Table of contents
- Checklist For Starting a Business
- Writing a Business Plan
- Business Startup Costs
- Electing Your Business Entity
- Choosing Your Business Name and Getting Your Licenses
- How to Find a Business Location
- Taking Payments at Your Business
- How to Hire Employees
- Industry-Specific Information
Intro to Starting a Business
So you’ve decided to venture out on your own and start a business. First off, congrats on taking the plunge — being in business for yourself has personal rewards above and beyond any monetary success you might achieve. There’s autonomy and knowing that every milestone is the result of your own blood, sweat, and tears.
But whether this is something you’ve been dreaming about for years or an idea that’s just recently struck, you need to make a plan before you fully dive in. This guide walks you through the steps required to start a business. Once you’ve checked all these off, you’ll be ready to hit the ground running.
Checklist for Starting A Business
Before embarking on your entrepreneurial journey, you want to create an in-depth checklist for starting a business. While your industry and business goals will largely influence this checklist, all owners must do the following before opening their doors for business:
- Solidify a business idea and do your market research: Before you start planning, make sure you have a clear idea of what you want your business to be. Decide on a name, location, your specialty, and the branding for your business. This is also the time to research your industry to determine trends and identify key competitors and how you can differentiate yourself from them.
- Write out a business plan: Think of a business plan as your roadmap and guide for success and any potential roadblocks you may face. It’s not just how you get things off the ground, it’s your strategy and tactics for growing your business. Your business plan should show you’re planning three to five years ahead, and include markers for milestones along the way.
- Determine your startup costs and financing options: You may not have the cash flow to get your business going, so you’ll want to look for financing from other sources. Once you decide how you want to structure your business, you’ll be able to choose the right form of financing, whether that’s traditional bank loans, loans from friends or family, or Square Capital. The biggest factor when accepting financing is to read the fine print and make sure you fully understand how it will affect your business.
Register your business name: The first step to registering your business name is to decide on a business structure. The laws and registration process for sole proprietors, LLCs, corporations, and partnerships vary. If you’re stuck, the IRS is a good place to start. After that comes registering your name. Registering your business name is usually part of the process of registering LLCs and corporations. But if you’re starting a sole proprietorship or a partnership operating under a name that isn’t your own (e.g., your name is John Smith but you want your business name to be something else), you may need to file a DBA (a “doing business as” name).
- Obtain necessary licenses and local permits: Most businesses require licenses or permits to operate. If figuring out licensing and permits sounds overwhelming, you might want to think about consulting an attorney in the beginning stages, just to make sure you are compliant with all rules and regulations. Outside of a general business license, depending on the type of business you’re building, you may need additional licensing and permits.
- Develop your product/service plan: Define your product or service offering: what it is, how it works, how it benefits customers, and how you will make it come into fruition. Include your sales and distribution strategy, as well.
- Determine how to take payments from customers: From cash to credit cards to mobile payments, customers expect businesses to accept multiple forms of payment. Consider what each payment option means for you on the back end, but you may need to adapt to support customer expectations and needs. Look for a service that covers these areas and also provides resources for risk management, fraud detection, and disputes.
- Make a marketing and promotional plan: While it’s often the last thing new business owners focus on, marketing can be the thing that ensures your new venture is successful. If you don’t have a budget, the simplest way to get started is stoking some word-of-mouth marketing. When you launch, send your friends and family a mass email announcing that you’re open for business. You may also offer them a freebie or an invitation to your grand opening event. Social media is also important as you rev up — set up Twitter, Facebook, and Instagram accounts for your business, and start posting regularly.
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Writing a business plan
A business plan is where you plan out your business’s future objectives and how you will achieve them.
You need a business plan for a couple of reasons. First off, it’s a blueprint for how you’re going to start, run, and then grow your business—something you can look back on for reference and measure yourself against. Secondly, if you’re seeking outside funding for your venture, you need a business plan to show that you’ve thought things through carefully.
When it comes to writing a business plan, there’s no one size fits all. To land on the plan that fits your business, it might be a good idea to enroll in a course at a local community college, or even online. There’s a bounty of resources out there to help entrepreneurs like you get started.
