You know you’re ready to start a business - but are you ready ready?
There’s a key difference between knowing you’ve got a money-making idea, and mapping out each step of actually starting a bona fide business. That’s why this page is dedicated to walking you through the exact questions you need to answer so you can set yourself up for success. And if you like what you read, you can get even more awesome info in our free guide on how to start a small business.
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How to Start a Small Business: A Simply Business Guide
Our Checklist For What You Need to Start a Business
Want to know the basics you need to start your business? Take a look at our handy checklist:
Do you need a company name?
The answer depends on how you choose to structure your business. If you’re a sole proprietor, for example, you can come up with your own company name, or just do business under your own name. If you choose to operate under a company name as a sole proprietor, you’ll be considered: “NAME doing business as COMPANY NAME”.
A general partnership should register their business name, which can be a unique trade name or a combination of the partners’ last names (law firms often opt for the latter choice).
If you’re registered as a corporation or limited liability company (LLC), you should come up with a name for your business.
No matter how you structure your business, if you come up with a company name, do a little research first to make sure no one has your business name. Make it clear, memorable, and easy for customers to figure out what it is that you do.
Make a business plan
The official definition of a business plan is a document that sets out what goals you have for your small business and the steps you’re taking to achieve those goals. But for our purposes, let’s think of a business plan as a blueprint that helps you measure if your business is on the right track or if you quickly need to make adjustments.
Your business plan will be like your entrepreneurial roadmap. You’ll list out your company’s goals and break down how long those goals are going to take you. After that, you’ll list multiple steps that you’ll take to achieve those goals. If anything changes and you need to make a “detour,” you can revisit your business plan to get yourself back on track.
Establish a business location
In some cases, you may be able to operate your business out of your own home. In other cases, you may need to rent a storefront or office. Make sure you decide where your business is going to be located, because that could influence everything from your business license to how much your business insurance turns out to be.
Get an Employer Identification Number (EIN)
When structuring your business, you may be required to create a federal and state tax ID, which is known as an Employer Identification Number (EIN). Your EIN makes it possible for your business to pay state and federal taxes, as well as hire employees and conduct other business activities. You’ll also need an EIN before you can open a business bank account.
Applying for an EIN is a pretty straightforward process - just head to the IRS website to get yours.
Register your business name
You’ll only be required to register your business if you’re a corporation, limited liability company, or general partnership that does business in a particular state. “Doing business” means performing any of the following in a state:
- Having a physical presence (store, shop, office)
- Holding business meetings with clients and vendors
- Earning a large amount of revenue from sales in that state
- Hiring and managing employees
Each state has different registration requirements, which you can find here.
Apply for a business license
The easiest way to figure out what licenses and permits you need is to visit this site and click on your state where your business operates. From there, you’ll be taken to your Secretary of State’s website, where you can learn your state’s requirements for getting a business license and/or permit.
Select and set up a business bank account
Opening your business’s first bank account is pretty straightforward, so we’ll keep our tips simple:
Don’t register your bank account under your social security number (unless you’re a sole proprietorship). Instead, use your Employer Identification Number (EIN) to open up your account. If you don’t have it yet, just head to the IRS website to get yours.
Come with all paperwork pertaining to your business, including your license. If you don’t have your business license yet, go back in this book to learn how to get one.
Get separate accounts for all your financial purposes. If you’re starting out small and don’t plan on hiring employees right away, one business bank account should work. Otherwise, it’s recommended that you get one account for business expenses, one for payroll, and one set aside for paying taxes.
Finding the best business bank account will largely depend on where you live, the type of business you’re running, and your immediate needs.
Consider if your business requires a website
Most of your customers search online for local businesses, so if you don’t have a website, you’re really missing out. You don’t have to be an expert website developer to build one. In fact, it’s as simple as setting one up on SquareSpace.com or Wix.com.
From there, create a free Google Account for your business, then search for that business name on Google. When it appears, you should see a “More Info” option that appears in the top-right corner of the map listing. Click on that link to be taken to a page where you can manage your business listing, as well as add your website address, request reviews, and more.
How Much Does It Cost to Start a Small Business
Wondering how much money you’ll need to start your business?
Talk to other entrepreneurs in your industry or reach out online. There are plenty of Facebook groups, LinkedIn networks, and forums out there filled with people who are happy to point you in the right direction. Remember, each industry is different and requires different startup capital. For example, starting a commercial cleaning business or handyman service is going to take a lot less capital than starting your own restaurant.
Here are a few more ways you can find out how much money you’ll probably need to start your business:
- The cost of supplies in your area
- Join a trade association
- Seek out a mentor
Of course, these aren’t the only ways to find out how much money you’ll need to start your company. Business consultants, guides, and even online articles can shed some much-needed light on what your wallet should anticipate.
What Do You Need to Budget For With Your New Business?
No matter what type of funding you use to start your business, make sure you properly budget so you can stay in business. Avoid these common budget mistakes so you can make your funding last longer:
Not doing your research: We’ve mentioned it before, but it’s worth mentioning again - make sure you research exactly how much you anticipate spending on your new business. While you don’t need to get an exact figure, you do need some sort of ballpark number. Otherwise, it becomes too easy to quickly run out of money.
Not planning out the famine:** Unless you’re very lucky, you’re probably not going to land sales right away. In fact, you may even have a few months where you’re not making money at all. Make sure you plan ahead for these “famine” periods. Have enough funding to see you through the months where you’re spending heavily but not making money. Give yourself a timeline for when you want to start breaking even or making a profit, since you don’t want to be dipping into your rainy day fund forever.
