Whether it’s that long-term, burning desire to create a product or taking full control of your time, starting a new business gives you the best experience for both.
With global networking at its peak, there’s a vast opportunity for you to reach out to people as passionate as you are about building a successful business
This guide will help you learn how to start a business in twelve steps.
- Why Start a Business in 2023
- Basic Requirements for Starting a Business
- 12 Steps on How to Start a Business
- Step 1: Define and Expand on Your Business Idea
- Step 2: Conduct Market Research
- 1. Target Audience
- 2. Industry Competition
- Step 3: Analyze Your Startup Costs
- Step 4: Build a Solid Business Plan
- Step 5: Decide on a Business Structure
- Step 6: Choose a Business Name and Brand Identity
- Step 7: Register Your Company and Get a Business License
- Step 8: Organize Your Business Finances With a Separate Bank Account
- Step 9: Acquire Startup Funds
- Step 10: Hire Employees or Professional Services Where Applicable
- Step 11: Create a Marketing Plan
- Step 12: Consider Getting a Business Insurance
- Questions to Ask Yourself Before Starting a Business
- Frequently Asked Questions
- Business Formats and Scenarios to Consider This 2023
- Wrapping Up
Why Start a Business in 2023
It starts with a business idea. But there are solid, significant data that tells you why starting a small business is worth it.
For instance, Forbes research finds 99.99% of all businesses in the U.S. are small businesses. This tells you that entering this arena is far from experimental. It works for thousands of small business owners, which means it can work for you.
Another reason to consider starting a small business is when you have a great idea of how to solve a common problem that nobody else in the industry is addressing.
Businesses are all about providing value, and it doesn’t always mean creating out-of-the-box products and services.
Value usually means providing the best solutions or better alternatives to people’s everyday problems.
But the most powerful reason is your pure desire and belief in the product or service you’re creating.
Here are some great lessons from Steve Jobs to remind you that a great idea, paired with the desire to build it, leads to a successful business.
Basic Requirements for Starting a Business
Starting your own business can be exciting and lengthy.
Before diving into the nitty-gritty of business creation, let’s breeze through the basics of what you’d need to have.
- Business Idea: Begin by answering your business idea’s ‘What’ and ‘Why.’ Everything about your business plan will revolve around this.
- Separate Business Bank Account: Keep your personal finances separate by setting this up with trusted financial institutions. This helps in cash flow management and financial plan execution.
- Business Plan: Create a detailed business blueprint. This should cover all aspects of your business structure, including specifics on timeframe and execution.
- Business Costs Projection: Detail your initial startup costs and expenses in line with your capital. This helps you spot any financial risk that can emerge within your plan.
- Comprehensive Market Research: Identify your target market and dive deep into their collective profiles. This helps you frame your marketing efforts in ways that attract them.
12 Steps on How to Start a Business
Here are 12 steps you need to do to get all the bases covered and minimize risks that come with all types of businesses.
Step 1: Define and Expand on Your Business Idea
You can’t begin planning without a core idea.
Before investing time, money, and energy in ventures that you think are profitable, it’s crucial to consider these three core elements:
- Technical skills and interests
These three elements narrow down business ideas to those you love to do at your preferred timeframe, coupled with your familiarity with those ideas based on work or personal experience.
As a small business owner, here’s where desire and profitability intersect. Yes, skills play a major role, but nobody said you’d have to do everything on your own.
For example, being a skilled full-stack developer is a huge plus if you’re starting a web design agency.
However, it’s not a requirement. Remember that you can always hire employees in the long run.
When refining your idea, focus on its value to future clients and why you chose it. Here are some things you can do to polish your thoughts:
- Seek Feedback and Evaluate the Idea: The goal is to get multiple perspectives from different people. Don’t limit it to friends and family who tend to be subjective about their views. Seek feedback from colleagues, mentors, or industry leaders.
- Build the Idea into Something Practical: This is where the market demand comes in. You want to make sure you’re creating something that people can use. Even if you started with a vague idea of what your product looks like, framing it as part of the solution enhances your creativity in presenting it.
- Sample the Product in Real Life: This doesn’t have to be your final product. The goal is to gauge people’s impressions of what you’ve built. From their comments, you can start working on making it better.
Step 2: Conduct Market Research
Imagine having a clear business concept. You can envision its success, potential for profit, and everything in between.
The opportunities for scalability are so vast you can see it as a perfect avenue for wealth building.
But before getting too excited about your small business, the first thing you must work on is knowing your niche market.
Who will use and benefit from your product?
When researching your market, you’ll need to approach it from two angles:
1. Target Audience
They are your consumers, so it makes sense to know the details of their demographics.
- What are their common interests?
- What social media accounts do they hang out on?
- Do they prefer video or written articles?
