There are 33.2 million small businesses in America, accounting for 99.9% of all businesses.
Why it matters. A small business is defined by any business employing under 500 employees. But many are much smaller: eight out of every 10 small businesses are run by a single owner, while nearly half of the American workforce is employed by a small business. Over the last quarter-century, small businesses have added 12.9 million jobs to the US workforce—nearly two-thirds of all new jobs added to the economy.
Starting a small business can be both exciting and challenging. Whether you’re a visionary with a singular goal for your own career or an entrepreneur hoping to employ a workforce, the following 8 steps will increase your chances of building a successful and profitable business.
Develop a Business Idea
Everything begins with a vision—but one that has to strike a social chord, otherwise monetizing the idea will be impossible. Ideally, this should be something you’re passionate about and that you believe has the potential to be successful. Market research is necessary in order to ensure demand exists.
Consider the following questions:
- What are your top skills and talents?
- What are your interests and passions?
- What problems can you solve with your product or service?
- Who is your target market? What are their needs and preferences?
Write a Business Plan
Now it’s time to start writing. Your business plan will outline your business goals, strategies, and action plans. It should also include a financial plan, which outlines your projected revenue, expenses, and profits.
A business plan should include the following elements:
- Executive Summary: A brief overview of your business, including your mission, vision, and goals.
- Company Description: An overview of your business structure, products or services, and target market.
- Market Analysis: A description of your industry, target market, competitors, and market trends.
- Products or Services: A detailed description of your products or services, including features, benefits, and pricing.
- Marketing and Sales Strategies: An outline of your marketing and sales strategies, including advertising, promotions, and customer acquisition.
- Financial Plan: A projection of your revenue, expenses, and profits for the first three to five years of your business.
Pro tip: a number of AI-generated business plan websites have appeared in recent months.
Choose a Business Structure
Now it’s time to choose a business structure. Choices include sole proprietorship, partnership, LLC, and corporation. Each business structure has its own advantages and disadvantages, so it’s important to research each option.
The following factors will help aid your decision:
- Liability: How much personal liability are you willing to take on?
- Taxes: How do you want to be taxed?
- Ownership: How many owners will your business have?
- Management: Who will be responsible for managing the business?
- Funding: How will you fund your business?
Register Your Business
Now you need to register your business. This involves:
Consider the following steps when registering your business:
- Choosing a business name that is unique and easy to remember.
- Registering your business with your state’s Secretary of State office.
- Obtaining any necessary licenses and permits, such as a business license, sales tax permit, or zoning permit.
Create a Brand
Your brand identity sets you apart from the crowd. Your brand communicates your values, personality, and unique selling proposition.
Consider the following steps:
- Choose a business name that reflects your values and personality.
- Design a logo that is simple, memorable, and visually appealing. Apps like Canva, plugins for Figma, and work-for-hire sites like Fiverr are great resources if you’re not a designer.
- Choose colors that represent your brand and create a cohesive visual identity.
- Develop a messaging strategy that communicates your unique selling proposition to your customers.
Consider financing options
Bootstrapping involves using your own funds or funds from family and friends. This option allows you to maintain complete control of your business, but it can be risky.
Crowdfunding allows entrepreneurs to raise funds from a large number of people, usually through a platform like Kickstarter or Indiegogo. While crowdfunding can be a great way to raise funds, it requires a lot of marketing and promotion.
Angel investors invest in early-stage startups in exchange for equity. They’re usually high-net worth individuals looking for high-risk, high-reward investments. While this option can be beneficial, it's important to find the right angel investors.
Venture capital firms invest in companies that have the potential for significant growth and can provide a large amount of capital. However, they often require a significant portion of equity in exchange for their investment.
Get your business materials in order
Preparation is everything when starting a business. You don’t want to swim upstream because you didn’t properly line up everything necessary to stay on top of legal requirements. Here are a few things to consider:
- Business credit card. Keeping your personal and business expenses separate is critical, and will save your accountant the risk of headaches. If you’re really being disciplined, you can consider a debit card as well.
- Accounting software. Even if you work with an accountant, keeping track of your expenses in the early days is a great practice. Knowing where your money is going will serve you well in the long run.
- Business insurance. Insurance is a hassle until it isn’t. Protecting your business and personal assets is a necessity. Every business should at least carry general liability insurance.
Fire up the marketing machine
Regardless of the type of business you’re about to start, people need to find out about it. Building a reliable website and/or app with good UI/UX is the first step. Choosing the right social media platforms to promote your business and converse with early adopters is also critical.
Setting up these profiles early on will help you start developing relationships with potential customers and users right away. Given that trust is an essential component in any business-customer relationship, it’s best to get ahead of any issues and be responsive from day one.