15 Essential Steps to Starting a Business
This post was last updated on November 10, 2020.
The process of starting a business is like navigating an ecosystem of pre-planning tasks which every emerging entrepreneur must fulfill in order to succeed. From forming an idea to creating a business website and promoting your brand, these are some of the essential components you should focus on to launch yours.
Though this seemingly appears like a lot to take on, having a strategy can clear the path laid before you by enabling you to effectively overcome each step along the way. We’ve put together a comprehensive guide on everything you need to know about how to start a business and help you begin this transformative experience.
How to Start a Business
Refine your business idea
Pick a business name
Create a professional website
Conduct market research
Choose a legal structure
Devise a business plan
Have a great pitch deck
Check out competitors
Design an effective logo
Make your business official
Apply for tax IDs, licenses and permits
Set up an accounting system
Secure capital and cash flow
Build a strong team
Promote your business
01. Refine your business idea
As someone who has set out to start a business, you most likely have an idea of what product or service you’d like to offer. Because of this, you may already be familiar with the kind of market you’re trying to break into. While it’s always good to know what you want to launch and for whom, it’s equally important to ask yourself why you should.
Setting goals and priorities in line with interests and skills is essential to building any business venture. In order for a business idea to thrive - and for you to have a better understanding behind its meaning - you should be able to answer whether what’s being offered will benefit potential customers or meet a demand.
This means that you’ll need to validate your idea by testing it out, which can involve anything from focus groups, information-gathering surveys and interviews to building a landing page for your target audience. Doing the latter is not only low-cost but can also generate an early interest in the desired marketplace.
If you find that your idea doesn’t actually resolve an issue for prospective clients or isn’t bringing something new to the market, it’s time to reassess other choices. In this case, take a look at some of the best online business ideas to let your inspiration flow.
02. Pick a business name
As you come up with ideas for how to name a business, take some time to check whether it’s on par with your tone and brand, easy to remember and pronounce, and that it’s available. And if you’re not sure where to begin, then this expert business name generator is one of our favorite tools to turn to for some expert insight.
Take your time, as the naming process is one of the most crucial and potentially challenging steps of starting a business. Keep in mind that whatever you decide on will eventually show up everywhere, from your domain name to all the paperwork - and hopefully on the mind of all your potential customers.
03. Create a professional website
With more people online than ever before, businesses now understand that having a solid website is an absolute must in this day and age. Likewise, prospective clients, investors and partners are going to check out your online address. As a result, creating a strong online presence is important for enhancing your professional image, whether you’re a business owner looking to expand on the web, open an online store or have your hand in any other type of online business.
Begin building yours by choosing a professionally designed website template and customizing it to meet your specific needs as well as those of your potential customers. Depending on what you’re offering, you’ll want to pick the right features for your small business website, as seen in these best business websites. For example, creating a site on Wix means you’ll have access to a one-stop shop for all your business must-haves, from online scheduling and creating a business email and business phone number to managing a secure online payment processing.
You can also add a Google Map to your site in order to make it more convenient for anyone wanting to visit your physical location. And speaking of those on the go, having a mobile-friendly website will provide them with the best user experience, regardless of screen size and device.
When it comes to growing a business online, learning the fundamentals of SEO is essential to boosting traffic to your site. SEO, or search engine optimization, is the process of optimizing your web content to improve your site’s ranking for searches of specific keywords. Use these advanced SEO features to boost organic traffic to your site.
Finally, in order to seal your business’ online identity, remember to complete the domain registration of your website.
04. Conduct market research
Data has shown that 42% of businesses fail because there is no market need. To prevent this, you’ll need to have a clear understanding of how and where your business idea fits in the market. This begins with intensive market research on everything from potential customers to industry-related stats and reports.
Doing a quick online search or turning to public sources and commercial research agencies, like the U.S. Bureau of Labor Statistics are good starting points. You’ll also want to go more in depth about those who make up your target market by gathering first-hand research about the specific group of people you aim to sell to. Extracting such information will give you valuable insights on consumers’ purchasing habits and behavior, as not every customer is alike.
05. Choose a legal structure
There are many factors to consider when structuring a small business. Subject to geographic location, a great place to start is by reviewing the options and related factors via the U.S. Small Business Administration’s business structure breakdown. If you’re in the European Union, you can read about setting up a European company.