But even though business plans may vary from business to business, they all typically contain a few key components. When you think about formatting, it’s a good idea to use the below sections as a template — including visuals like graphs and projections where appropriate. Length can also fluctuate depending on what you’re trying to do, but typically, business plans are between 15 and 20 pages long. Here’s what they should include:
An executive summary
An executive summary should be a top-line synopsis of your business and how you plan to accomplish your goals. Because it’s often people’s first impression of your business, it’s the most important section. You might consider writing your executive summary after you’ve completed all the other sections of the business plan — so you know the key points to stress.
Think of your business description like your elevator pitch, i.e., how would you concisely answer the question “What’s your business all about?” This part should also include where you see the most potential and opportunity for your business, and why.
In your market analysis, you’ll extensively gather data on your industry and define your target market. What relevant data points would help people get an idea of your business segment? Where are the weaknesses in the market, and how will you fill that void?
Walk through your competition — what are other businesses in the space doing well, and where are they falling short? If you don’t currently have competitors, walk the reader through how you’ll continue to stay ahead of the game should another business choose to enter the market. Creating a SWOT analysis can help you identify the strengths, weaknesses, threats, and opportunities in your industry to better help you define your business’s competitive advantage.
Service and product line
This section details exactly what type of service or product you’re offering. Be sure to include any copyrights, as well as research and any associated development, that might be required to offer your product or service.
Operations and management plan
Present a clear picture of how you’ll actually run day-to-day operations. Do you need employees? A space for shipping or inventory? Describe it all here.
Here’s where you talk money. First off, how much do you need to start? And then to grow? A break-even analysis can help you forecast how many business units (or dollars) are necessary to cover your costs. Detail any capital you already have and if you need more, describe your strategies for procuring it. Once you get your business up and running, you’ll want to conduct a recurring financial analysis to measure your success.
Seek additional training and resources
It’s rare that you have all the skills you need to start and run a business — especially if you’re doing this for the first time. You may have the skill set and certifications necessary to do facials, for example, but might be shooting in the dark when it comes to running the day-to-day financials of your business.
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Business Startup Costs
Starting a business does come with a variety of up-front costs that all business owners incur while getting their new venture off the ground. While every business is different, and costs vary, there are a few expenses that are common to most businesses:
- Employee expenses: You’ve probably considered labor costs as part of your business plan, but when starting out, factoring in wages, salaries, and benefits can seem costly. Factor in employees you want to hire in the future when budgeting for employee wages and benefits. It may be tempting to keep your workforce to the bare minimum, but being staffed for your needs benefits you and your existing employees’ happiness in the long run.
- Equipment and supplies: Your business likely has an immediate need for some type of equipment. Purchasing inventory, property, and equipment, as well as the security deposit costs that may come along with them, can add up when your business is first starting out. Explore payment and leasing options for the equipment you need and budget for recurring costs that arise when repurchasing supplies.
- Insurance, licensing, and permit fees: Protecting your business by making sure you have all the appropriate licenses and permits to operate should be a top priority. A lot of licenses and permits do come with processing fees and some with annual fees. These should be factored into your business’s budget.
- Technology fees: Technology expenses can include everything from installing Wi-Fi and creating a website to IT systems that include your POS and payroll programs. Getting your business up to date with the latest technology (Wi-Fi, POS, etc.) is important for employee and customer satisfaction and helps keep you organized in the long run.
If you don’t have the capital required to start your business, you need to seek financing. (Here’s where that business plan you wrote comes in handy.) Luckily, there are a number of avenues for securing small business financing — from small business loans to investments from friends and family.
But before accepting money from any of these sources, there are some questions you need to think through. For example, evaluate how you’d like to structure ownership of the company. If you don’t want to give up a stake, bringing on investors may not be the right option for you. If you’re accepting a loan or financing from an institution, be sure to read all the details. You should be careful about how much money you really need — and do meticulous math on how long it will take to pay it back.
Electing Your Business Entity
There are a number of different ways you can set yourself up as a business. Each type of business entity has a variety of tax and legal implications. Your business entity determines which types of income tax forms you have to file on both the state and federal level, for example. Because of this, it’s smart to consult a reputable accountant and lawyer before officially deciding on what form of business entity you want to establish. It’s also a good idea to spend some time with the IRS Small Business and Self-Employed Tax Center, as well as the the State and Local Tax Guide.
