How to Start a Business: A Step-by-Step Beginner’s Guide

Starting a business can be a daunting task. But if you break down this daunting process into small steps, it will be much easier for you.

So, we want to explain how to turn your idea into a reality. The steps below are a guide to starting your new business and will help you make your dreams a reality.

How to start a business

The power of small businesses is truly immense. You can see that they make up the majority of all businesses in the United States.

According to the Small Business Administration, there will be 35 million small businesses by 2024. They employ nearly half of the private sector workforce and are a major driver of the nation’s economic growth.

If you’re already determined, the steps below will help you get your business off to a good start.

The Foundation of Starting a Business

If you’re thinking about starting a new business, the first thing you need to do is to define your idea. The challenge is to turn that idea into a product or service that you can actually sell.

To do this, as business professionals always say, start with the question of “Why.”

“As Simon Sinek said, always start with the question of why,” advises Glenn Gutek, CEO of Awake Consulting and Coaching.

He goes on to point out, “It’s important to distinguish whether your ‘why’ is to fill a personal need or a market need.”

It’s important to remember that the opportunity for a business that is driven by a market need is always greater than for a business that is driven by a personal need.

What might your ‘why’ be?

You might want to improve on a flaw in an existing product,
It could be that you want to offer a new, compelling subscription model,
that you want to provide superior customer service to outshine your competitors.

Or it could be that you want to start a freelance business that you can write or design for a living.

Whatever your ‘why’ is, understanding it will help you determine how to structure your business to achieve your goals.

Even before you start writing a business plan, this ‘why’ will be like a guiding star that you will follow as you implement your idea.

Business Plan – A Roadmap from Idea to Success

Now that you’ve asked yourself some questions and formulated your idea, it’s time to put those ideas into writing.

A well-written business plan clearly states where your company is headed, how you’ll handle the challenges it will face, and what resources you’ll need.

Think of it as a document that you can always review and update as your market or business situation changes.

Here are three key points to keep in mind when writing your business plan:

1. Do Market Research

The foundation of any solid business plan is market research. It helps you understand the attitudes, needs, interests, and behaviors of your target customers, as well as your competitors and the industry.

You can start with something as simple as free tools like Google Trends, US Census Bureau data, and social media analytics.

Once you’re sure your idea is a good one, turn to paid industry reports or professional surveys. The goal is to gather both quantitative data and qualitative insights to identify opportunities and weaknesses.

2. Clearly define your target audience

Before you can do effective marketing, you need to know who you’re talking to—your target audience. Think about the problems your customers face, how your business can solve those problems, and their budget.

By considering their age, lifestyle, and buying habits, you can tailor your message to them.

Stephanie Desaulniers, owner of Business by Dezign, says that entrepreneurs often skip this step, and it’s a big mistake.

“You need to be clear about why you want to work with these customers. Is it because you want to make people’s lives easier, or do you want to create art to add color to their world?

Finding these answers will help clarify your business’s mission,” Desaulniers explains. Then, “define how you’re going to deliver that value in a way that customers are willing to pay for,” he adds.

3. Think about an exit strategy

While it may seem like you’re just starting out, thinking about an exit strategy from the start can help you build your business with purpose.

Will you grow and sell the business, hand it over to a family member, or position it for another company to acquire? Knowing your long-term goals early on will help you have a clearer path forward.

Josh Tolley, founder and CEO of Kingsbridge M&A Brokers, made this comparison: “When you get on a plane, what is the first thing you see? How do you get off? When you go to the cinema, what do you see before the film starts? Where are the exits?

I’ve seen business leaders go into business without three or four pre-determined exits. It can devalue a company and even damage family relationships,” he said.

Financial Management for Starting a Business

Starting a business is expensive. So you need to figure out how you’re going to cover these costs. Do you have your own savings, or do you need to take out a loan?

If you quit your current job and started this business full-time, would you have enough money to support yourself for the time being before you start making a profit?

Here are some important steps you should take when assessing your business’s financial situation.

