How to start a business? 12 steps for starting your business

If you have aspirations of starting a business, but you just don’t know where to start, you’re not alone.

Starting your own business can be a gratifying endeavor, but it isn’t without its challenges. From carrying out thorough market research to find your business’ place in the market to sourcing a location for a store, there’s a lot to think about.

To see the process through, it’s worth coming up with a game plan to supplement your business plan. You need a clear set of steps to follow that will keep you on track even if you falter.

This article will help you and guide you through 12 steps on how to start a business.

But first, a word.

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📝 Table of contents
1. Find a business idea 2. Do market research 3. Create a business plan 4. Consider your funding opportunities 5. Find a business location 6. Choose a name for your business 7. Pick the structure of your business 8. Register your business 9. Obtain state and federal tax IDs 10. Get your business licenses and permits 11. Get a business bank account 12. Promote your business Bottom line

1. Find a business idea

If you’re wondering how to start a business, you should know that it isn’t as simple as settling upon a name, logo, and product to offer.

Often, deciding on a product to sell without much consideration is a surefire recipe for a failure to launch. You want to be 100% sure that you have settled on a niche that, at the very least, interests you if you want to grow a successful business.

It doesn’t have to be a product you sell, either.

You could decide to put your skill set to use and offer your time as a service. Maybe you are qualified to become a consultant, so you could set up a consultancy firm. Or perhaps you know a lot about managing personal finances, in which case you could establish a company that helps people manage their money.

Whatever you decide upon, it’s a good idea to do some keyword research. Using tools like Google Trends can give you key insights into whether people are generally interested in what you propose to offer.

Are you fulfilling a niche demand, or will you be competing in an oversaturated market?

The answer to this question will inform further decisions surrounding how to start your own business, such as what you’ll charge and how you market your product or service.

2. Do market research

In addition to keyword research, before you set up your business, it’s worth clarifying where it’ll fit into the marketplace.

Who will your customers be?

Will your competitors be local or international?

What is the demographic you’re going to serve not getting from the current options?

Asking yourself questions such as these will help you form a clear idea of how to start a small business and market it successfully. A company that doesn’t have a clear idea of what audience it serves will likely succumb to marketing that misses the mark and won’t reach the right demographic.

If your business is a financial consultancy, and you have experience in the field of finance, you can talk to the version of you that didn’t know the first thing about managing money. Think back to when you weren’t an expert in the field and what you would have liked to know, and this should help inform your marketing plan for your business.

3. Create a business plan

The part that most aspiring business owners dread, writing a business plan, can seem like an intimidating ordeal. It doesn’t have to be, though.

A business plan is basically a detailed breakdown of how you intend to create your business and get the ball rolling. There are several key pieces of information you’ll want to include, such as the following:

• Write out the solution your business provides - what purpose does it serve, and who can it help?

• A SWOT analysis which highlights the strengths, weaknesses, opportunities, and threats your business will come up against

• A finance plan that details all of your expected costs and how you plan to make a profit. You should also include financial projects for every quarter.

• Describe your expected demographic, going into as much detail as possible to show you’ve really thought about the customer.

4. Consider your funding opportunities

One of the most challenging aspects of setting up a business is having the money to get it off the ground. Unless you have a lot of personal wealth, the chances are you’ll need to look elsewhere to secure the funds for your business. Many businesses fail due to a lack of capital and poor cash flow, so you want to be sure from the beginning that you have sufficient funds to keep things moving.

Here are four ways you can secure the funds you need when launching your business.

Business loans

One of the most reliable ways to get a healthy cash injection for your business is seeking a commercial loan from a bank. Failing that, you can see if it’s possible to secure a small business loan from theU.S. Small Business Administration.

Business grants

With a business grant, you don’t have to worry about paying the money back. The catch is these grants are highly sought after, as you might imagine. To give yourself the best chance of obtaining a business grant, try to seek out a small business grant that’s very specific to your business.

Investors

If you’re open to the idea of bringing someone in to provide an initial cash injection, investors are an excellent resource. Of course, if you choose to work with an investor, you can expect to relinquish some of the control you have over the management of the business.

Crowdfunding

Crowdfunding is an alternative option that allows you to receive funding from a variety of people. Platforms such as Kickstarter have proved very popular in recent years for giving startups an opportunity to get the funding they need.

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5. Find a business location

The location of your business will largely be determined by what services and/or products you will offer. If you plan on becoming a vendor, you’ll need a brick-and-mortar store to sell from, whereas if you are setting up an online business, an office space will suffice.

There are three aspects to watch out for, when finding the perfect spot for your business:

• Costs: Overhead is an ongoing struggle for small businesses, so you need to factor the price of renting a space into your business plan. If you’re planning on selling merchandise, then paying more for rent to make sure you’re in a part of town with more footfall is a good move.

• Customers: If you’re selling in-person to customers, what location makes the most sense based on your target audience. The shopping mall might be a good place if you’re selling to young people, for example.

• Type of Sales: If you’re exclusively offering online services, you might only need an office space. However, if you provide any kind of products or shipping services, you will need additional space to store inventory.

💡 The biggest considerations regarding finding the right business locations boil down to costs, customers, and type of sales.