The most common business structures in both the U.S. and abroad include the following titles: Sole Proprietorship, Partnership, Corporations or a Limited Liability Company (LLC). Choosing which one will best serve your needs is based on multiple factors, such as how much personal liability you want to have, tax expenses, and business registration requirements. For example, a sole proprietorship is the easiest to file, but has the most personal liability. LLCs relieve you of many personal liabilities, but come with expensive tax payments.
Do compare and contrast the advantages and disadvantages of the different types of structures to find the right fit for your business.
06. Devise a business plan
At its core, a business plan is a document that serves as a roadmap for how to structure, operate and manage your new venture. It can also help to attract potential partners, investors and banks.
Using a business plan template is an effective way to organize and streamline your ideas on paper. Here are some essential components to include:
Executive summary: This is a high-level view of your business concept or proposal. If you were to give a professional elevator pitch (explaining your business in about a minute) you’d be reciting this bit aloud.
Industry analysis: The best way to describe this section is putting research about your industry, such as trends and growth, into a formal document. Here you should think about ‘How large is the industry you’re interested in and how is it expected to change? Who are your competitors and what are their key strengths and weaknesses?’
Customer analysis: Focus on your target audience and ask yourself, how do you plan to reach them? Be specific and realistic here.
Operational plan: Set up an action plan, for when you have a team, on how each member will contribute to achieving your company’s smart goals and objectives. Answer the following questions: ‘Is there a timeline?’ and ‘What are the milestones you wish to accomplish?’ For both, think in terms of years and quarters.
Financial projections: How much will you need to invest at first? How long until you’ll start earning a profit? Do you need investors? These questions are a good starting point, but we’ll dive deeper into it below.
07. Have a great pitch deck
A pitch deck is a brief presentation that helps potential investors learn more about your business and the ‘what, why and how’ that it entails. This is an important strategy for anyone starting a business since on average, investors spend 3 minutes and 44 seconds on any pitch deck they receive, according to startup and fundraising research.
A best practice for nailing yours is to create compelling content - both visual and text - so every bit of information is clear and simple to follow. Optimize your pitch deck with these general points:
Resolve one problem. Explain how your product or service will close a gap or fix an issue in the current market. Convince prospective investors that your business will bring value to customers over time.
Show passion for your business. Start by telling an interesting story that shows your commitment to the cause prompted by your business idea. Then, let them know how your passion has not only helped you come up with the idea, but that when you put your heart into something, it will shine through.
Use data-driven content. This will help you establish credibility and leave the impression that you have a deeper understanding of your market.
Offer a sound bite. Use a short and catchy phrase to be remembered by. Sometimes, the right sound bite can catch on faster than any glossy graph or image.
Be consistent with font size, color and layout. Your slides should look professional, reflect your brand identity, and be carefully planned with profound thought.
08. Check out competitors
The benefits of conducting competitive research include learning the market, better outreach to potential customers, seeing what others are offering and forecasting the potential for the overall industry. In order to recognize new opportunities, predict how others will perceive you and even make improvements for your own venture, you’ll need to develop a clear understanding of the competition. That said, you’ll learn what they did right and which mistakes to avoid.
Performing a SWOT analysis will provide you with a powerful tool for measuring and evaluating your competitors’ overall performance. To do this, organize each component of SWOT into four quadrants, where their strengths, weakness, opportunities and threats are ranked from top to bottom.
09. Design an effective logo
Your logo will be one of the most memorable parts of your business. It will become the face of your business, so find something that truly represents you and your values. As you create your own logo, make it unique, identifiable and let it convey the right message or feeling about your brand to your audience.
You’ll also want to make sure that all of your other assets are aligned and fit into the style of your brand. These include your slogan, color palette and font styles and business cards. Your website too, of course.
10. Make your business official
It’s important to get all the legal and formal paperwork done before you take your business out into the world. If you’re establishing a business in the U.S., depending on your location and business structure, this will determine how you’ll need to register your business. For most small businesses, this process is as simple as registering your business name with state or local government.
Additionally, you won’t need to register at all if you conduct business as yourself using your legal name. But keep in mind that the benefits of registering your business include personal liability protection, legal and trademark protection and tax benefits - all of which are crucial to the prosperity and expansion of any entrepreneurial operation.
Meanwhile, for those who are seeking to set up a business in the U.K. or EU, it's good to familiarize yourself with the different requirements and rules for registering a business, relevant certifications, and VAT.