1.Calculate Startup Costs

Most businesses fail because they run out of money before they start making a profit. That’s why it’s important to have a clear understanding of your startup costs. It often takes longer than expected to turn a profit, so it’s smart to have more money than you think you’ll need.

Startup costs vary depending on the type of business. Ramp estimates that retail businesses typically need $30,000 to $50,000 to start, while Manufacturing businesses can cost anywhere from $50,000 to $150,000, depending on equipment and space requirements. Service businesses can cost much less.

Your business’s costs can vary, so it’s important to calculate them carefully. The SBA’s Startup Cost Calculator is a useful tool for estimating costs for your business model.

2. Check your break-even analysis

To find out how much money you need to start your business, you should conduct a break-even analysis. This method shows you when your company, product, or service will start making a profit.

3. Reduce and monitor startup costs

It’s easy to overspend when starting a business. To avoid this mistake, avoid making unnecessary large purchases that don’t directly contribute to your goals, and keep a close eye on your business expenses.

“Most startups tend to spend money on unnecessary things,” warns Jean Paldan, founder and CEO of Rare Form New Media. “Spend the minimum amount when you start, and only on the essentials that are essential for your business to grow and succeed. Leave luxuries for later,” he advises.

4. Find funding sources

Funds for your business can come in a variety of forms, depending on your credit score, the amount you need, and the programs you have available. Some sources of financing for your startup include:

Business Loans: Commercial bank loans are difficult to obtain, but you should explore SBA loans and other alternative lenders.
Business Grants: These grants are valuable because they don’t have to be repaid, but they can be competitive. Look for government or private grants that are specifically designed for women-owned, minority-owned, or niche businesses.
Angel Investors: These are great for businesses that need a lot of capital and are open to investor involvement.
Crowdfunding: This method allows you to raise small amounts from a large number of supporters.

5. Choose the Right Commercial Bank

You’ll need to open a commercial bank account with a financial institution that’s right for your business. Marcus Anwar, co-founder of OhMy Canada, recommends working with small, community-based banks that understand the local market and are quick to make decisions.

“They are more selective in lending to small businesses, unlike big banks, which only look at your credit score,” Anwar explains. “Small banks want to build a personal relationship with you and are more than willing to help you if you have a problem or if you miss a payment.”

When choosing a bank, ask yourself these questions:

What services are most important to me?
Do I want a close relationship with the bank or do I just want to do business?
How much flexibility do I need if things go wrong?

Write down your banking needs and meet with a few banks to see how they support small businesses. That way, you can find the one that’s right for you.

Legal Business Structure That Will Shape Your Business’s Future

Before you can legally incorporate your company, you need to decide what legal entity your business will be. This decision affects everything from how you pay taxes to how you operate your business to your personal liability if something goes wrong.

Here are some of the most common business structures entrepreneurs choose:

1. Sole Proprietorship

Best for: Perfect for sole proprietors who want complete control and responsibility.
Pros: Simple and easy to set up.
Things to watch out for: The debts and obligations of the business can fall directly on your personal finances. According to the SBA, this is the case for 86.3 percent of all self-employed businesses and 13 percent of small businesses with employees.

2. Partnership

Nature: Two or more people share ownership and personal liability of the business.
Pros: This is a good choice if your business partners have skills that complement each other.
Things to watch out for: You’ll need to be comfortable sharing responsibility for the debts and decisions of the business.

3. Corporation (C corps and S corps)

Nature: Corporations create a separate legal entity from their owners. When formed in this way, the company can own assets, pay taxes, enter into contracts, and assume liabilities.
Best for: “Corporations, especially C corporations, are ideal for new businesses that plan to go public or raise capital from venture capitalists,” suggests Deryck Jordan, a management attorney at Jordan Counsel. According to the SBA, more than half of all small businesses are S corporations.

4. Limited Liability Company (LLC)

Popularity: This is a very popular choice for small businesses.
Pros: It combines the limited liability protection of a corporation with the tax benefits of a partnership, making it a great option.