Going to the wrong bank: Make sure you’re picking the right lender for your small business. Ideally, the right lender will understand your particular industry, as well as what common financial milestones look like. Ultimately, pick the lender that makes you feel comfortable and confident. Think of your lender as another business partner - you only want to work with one who’s just as excited about your business as you are.
Planning out your business funding and budgeting can help ensure you stay in business for longer. Speaking of which, you should think about protecting your business - and that’s where insurance comes into play.
What Business Insurance Do I Need?
Business insurance is no joke - and if you want to own a successful small business, you have to have it. Clients won’t work with you if you’re not insured. In fact, in many states, you may find that you can’t even get licensed without business insurance.
Don’t worry, you don’t need anything too complicated when you’re starting out your business. Most business owners will need to start with a general liability insurance policy, which typically covers accidents, property damage, and anything else damaged while running your business. Business owners with employees should also secure a workers compensation policy, which covers the medical costs and wages of any employee who is injured on the job.
You can find and compare quotes for insurance at Simply Business. We specialize in small business insurance, so you’ll get personalized coverage at affordable prices. All you need to do is provide a few details about yourself and your business - we’ll take care of the rest.
How to Market a Small Business
At first glance, the plan is simple: Find potential customers. Get them to buy your product or service. Impress them so that they continue to be customers.
These are great goals to have - but how exactly are you going to achieve these steps?
That’s precisely where the marketing plan comes into play. Like a business plan, the marketing plan is the blueprint for detailing what success looks like to your company. Your marketing plan should map out your goals for the upcoming year, as well as what milestones you’ll be using to determine if you’ve achieved those goals.
To determine what these milestones are, ask yourself the following questions:
What’s your overall goal? Every plan needs a strong goal - so when it comes to your marketing plan, think about how much you want to sell in your first year of business or any other growth metric that matters to you. When creating this goal, make sure it’s realistic for your small business. Everyone has dreams of making millions of dollars right off, but it’s probably not going to happen for a bit.
If you’re still having trouble identifying a realistic goal for your marketing plan, reach out to other small business owners in your industry for their advice.
How will you build awareness? Awareness of your business or product is crucial to having a successful launch. How are you going to get word out there that you’re in business? Where are you going to spread the word? Will you be offering a trial of your products or services? How soon do you want to start letting others know that you’re ready to do business? Building awareness can make for a better launch, since you may have customers that are ready to buy from you on Day 1.
What’s your pricing? Figuring out your product or service pricing is a crucial step - and one that a lot of business owners tend to mess up. Here’s the most common mistake: a business owner knows they are going up against some competition. So in order to attract customers, the business owner decides to price their products at an incredibly low price.
Here’s the thing: It’s a lot harder to raise your prices than it is to lower them. Customers will already be used to your prices, so if you raise them, they’ll definitely be unhappy about it. But think about the reverse - if you end up lowering your prices, you’ll have some pretty pleased customers.
Play around with your pricing as you grow your business, but remember to overestimate how much you should charge. Underpricing your products or services might leave you struggling to pay your business’s bills. Plus, what’s to say that another company won’t offer even lower prices and take a chunk out of your clientele base?
What’s your marketing budget? Figure out how much you’re willing to spend to reach out to your customers. You don’t need thousands of dollars to have a strong marketing strategy - just be a little creative with how you’re spreading your message. Even something as simple as mailing high-quality postcards about your business can be enough to get a few customers rolling in.
Don’t forget about the importance of word-of-mouth, especially if you’re on a shoestring budget. Get family and friends to spread the word that you’re in business. If you have previous clients from another job, let them know that you’re working for yourself. Take every opportunity to talk about your new business. Once you start bringing in customers, offer them referral bonuses or discounts for recommending you to other customers. It may feel like you’re tooting your own horn a lot, but the more you talk about your business, the more likely it is that people will sit up and take notice.
Who is your customer? We’ve spent a lot of this guide talking about customers - but who exactly is your customer? Identifying your customer can be helpful for your marketing efforts, because then you can tweak your messaging to really hit their particular pain points.
For example, let’s say you’re a handyman in a suburb where real estate is in high demand. With a little research, you discover that your average customer is a middle-class family with a couple of kids, and they’re looking to get the best offer on their house possible. Thanks to this information, you can start tailoring your marketing message to their situation. Instead of just listing your handyman services, you can talk about how your work helps lead to higher listing prices and faster closing times.
Finding out who your customer is and what they look like can be a huge win for your marketing efforts. If possible, look for revealing info about your customer like:
- Income level
You can get more specific with your customer research, but the above characteristics will tell you a lot about how you should craft your message and the type of places where you should market to your customers. Speaking of which…
How will you reach this customer? There are a lot of different ways to reach your customers; from social media to email and billboards to mail, there’s a wealth of marketing opportunities. The only problem is that with lots of choice comes tough decisions. How do you determine which channel is best to reach your customers? How much will you need to spend in order to get your message in front of your customers?
This is at the heart of marketing, and it’s a topic that requires a much more in-depth exploration. But when you’re just starting out,don’t be afraid to try out different ways of reaching the customer. With a little trial-and-error, you’ll find the right marketing opportunity for your business.
Your marketing plan can give you a lot of guidance on what you can do to reach out to customers. Follow it closely, but be sure you make adjustments as you go along, especially if you stumble across a really great marketing technique that you hadn’t thought of before.
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