11. Apply for tax IDs, licenses and permits
As a registered U.S. business, you’re going to need to obtain your federal and state tax ID numbers, known as your Employer Identification Number (EIN). This is how your business is recognized by the government when it comes to paying taxes on both the state and federal level. Furthermore, you’ll need a tax ID number to hire employees, open a bank account and apply for relevant licences and permits.
Applying for an EIN is free and you can do so with the IRS assistance tool to help guide you through all the questions. Taxes vary by state, so visit your state’s website to check whether you need to get a state tax ID number in order to pay taxes.
It's important that you check what types of licenses and permits you might need to apply for. If your company’s activities are regulated by a federal agency, such as the case if you sell alcoholic beverages or broadcast on a public radio station, you’ll need to sign up. You can review this list of business requirements for federal licenses and permits for more information.
12. Set up an accounting system
Having an accounting system in place will help you organize and keep a meticulous track of what you own and owe. With a bank account , you will be able to accept payments and pay your creditors. Depending on the type of business structure you choose, you might be required to set up a separate business bank account from your personal one.
You’ll also need to regulate your finances through budgeting and manage your income and expenses in order to pay your obligatory taxes. To learn how to do so, turn to this guide to small business accounting, which includes everything from creating financial statements to setting up payroll services.
13. Secure capital and cash flow
At this point in the game, you should be talking more explicitly about how to raise money for your business. Since raising sufficient capital and securing a cash flow is how one finances an operation, you’ll need both to get your business off the ground.
With so many strategies to take, from applying for grants and loans to reaching out to an angel investor or setting up a fundraising campaign, you’ll need to find the right match for you. Here are a few good ways to raise money:
Applying for a small business grant. The biggest benefit of using grant money is that you won’t have to pay it back. A good place to begin looking for grants and eligibility is on the government’s SBA grants program. Alternatively, you can check out private institutions that offer small business grants, including FedEx, the Street Shares Veteran Award and Nav’s grant contest.
Setting up a crowdfunding campaign. Here’s a fast and easy way to share your ideas on a wide scale, get feedback and raise money at the same time. When choosing from one of the many crowdfunding sites, consider each one’s fees and terms and conditions, as well as the kind of audience they typically draw.
Bootstrapping. In some cases, investing your own money may outweigh the challenges of having to depend on outsiders. To reduce your own costs and finance risks, you’ll want to minimize external resources and cut back wherever possible.
14. Build a strong team
Unless you plan to be a team of one, you’re most likely going to want to bring in a business partner. After all, having another person to bounce ideas off of will help you along the way. Look for a partner with strengths that complete yours in order to fill in the missing pieces of the pie.
The same concept can be applied to employees. Unless you have a very small scale business and want to be a solopreneur, it’s going to be quite difficult for you to wear multiple hats. These include being an accountant, head of marketing, software engineer, and so many other vital roles.
Oftentimes, there comes a point when you’ll need to turn to freelancers or independent contractors for assistance. When you begin this hiring process, it’s important to factor in your budget, needs, and the company culture you want to portray by having a well-defined mission statement and business goals.
15. Promote your business
Once you’ve launched your business and published your website, you can start building a marketing strategy to help fuel growth. This is a vital part of any entrepreneurial success since implementing a strong promotional plan will allow you to reach and attract potential customers and in turn, generate leads.
Here are some of the most common marketing strategies to consider:
Social media marketing: With so many consumers on social media today, it’s not even a question of whether to jump aboard or not. Businesses will find another big plus to marketing on social media - gaining mass exposure from diverse groups of people. From Facebook and Instagram to Twitter and LinkedIn, pick a platform that serves the needs of your target audience, as well as your own.
Email marketing: A comprehensive and effective tactic, email marketing helps promote brands and build engagement. This method has the power to reach customers directly and lets businesses customize messages based on an individual’s interests or needs. They can come in the form of newsletters, email marketing campaigns and automated responses to predefined user actions.
Content marketing: This involves crafting and sharing valuable and relevant content in order to draw in your target audience. It can be done in a variety of ways, including publishing and maintaining a blog, creating a YouTube channel and podcasts.
Use any of these outlets to discuss business updates, distribute relevant industry related news, and learn to connect with potential customers. Today, people want businesses to be relatable and which they can actively engage with on a regular basis.
By Cecilia Lazzaro Blasbalg
Small Business Expert & Writer