How to Start a Small Business: Your 101 Guide
In the last year, approximately 500,000 people have decided to open small businesses. These entrepreneurs have decided to go into business for a variety of reasons.
Some wanted to become their own boss. Others wanted to have more flexibility in their schedule than they could get from the typical 9-5. A few even realized that life is too short to put their dreams on the back burner.
Whatever your reason, if you've decided to pursue your dream and open a small business, congratulations! The life of an entrepreneur is hard but fulfilling.
Now you're probably wondering how to start a business. The details can be a bit confusing, but you've come to the right place to learn just about everything you need to know about starting a business.
1. Choose a Unique Name
From the beginning, you'll want to choose a business name that's memorable and unique. Ideally, it will communicate exactly what it is your business does while aligning with your company's brand.
For example, if you're starting a company that sells pet products, you'll want a name that appeals to your key demographic (pet owners) and let your customers know what you're selling (pet toys and supplies).
Once you've decided on the perfect name, take a moment to look up the name on the Internet. If another business already has that name, it's time to start coming up with something new. If you don't get any search results, chances are you've landed on the perfect name!
After confirming that no one else is already using your business name, take a second to register your business name on your state's website. That way, your business will meet some of the legal requirements for being in business, and no one else will be able to claim your business name in your state.
2. Do Your Market Research
Before you can start doing business, you need to know who you're doing business for. Decide who your target customer is, where they're located, and what they're willing to pay for products like yours.
How many people in your target area are there? Are there other people selling similar products in the area?
While researching, keep an eye out for any key competitors in your area. What products do they offer? What do they charge for their products and services? Is there any category of products or services that isn't being offered to your target market right now?
The answers to these questions can all be clues to an open niche in the market, which you may want to fill with your business.
3. Write a Business Plan
Once you've decided on a name for your business and completed some preliminary research on your target audience, it's time to write your business plan.
Write out the problem that your customers currently face and how your business is going to help them solve that problem. Detail exactly which products and services your business will offer and how it will market them. If you've already started selling a few items or consulted with a finance professional, you should include your financial projections in your business plan as well.
4. Get Funding
With a complete business plan in hand, you can start to source funding for your business. With a completed list of the funding you need and what you need it for, banks and investors are much more likely to take your request for funding seriously than if you just ask for a lump sum with no further information.
Don't be afraid to source funding from nontraditional sources. Many small business startups have gained success through neighborhood-based lenders, economic development agencies, and even online crowdfunding campaigns. If you have a solid business idea and well thought out business plan, there is a higher chance that funders will be interested in your business.
5. Choose the Right Legal Structure
The legal structure of your business ;may change across its lifespan. However, it's worth doing the work of choosing the appropriate legal structure upfront if you can.
Sole proprietorships, LLCs, S-corps, and B-corps all have different tax requirements and confer different levels of financial risk onto the owners. Take the time to research each of these business types and choose the one that is best suited for your business. Even if you don't register your business as one of the above right away, knowing where you're headed can set you up for success later down the road.
6. Set Up Your Small Business Insurance
No one likes to think about the things that can go wrong with a business but preparing for the worst means that there is less of a chance for your business to struggle if a disaster comes knocking on your door.
PolicySweet® offers three types of insurance coverage for small business owners: Business Owners Policy, which covers general liability, property, and cyber insurance; Workers’ Compensation; and HomeHQSM, which covers general liability and property insurance for home-based businesses.
7. Get Your Tax ID Numbers
With a sole proprietorship, you have the option to use your social security number as your business's tax ID number. For other forms of business, you'll need to apply for a separate ID number from the government.
Many businesses have both a federal filing number and a state filing number. Applying for these numbers requires you to answer a few basic questions about your business and should only take a few minutes of your time.
8. Open a Bank Account
Just like applying for tax ID numbers, opening a bank account specific to your business can help you with keeping your personal finances and your business finances separate.
This could make your life much easier in terms of financial recordkeeping. Also, if your business receives an audit from the IRS, it could be much easier to provide them with the supporting documents and details they need than if your business finances are entangled with your personal finances.
9. Network, Network, Network
Now that you've done all the backend logistical work for your business, it's time to grow your professional network! If you're just starting a business, your network most likely will be your friends, family, and other personal contacts.
As your business matures, you'll build a network that extends beyond your personal circle. There are a couple of things you can do as a business owner that could make this process go faster.
First, establish a professional and consistent online presence for your business. This includes an easy-to-find website and a consistent social media presence. Most new customers can find you through online reviews and your social media sites, so setting these up early might pay off in the long run.
If you can, join groups and online forums related to the product you're selling. Joining groups related to your products or services could give your business credibility with its customers.
Additionally, take the time to attend product expos and other networking events for business owners. Building connections with your peers could help you to expand your customer base and give you a group of peers to go to with your successes, your struggles, and your questions.
10. Prepare to Grow Your Business
If you follow the steps above, you may be able to help your business grow quickly. Be prepared for an explosion in sales, and make plans for hiring staff, leasing a physical space, and anything else you might need to expand your business operations.
Get Your Business Off the Ground Today
If you have a small business idea that you've been sitting on, this is your sign to get out there and get it started. You won't know how successful it can be until you begin!
Want to make sure your business is ready for things that might come its way? Contact us today, and one of our experts will help you find the right insurance policy for your business.