Which form is right for your business depends on your current needs and long-term goals. If you are unsure which to choose, we recommend that you discuss your options with a business or legal advisor.

Register Your Business for Legal Status: Licensing and Tax Issues

Registering your business with the government and obtaining the necessary licenses is essential to legally start operating your business. The exact requirements will vary depending on the type, location, and industry of your business. However, here are some of the key steps that every business owner should take:

1. Business Formation Documents

You may need to file the following documents:

Articles of Incorporation and Operating Agreements: Corporations must file Articles of Incorporation, which include the business name, purpose, structure, and stock information. Some LLCs also require an Operating Agreement, which outlines ownership and responsibilities.
Doing Business As (DBA): If you are a sole proprietorship or partnership and are using a different business name, you will need to register for a DBA. Most states require this registration, You can usually file for a small fee at the County Clerk’s Office. While a DBA does not provide direct legal protection, it is a good idea to register your business name as a trademark for additional security.

2. Tax Identification Numbers and Forms

You will need to complete the following tax forms:

Employer Identification Number (EIN): Most businesses are required to obtain an EIN from the IRS (Internal Revenue Service). Sole proprietors without employees may not need one, but it is a smart move to get one to clearly separate business and personal taxes. Registration is free and can be done online.
Income Tax Forms: Depending on the type of business you have, the types of tax forms you need to file will vary. Check your state’s website for local requirements and manage your monthly, quarterly, and annual business and payroll tax payments.

3. Licenses and Permits

Depending on your business and location, you may need the following:

Federal, state, and local licenses: Many states or cities require a general business license, while specific industries require additional permits. The SBA’s license database can help you determine what requirements apply based on your location and type of business.
Seller’s Permits: If you sell taxable goods or services, your state may require a Seller’s Permit. These requirements vary significantly by state. For example, in New York, attorney Jordan points out that while services like education and medicine are exempt from sales tax, goods, hotels, and restaurants require permits.
Professional Licenses: Businesses that operate buses, tankers, or heavy trucks require separate professional licenses, such as a commercial driver’s license (CDL).

Essential Protection for Startups: Business Insurance

While you may think that getting business insurance is a last resort for starting a business, it is actually one of the most important steps you can’t put off.

If something unexpected happens, such as property damage, theft, or a customer lawsuit, the costs can be enormous, so you need to make sure you have it in place to protect your business.

While there are many types of business insurance, here are some basic types of insurance that most small businesses need.

1. Workers’ Compensation and Unemployment Insurance

Most states require you to have these two types of insurance if you have employees. These types of insurance protect your employees if they are injured on the job.

2. General Liability Insurance (GL)

You should have a general liability insurance or business owner’s policy (BOP). These types of insurance cover property damage, It can protect you from bodily injury and personal injury that you or someone else may suffer.

3. Professional Liability Insurance

If you provide a service, it is recommended that you have this insurance. This insurance will protect you if you make a mistake or fail to deliver the service you promised.

While the exact needs of your business will vary depending on your location and industry, starting with these basic insurance policies will provide a solid foundation for your business.

Human Resource Management for Startups: Teamwork is the Key to Success

Unless you plan to run your business alone, hiring and building an organization should be among your top priorities. You need a strong team to get your company off the ground.

Joe Zawadzki, General Partner at AperiamVentures, says that entrepreneurs need to focus on the “people element” of their business just as much as they do on their products.

“Identifying the people who will be starting your business, understanding what their weaknesses are, and deciding how and when to fix them should be a top priority,” Zawadzki suggests.

Additionally, figuring out how the team works together is essential to building a healthy company culture, Zawadzki points out.

“Defining responsibilities and roles for who does what, dividing up work, how to give each other feedback, or how to work together when everyone is not in the same room will save a lot of headaches in the long run,” he explained.

Finding Outsourced Partners to Make Your Business More Efficient

Running a business can be overwhelming. You and your team can’t do it all on your own. That’s where third-party vendors come in.