Choosing Your Business Name and Getting Your Licenses
It’s time to make things real. First things first: decide on your business name (an important branding exercise in itself) and register it with the government. You can also choose to register a fictitious name for your business with something called a “doing business as” name (DBA). You need to register your name or DBA with the county clerk’s office or your state government, depending on where your business is located.
Now for all the paperwork.
- Get a Tax Identification Number (TIN), also known as an Employer Identification Number (EIN). You can file for an EIN in a number of ways, including online, by fax, or by mail. Check the IRS for a detailed explanation of how to apply for an EIN.
- Register for state and local taxes. Each state and locality has its own taxes, so it’s important to have a solid knowledge on this front to help you avoid problems and save your business money. (This one’s another place where an accountant or lawyer comes in handy.) Check the Small Business Administration for more information on determining your state and local tax obligations.
- You may also need a number of state and local licenses and permits. The required licenses and permits vary from business to business, so be sure you have all the ones you need before you set up shop.
If you’re planning on hiring employees, now is the time to familiarize yourself with all your obligations as an employer. You want to cross your t’s and dot your i’s before you hire your first team member. This is also something you may want to discuss with your lawyer.
Finding A Location
Where will you be conducting business? For obvious reasons, this can vary widely based on the type of business you’re running. If you’re a home contractor, for example, you may not even need to rent a physical office. But if you’re opening a salon, on the other hand, you need a space you can use for cutting hair.
Choosing a physical space is one of the most challenging aspects of starting a business. But it’s also one of the most important and requires loads of research and planning. For starters, you have to understand your city’s zoning laws and have a solid grasp on all the financials (like payroll taxes and any hidden costs) associated with renting a space. For help with this, talk with your city and neighborhood councils, or consider bringing on a professional agent to help.
Aside from laws, fees, and regulations, you should also consider your brand image, the safety and accessibility of the neighborhood, your proximity to any suppliers you might need to work with, and any plans for expansion. Talk to fellow business owners in the area and consult free government-provided data on neighborhood and city demographics to help inform your decision.
Taking Payments at Your Business
Now comes the fun part — making your first sale. To do this, you’re (obviously) going to need a way to accept payments. Do your research, but any solution you go with should be affordable and easy to set up. It should also accept credit cards and have no complicated fees.
In recent years, new payment options have been introduced and electronic payment methods have become increasingly popular. The annual Federal Reserve payments study found that credit card payments had the highest growth rate of all payment options, with 8.1-percent growth from 2012 to 2016. Additionally, make sure you have the capability to accept credit cards with chips. In 2016, 19.1 percent of all in-person, general-purpose card payments were made with chip cards.
Employees are the face of your business. They’re often the people customers interact with on a daily basis and should represent your company well. When looking to bring on new employees, there are a few important factors to consider.
- Define the role you’re hiring for. First, identify which roles you want to hire. Then create a job description for each role, detailing the job responsibilities and the skillset you’re looking for in an ideal candidate.
- Find your candidates. When looking for candidates, cast a wide net. Employee referrals are a great place to start, but to create diversity look for employees outside of your or your employees’ networks. Post your job description to sites like Indeed, Craigslist, or LinkedIn.
- Conduct interviews. Interview a few candidates and include existing employees in the process. Go through each candidate’s work history to make sure they’re qualified and ask questions that give you an idea of how they’d interact with the rest of your staff and your customers.
- Obtain workers’ compensation insurance. Most states require employers to obtain an insurance policy for workers who are injured or become ill due to a workplace exposure. Workers’ compensation insurance requirements for employers vary from state to state, so be sure to review your state’s requirements and find a policy that suits your business.
- Choose a payroll method. After you hire your first employee, you need to set up a system to pay them and take care of payroll taxes. You can do payroll yourself, through an accountant, or through a payroll service.
This guide provides general information about how to start a business. But each industry has its own requirements and unique factors that you need to take into consideration when you open up shop. Here are some industry-specific guides to help you get started:
-How To Start A Restaurant
-Starting A Photography Business
-How To Open A Salon
-Starting a Retail Business
-How To Open A Bar
-What is Consulting?
-How To Start A Cleaning Business
-Opening A Coffee Shop
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