So you want to be an entrepreneur. Maybe there’s something you’re really knowledgeable and passionate about, or perhaps you think you’ve found a way to fill a gap in the marketplace. Wherever your interests lie, it’s almost guaranteed that there’s a way to turn it into a business.
Don’t be fooled into thinking it will be easy, though: Starting a business requires a lot of time, effort and hard work, and perhaps unsurprisingly, many would-be entrepreneurs end up failing. But if your company survives, the rewards of entrepreneurship are well worth the obstacles you’ll face on the road to success.
There’s a lot to consider and plan before you launch, and it’s important to prepare yourself for the journey ahead. If you think you’re ready to start your first business, here’s a step-by-step overview of what you need to do to make it happen.
1. Refine your idea
If you’re thinking about starting a business, you likely already have an idea of what you want to sell, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing, and figure out how you can do it better. If you think your business can deliver something other companies don’t (or deliver the same thing, but faster and cheaper), you’ve got a solid idea and are ready to create a business plan.
Another option is to open a franchise of an established company. The concept, brand following and business model are already in place; all you need is a good location and the means to fund your operation.
2. Write a business plan
Now that you have your idea in place, you need to ask yourself a few important questions: What is the purpose of your business? Who are you selling to? What are your end goals? How will you finance your startup costs? All of these questions can be answered in a well-written business plan.
A business plan helps you figure out where your company is going, how it will overcome any potential difficulties and what you need to sustain it. A full guide to writing your plan can be found here, and when you’re ready to put pen to paper, these free templates can help.
3. Assess your finances
Starting any business has a price, so you need to determine how you’re going to cover those costs. Do you have the means to fund your startup, or will you need to borrow money? If you’re planning to leave your current job to focus on your business, do you have some money put away to support yourself until you start making a profit?
If you need financial assistance, a commercial loan through a bank is a good starting point, although these are often difficult to secure. If you are unable to take out a bank loan, you can apply for a small business loan through the Small Business Administration (SBA) or an alternative lender.
Startups requiring a lot more funding up front may want to consider an investor. Investors usually provide several million dollars or more to a fledgling company, with the expectation that the backers will have a hands-on role in running your business. Alternatively, you could launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers.
4. Determine your legal business structure
Before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong.
If you own the business entirely by yourself and plan to be responsible for all debts and obligations, you can register for a sole proprietorship. Alternatively, a partnership, as its name implies, means that two or more people are held personally liable as business owners.
If you want to separate your personal liability from your company’s liability, you may want to consider forming one of several different types of corporations. This makes a business a separate entity apart from its owners, and therefore, corporations can own property, assume liability, pay taxes, enter into contracts, sue and be sued like any other individual. One of the most common structures for small businesses, however, is the limited liability corporation (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
Ultimately, it is up to you to determine which type of entity is best for your current needs and future business goals. More details about the different business structures can be found here.
5. Register with the government and IRS
To become an officially recognized business entity, you must register with the government. Corporations will need an “articles of incorporation” document, which includes your business name, business purpose, corporate structure, stock details and other information about your company. Otherwise, you will just need to register your business name, which can be your legal name, a fictitious “Doing Business As” name (if you are the sole proprietor), or the name you’ve come up with for your company. You may also want to take steps to trademark your business name for extra legal protection.
After you register your business, you may need to get an employer identification number (EIN) from the IRS. While this is not required for sole proprietorships with no employees, you may want to apply for one anyway to keep your personal and business taxes separate, or simply to save yourself the trouble later on if you decide to hire someone else. The IRS has provided a checklist to determine whether you will require an EIN to run your business. If you do need an EIN, you can register online for free.
You also will need to file certain forms to fulfill your federal and state income tax obligations. The forms you need are determined by your business structure. A complete list of the forms each type of entity will need can be found on the SBA website. You can also find state-specific tax obligations there. Some businesses may also require federal or state licenses and permits in order to operate. You can use the SBA’s database to search for licensing requirements by state and business type.
6. Purchase an insurance policy
It might slip your mind as something you’ll “get around to” eventually, but purchasing the right insurance for your business is an important step that should happen before you officially launch. Dealing with incidents like property damage, theft or even a customer lawsuit can be costly, and you need to be sure that you’re properly protected.
If your business will have employees, you will, at minimum, need to purchase workers’ compensation and unemployment insurance. You may also need other types of coverage depending on your location and industry, but most small businesses are advised to purchase general liability (GL) insurance, or a business owner’s policy. GL covers property damage, bodily injury, and personal injury to yourself or a third party.
If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business. Learn more about the types of insurance policies your business might need here.
7. Build your team
Unless you’re planning to be your only employee, you’re going to need to hire a great team to get your company off the ground. Joe Zawadzki, CEO and founder of MediaMath, said entrepreneurs need to give the “people” element of their businesses the same attention they give their products.
“Your product is built by people,” Zawadski said. “Identifying your founding team, understanding what gaps exist, and [determining] how and when you will address them should be top priority. Figuring out how the team will work together … is equally important. Defining roles and responsibility, division of labor, how to give feedback, or how to work together when not everyone is in the same room will save you a lot of headaches down the line.”
8. Choose your vendors
Running a business can be overwhelming, and you’re probably not going to be able to do it all on your own. That’s where third-party vendors come in. Companies in every industry from HR to business phone systems exist to partner with you and help you run your business better.
When you’re searching for B2B partners, you’ll have to choose very carefully. These companies will have access to vital and potentially sensitive business data, so it’s critical to find someone you can trust. In our guide to choosing business partners, our expert sources recommended asking potential vendors about their experience in your industry, their track record with existing clients, and what kind of growth they’ve helped other clients achieve.
Business News Daily offers reviews of the best vendors across a wide range of B2B product and service categories.
9. Brand yourself and advertise
Before you start selling your product or service, you need to build up your brand and get a following of people ready to jump when you open your literal or figurative doors for business.
Create a logo that can help people easily identify your brand, and be consistent in using it across all of your platforms, including your all-important company website. Use social media to spread the word about your new business, perhaps as a promotional tool to offer coupons and discounts to followers once you launch. Be sure to also keep these digital assets up to date with relevant, interesting content about your business and industry.
10. Grow your business
Your launch and first sales are only the beginning of your task as an entrepreneur. In order to make a profit and stay afloat, you always need to be growing your business. It’s going to take time and effort, but you’ll get out of your business what you put into it.
Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies or even influential bloggers and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization and volunteer some of your time or products to get your name out there. In this article, Business News Daily offers some suggestions for rapid growth.
Starting a business can be risky and challenging, but armed with the proper tools and information, you can put yourself on the path to entrepreneurship.