From human resources (HR) service providers to business phone system providers, B2B (business-to-business) partners can help your business run more efficiently.

For example, the best business phone systems include an automated voice response (IVR) system that automatically routes calls to the right person.

While not every business needs the same outsourced service provider, most businesses rely on partners for a few key functions:

1. Accepting customer payments

Being able to offer multiple payment methods makes transactions more efficient. Small businesses’ payment processing has a direct impact on their bottom line, so it’s important to compare credit card processors to get the best rates. The best processors should offer pricing that fits your budget, a format that’s appropriate for your transaction volume, and terms that meet your needs.

2. Point-of-Sale (POS) System

Setting up a POS system creates an interface for in-person sales. The best POS systems integrate payment technology with inventory and customer management tools, making them especially valuable for product-based businesses.

3. Financial Management

Most business owners start out doing their own bookkeeping. However, as your business grows, you can save time by choosing accounting software or hiring an accountant.

Earn Customer Trust Before You Start: How to Create a Brand and Marketing Strategies

Before you start selling your product or service, you need to build your brand and create an audience that is ready to start selling. A strong brand makes you easily recognizable to customers, and smart marketing builds enthusiasm and customer trust.

First, start with the following basic branding elements:

1. Key Brand Elements

Logo and Visual Branding: Create a corporate logo that is easy to identify and use consistently everywhere you go. Use a consistent color scheme across your website, social media, and marketing materials to establish a recognizable personality.
Company Website: Build your online reputation with a professional website. Since most customers research businesses before making a purchase, a website is a great way to prove your company exists and build relationships with current and potential customers.
Social Media: Depending on the platforms your target customers spend their time on, use social media to spread the word, promote your products, and connect with your audience.

2. Launch an Effective Marketing Campaign

Once you’ve established your brand, it’s time to market. While there are many ways to market your business (from content marketing to paid advertising), email marketing is one of the most cost-effective ways to get started.
Use a CRM to Manage Your Contacts: Successful email marketing starts with a quality contact list. The best CRM (Customer Relationship Management) software helps you organize customer data and market more effectively.
Get Opt In: Ask for permission before sending emails to your customers. Opt-in forms allow you to send emails, newsletters, and promotions only to those who want to receive information from you. “People get so much junk email these days, you can start building trust by getting their permission in a transparent way,” suggests Dan Edmonson, founder and CEO of Dronegenuity.
Stay Persistent: Create a marketing plan that’s broader than the one you started with. It takes time to build brand awareness, and consistent communication will help you grow your customer base while providing a great product or service.

Grow Your Business

Starting a business and getting your first sales is just the beginning of an entrepreneur’s journey. To be a profitable and sustainable business in the long run, you need to keep finding ways to grow. While growth takes time and effort, you also need to get a return on your investment.

Here are two tips to help you grow your business:

1. Partner with established brands

Partnering with established and successful businesses in your industry can help you reach new audiences. For example, you could offer them free samples or services instead of advertising for them.

2. Give back through charity

Donating to nonprofits or volunteering your time and products can help build your brand’s reputation and increase awareness.

Important Resources

Starting and growing a business is no easy task, but you don’t have to think it through all by yourself. We’ve found trusted resources that can provide expert guidance, practical tools, and even personalized support:

Government Resources

SBA Business Guide: Step-by-step instructions for starting and managing a small business.
IRS Small Business Tax Info: Tax requirements and forms explained.
USA.gov Business Resources: Federal licenses, permits, and legal information.
State Business Registration Websites: Check your state’s requirements.

Educational Resources

SCORE Advisor Resources: Free business advice from experienced entrepreneurs.
SBA Learning Platform: Free online courses and training.
Small Business Development Centers: Local consulting and training programs.

Planning Tools

SBA Business Plan Tool: Build your own business plan.
SBA Market Research Resources: Tools and templates to help you measure your market.

These resources are reliable, up-to-date, and designed to support entrepreneurs at every stage, from writing a business plan to managing business growth.