulations. Reflect on zoning laws for physical location standards that you must comply with in your field.
- Location-specific costs. They include rent, salaries, utilities, and other costs of running your business.
- Tax environment: Some states are more costly from a tax point of view than others. See if you can identify tax credits, incentives, or loan programs that will help you at the start of your journey.
5. Register the Business
Registering the business is the step you must make to become a legal entity entitled to sell products or services. Using your business structure, start the process of registering with your local authorities, such as the government and IRS. Ensure you comply with business regulations in your country or region and apply for a tax ID before starting your activity.
At this stage, you need to have prepared a unique business name, a working address, information about your partners or associates, if any, and all required legal documents. Pay attention to the rules. In some countries, you need to have a professional certificate attesting your expertise in your field of activity or a minimum initial budget, a bank account, or a local address.
Get your Employer Identification Number (EIN)
An Employer Identification Number (EIN) is required for businesses to establish their legal identity, open bank accounts, apply for loans, and pay taxes. Here are the top 10 reasons why new companies should obtain an EIN:
- Opening a business bank account
- Applying for loans or credit
- Filing taxes for your business
- Hiring employees
- Establishing business credit
- Applying for business licenses and permits
- Protecting your identity
- Builds trust and helps to attract investment or partnerships
- Registering your business with the government
- Staying compliant with tax and legal requirements.
Open a bank account
Opening a bank account is crucial for any business. A business bank account separates personal expenses from business expenses, making it easier to manage finances and track income and expenses. It also provides additional benefits such as loans, credit lines, and check-writing capabilities. Additionally, having a business account helps establish credibility and professionalism, making accepting payments and conducting transactions easier.
6. Apply for Licenses and Permits
The paperwork for registering your business or conducting your activity may include mandatory licenses and permits. For example, food-related businesses may need health and sanitation permits, heavy industries businesses may require safety permits, and liberal activities (e.g., attorney, accountant, etc.) may require a professional license.
You may also need permits from neighbors to conduct commercial activity in a space near their homes or from the council to use a space as a commercial space. All these require thorough research because they greatly impact your activity.
7. Protect Your Business
Protecting your business starts with following the rules and ensuring your business complies with local legislation regarding your industry, such as labor and tax legislation. It continues with insuring your business for different scenarios, such as:
- Liability claims
- Lost income due to natural disasters or theft
- Lost data
- Negligence or error claims
- Property damages.
Other forms of protection are registering your products or services as trademarks, applying for patents, and subscribing to professional associations and unions.
Trademark your brand
Trademarking your brand, business, or product is a crucial way to protect your intellectual property and maintain your market identity. To trademark your product, you must conduct a thorough search to ensure that no similar trademarks already exist. You then need to file a trademark application with the U.S. Patent and Trademark Office (USPTO), providing all required information about your brand and product. Once approved, you can use the trademark symbol to legally identify your product and prevent others from using your trademark without your permission.
Get business insurance
New businesses typically need various types of insurance to protect them from potential risks. These include liability insurance, property insurance, workers' compensation insurance, and business interruption insurance. The specific insurance needs will depend on the type of business and its location. It is recommended to consult with an insurance agent or broker to determine the best types of insurance for a new business.
8. Use the Right Business Tools
At this stage, your business is ready to roll. While you’ve taken care of the legal and administrative aspects, it’s now time to take care of the practical aspects. Having the right management tools to reach your goals and create and maintain a trustworthy work environment would be best. Amongst the best business software tools you can use to your advantage are:
- Accounting software, if you do in-house accounting
- HR software, if you manage a group of people, regardless of how many they are
- Project management software
- Communication software, such as email hosting and social media channels
- Customer relationship management (CRM) software, if you need to manage customer relationships
- Payment software, such as PayPal or Stripe, to receive money from your clients or Merchant to manage payments and bills.
Software tools release you from repetitive tasks, help you avoid mistakes, improve your responsiveness, and support you in building motivation and creating a healthy work environment for your employees.
9. Market and Brand Your Business
To be successful, you need customers. And to land customers, you need your business to be visible. Regardless of size, marketing and branding are important for a new business. Even if you plan to work on your own, you need a marketing strategy and a solid brand.
To create a successful marketing plan, you need to focus on the following key elements:
- Target Customer: Understand your market size, demographics, traits, and trends.
- Unique Value Propositions: Identify your competitive advantages, such as employee expertise, certifications, or offerings (see below how to write yours).
- Sales and Marketing Plan: Develop a strategy for customer interaction through various methods and channels.
- Goals: Set measurable targets for social media growth, public relations opportunities, and sales targets.
- Execution Plan: Break down higher-level goals into specific actions.
- Budget: Allocate funds for different marketing projects and activities.
If these aren’t your strength points, hire a professional. Your brand is the first impression that makes or breaks a deal. Your business name is what they will remember. And if you're stuck, we help you find come up with your business name. If your marketing campaign helps you reach many people, but they don’t fancy your logo, you fail. So, invest time, energy, and money in creating a brand. Focus on color palette, logo, graphic design, website design, etc. Don’t forget to put your values and mission in a well-written statement that gives you a voice and a story.
How to promote your business?
There are several ways to promote your business and increase its visibility. Here are some of the most well know and available for any ambitious entrepreneur:
- Create a SEO optimized website
- Write quality content educating potential clients.
- Record videos with your products and share them on YouTube.