6. Choose a name for your business

Choosing a business name might seem like the easiest thing in the world, or the hardest. For some, a business name will come to them out of the blue, and there’s nothing more to it. For others, it will be a painstaking process full of brainstorming and strategical thinking.

The most disheartening part of the process, though, is that even if you come up with the perfect name for your business, it might already be taken. This is why you need to search for the domain on a website like GoDaddy or Wix whenever you have one to see if you can claim the website.

The name you select shouldn’t be arbitrary. If all goes well, one day it will be the name customers mention to their friends, so you want it to be memorable.

7. Pick the structure of your business

There are several types of businesses you could set up, so you need to be clear from the start as to which makes most sense for you.

How you settle upon a legal structure will depend on how many people are involved, how you expect the business to scale, and the laws in your country or state.

Sole Proprietorship

As the name suggests, a sole proprietor business is run by a single person. This business structure requires the least effort, but it also has you in sole charge of everything that happens - both the good and the bad.

Partnership

In a business partnership, there are two or more owners. This is a good idea if you plan to go into business with one or more people you trust. The benefit of a partnership is that each partner can bring their own unique set of skills to the table to help the business flourish.

Limited liability company (LLC)

An LLC is a common structure for small businesses, and it offers a balance of the flexibility from a partnership and the legal rigor of a large corporation.

Corporation

A corporation is a separate entity, so you can distance yourself from the business if you don’t want full liability. If you have plans to public or secure venture capitalist funding at some point, it’s the best option.

8. Register your business

To register your business and make it official in the eyes of the law, you may need to acquire a DBA, an EIN, and more.

DBA (Doing Business As)

A DBA name is the name through which you operate your business if it’s different from the company’s registered name. This applies mainly to sole proprietorships and partnerships, but some states also require a DBA name, so check your local laws.

EIN (Employer Identification Number)

An EIN is a number you can apply for from the IRS. This is only necessary if you hire employees, but even if you’re a sole proprietorship, if you plan on one day having employees, it might be worth getting sooner rather than later.

To get one for your business, you’ll have to fill out an SS-4 form through the IRS with business and personal information.

9. Obtain state and federal tax IDs

For your business to operate legally, it’s necessary to have both a federal and state tax ID number. Every company has tofile the right business taxes, as failure to do so can result in penalties and late fees.

Federal tax ID number

Federal income tax will apply to every registered business, fortunately, though the process to acquire the ID number is straightforward. Once you have your EIN, you will be able to file taxes on a federal level.

State tax ID number

State tax applies to most companies, but there are currently seven states that don’t demand personal income tax in the US.

To acquire a state tax ID number, you need to find out what the rules are in the state you wish to operate in. The state government website will have all o the information you need to get the number.

10. Get your business licenses and permits

You’ll also need to apply for certain business licenses and permits before you can start running your business.

The best place to start for small business owners at your local city hall, where you should be able to get a business license, and from there, you can find out what licenses and permits are required in your state.

• Federal licenses and permits: To find out which federal licenses and permits you need to apply for, you should check in with the Small Business Administration (SBA).

• State licenses and permits: The most common state licenses and permits are professional licenses, sales tax permits, and employer registration.

11. Get a business bank account

Now that you’ve obtained all the neccesary licenses and given some thought to what your business will look like and who your target audience will be, it’s time to talk money.

To streamline your business finances, it makes sense to set up a business bank account. With a business bank account, you can expect certain benefits for your business, making it more cost-effective to manage your money.

The Wise Business account offers transparent fees and low exchange rates, cutting costs for your business, so you can keep more of your profits. With this account, you can do the following:

• Set up an IBAN, routing number, sort code, and more in a single account.
• Pay up to 1,000 people at once and without the hefty fees.
• Receive payments from anywhere in the world without large conversion or recipient fees.
• Pay invoices in more than 70 currencies, and save up to 19x on fees.

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12. Promote your business

Promoting your business is just as important as the other aspects since if you can’t reach your customers with your messaging, boosting your sales is going to be challenging.

• Create a company website - Without a website for your business, it will be challenging to build organic interest. If customers catch word about your business but can’t find any evidence of your presence online, you might miss out on valuable sales.

• Offer discounts - It always pays to incentivize customers to part with their cash, and discounts are one of the best marketing strategies you can lean upon to secure a sale or two.

• Social media - Even if you don’t think people would care about garden furniture posts on social media, you should create social media accounts anyway. With the right social media manager, you can drum up further interest in your business at a low cost.

• Paid ads - Paid ads are a great way to rise to the top of the pile on popular search engines such as Google and social media platforms like Facebook.

Bottom line

Starting a business can definitely seem like a daunting process, but if you follow the right steps, your chances to succeed are going to be fairly higher. It's key to do the right amount of research and getting funding for your business.

Once the essentials are done, you need to register your business at the authorities and get all the important federal and state licenses and permits for your business.

In any case, Wise Business can surely help you if you need to manage your finances. With Wise Business, you could save up to 19x on fees, making it more cost-effective to run your business.

Learn more about Wise Business

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Sources:

1. SBA - US Small Business Administration
2. IRS - About Form SS-4
3. SBA - Apply for licenses and permits

All sources checked on 20 May 2021