- Connect with customers on social media ( Facebook, Instagram, TikTok, or X)
- Leverage online reviews and publicity
- Advertise online
- Create a newsletter, where you provide discounts
- Make partherships with other busienss
- Create a google business listing
- Try influencer marketing
- Create contests and giveaways
- Join industry specific events and trade shows.
Ultimately, the most effective way to promote your business will depend on your specific industry, target audience, and resources.
10. Grow Your Business
The first step in growing your business is to increase the number of your clients and revenue. Business growth may be a solo or team effort. But at some point, you will need to consider growing your team and collaborating with experts. For example, you may build a marketing department to create better marketing strategies and land more clients. Or you can focus on improving your sales team by attending courses and training. Or you could focus on developing better products or services by hiring experts in the field.
As a result, growing your business is synonymous with people management. Whether they are full-time employees, collaborators, project-based freelancers, volunteers, or experts, you need the right tools to boost motivation and create a strong team. Start by hiring the right people for the job you need them to do and the rest of the team. Invest in HR software that empowers people and makes them responsible. And make sure everyone is on the same page regarding your company’s culture and values.
Starting a business is an endeavor that transforms your ideas into products and services. Do it right, and your business will have a proper start and the best chances to become profitable and enjoyable. Consider all the people and tools that can help you along the way and outsource tasks you need to prepare for. Your team will appreciate your transparency, correctness, and consideration for their well-being.
How do I start a small business with no money?
The best way to start a business with no money is to focus on working online and invest your own time into solving problems, building products and finding your niche. Your team can work from the comfort of their homes, releasing you from the costs of an office. A small online business that provides services can generate income before paying salaries. Therefore, you can start with no money at all.
How do I start a small business with no ideas?
Although you don’t have an idea per se, you have a preferred industry, expertise, or dream of doing a particular job. Thus, you can look for business ideas that fit your profile and workflow. You may also want to ask your friends and family what products or services they want to see on the market or if they would like a partnership to meet a common goal. It’s always better to start a small business with people you trust.
How do I start a small business online?
This article expands on the key ten steps to develop a business idea and plan, register your company, and create a brand. Follow them, and add ones that fit your business needs and criteria if needed. In the case of an online business, you won’t need an office. Your home address can become the business address of your company. Hire people for remote work, find an HR app to manage your small team, and provide them with the necessary tools to feel connected. Now, all you need is a good internet connection.
How do I start a business from home?
Your home is similar to a rented office. Many businesses started in a garage or spare room. Moreover, it’s easier nowadays to coordinate a remote team and have your employees working from their homes. Invest in a good HR app, collaborative software, and communication software. Other than that, all the steps required by starting a standard business apply to starting a business from your home.
How do I start a business as a woman?
If you need more preparation to start a business as a woman:
- Look for dedicated training for women entrepreneurs.
- Focus on project management, people management, emotional intelligence, and communication skills.
- At the same time, look for business opportunities for women in your area. You can apply for a grant or funding to start your business.
What is the easiest business to start?
The most straightforward venture to start is the one you are prepared for. Consider your skills, expertise, and motivation when choosing a business. If you have a great idea and want to see it become reality, go for it. Comparison has no place in starting a business. If you aren’t motivated enough and willing to work hard to reach your goal, there is no point in starting a business, regardless of how easy it is for other people.
How much does it cost to start a business?
The cost of starting a business can differ depending on the kind of business and location, among other elements that we will expand on below. According to a study by Kauffman Foundations, the average cost of starting a business is around $30,000. However, the expenses can be significantly lower for specific business models, including home-based and micro businesses.
Here are some of the startup costs that you may need to consider when launching your company:
- Equipment: This can include anything from computers to machinery, costing anywhere from $10,000 to $125,000.
- Office space: Renting or leasing an office space can be a significant expense, with costs varying depending on the location and size of the space.
- Legal fees: Incorporation fees, permits, and licenses can add up quickly and cost anywhere from $500 to $5,000.
- Marketing and advertising: On this type of cost, we discuss everything from creating a website to running social media ads, crafting the logo, business cards, and why not a presentation video costing anywhere from $2,500 to $10,000.
- Insurance: Depending on the type of business, you may need to purchase insurance, which can cost anywhere from $500 to $5,000.
It’s important to note that these costs are estimates and can be lower or higher depending on variables such as the business type and industry (ie launching a restaurtant will cost much more than design studio). Drafting a business plan is the best way to estimate your startup costs. The financial projections section within your business plan should forecast sales, profit, and expenses (including payroll) for the next three to five years. There are other resources to evaluate your finances, such as the SBA’s startup costs worksheet. Such templates will assist you in analyzing your early investment costs so you know how much funds you should require when you seek startup funding.
Remember that many of the business startup costs we list above are recurring. You’ll need to cover these costs monthly, quarterly, or annually — consider the costs of rent, office supplies, and payroll. Other costs, such as the incorporation fee and office furniture, are one-time.
1. Prioritize thorough market research before starting a business. Analyze competition, identify your target audience, and assess market trends to generate a viable business idea.
2. Develop a comprehensive business plan to outline the financial aspects of your business. Investors need to understand your funding requirements and revenue projections.
3. Choose the right business structure by understanding the legal entities and regulations in your state or country. Evaluate the partnership rules, fees, paperwork, and taxation systems to make an informed decision.
4. Determine your funding needs before starting your business. List all expenses, including company registration, material costs, employee-related expenses, and office space rent.
5. Follow a step-by-step process without shortcuts to start a successful business. Learn from the experiences of other entrepreneurs to avoid common mistakes.