You can use surveys, focus groups, and interviews to get information. You may also do keyword research and read online forums.
2. Industry Competition
Your competition isn’t necessarily your enemy. They can be success stories that can help you polish your business model.
Studying your competition gives you a clear idea of what works for the industry and what doesn’t.
Competition analysis is also a perfect way to brainstorm the added value you can provide to the market compared to what’s already on it.
This step is the perfect way to validate the demand for your product. Once you see a clearer picture of your audience, you understand their needs better.
There’s also a chance you’ll end up tweaking your main product to fit market demand, which is fine.
Step 3: Analyze Your Startup Costs
This step is focused on your new business expense for the first year of operation.
Do you have enough money to fund your startup, or will you need to take on a business loan?
If you’re doing this full-time, you’d also need to consider if you have enough savings to take care of your personal expense.
Any funds in your business bank account should be used exclusively for your new business.
The idea behind this step is to create a ballpark figure of how much money you’d need to cover the following areas for a year:
- Operating Costs: This is your daily business expense that covers the cost of the product or service and other operating expenses like logistics and administration.
- Marketing Initiatives: From digital marketing to print ads, this covers all things related to publicity.
- Product or service: This is the cost of manufacturing your products.
- Shipping costs: This only applies to product-based businesses. Ventures with nationwide operations, such as e-commerce shops, may incur a larger expense for this.
- Employee wages: This covers your team’s base salary, overtime pay, and bonuses.
- Land Rentals for Brick-and-Mortar Business: Unless you own the land where you’re operating, you must record how much rent you pay annually.
- Business Website and Social Media Fees: The cost for this is dependent on several factors, like hosting plans, site maintenance, social media campaigns, duration, and more.
- Inventory Management Costs: This covers all ordering, holding, and shortage expenses.
Although profit-making is the goal, calculating how much revenue you’ll make during the first year can be tricky.
This is because any income within that year is often reinvested back into the business or used to pay taxes and loans.
Creating cost projections for the succeeding years becomes easier by drafting your startup cost analysis.
Step 4: Build a Solid Business Plan
Think of your business plan as your blueprint for a successful business.
It’s a document that details the background of your product, service, and your method of execution.
One of the most common mistakes by many business owners is not spending enough time drafting this plan.
Even if you commit to knowing everything about your new business by heart, making your brain a filing cabinet is unwise.
Harvard research even supports how a written plan increases the potential for business success.
All successful businesses have a business plan, and if you’re still doubtful of its benefits, here are the top reasons to convince you why you need to write one.
- It helps you establish a more precise timeline for achieving each small business goal.
- It enables you to assess business finances by providing insights into potential risks.
- It shows you the present and future resources fit for your business model.
- It helps determine appropriate steps for potential market expansion.
- It increases the chance of attracting investors.
- It increases your chance of acquiring business loans.
Now that you know the value of a business plan, the first question is, how do you create one? Secondly, how long should it be?
The length of a business plan can vary, but the industry standard for small businesses is between 20 to 30 pages.
It can run for more if you use photos, tables, and charts on your document.
In terms of outline, a business plan must contain these ten crucial sections:
1. Executive Summary
This is an overview of your business. It must be concise and is often written in the last part after you’ve detailed all the other sections.
Doing this ensures you have a full grasp of your business structure and can identify all the key elements that should be included as part of the summary.
A great executive summary should contain the business name and location, or if it’s an ecommerce store, at least the domain name, the product (s) or service (s), the company mission and vision, and the purpose of the business plan.
2. Business Description
This is where you explain who you are and provide details on the relevant skills or experiences that you and your team have in line with the product and service you’re offering.
For example, if you’ve years of experience as a chef, you can use it to start a food business offering unique cuisines in your town. That boosts your credibility to provide high-quality goods.
This is also where you introduce your legal business structure, which we’ll talk about more later in the article, including the nature and a brief history of your company.
You can also include an overview of your product or services and mention names of suppliers if you’ve already locked in on a deal.
3. Products and Services Description
Be as specific as possible. You’d want to paint a picture of your product or service and the benefits potential customers will get from them.
Talk about the process of creating your product, its cost, the people in charge of producing them, and how the final product will look in the hands of your customers.
You can even mention your top competitors and highlight key information that makes your product a better, if not the best, choice in your industry.
5. Market Analysis
This part of your business plan is otherwise known as Client Profiling. You don’t only identify who they are but create detailed descriptions, segmentation, and behavioral demographics.
Your goal in this section is to answer the question, ‘What is your customer persona?’
To help you arrive at the answers, you can begin with these queries:
Strategies and Implementation
How does your business operate?
This is the part where you provide a walkthrough of your business’s operation cycle.
Details such as the supply or talent acquisition logistics, the production process, and delivery methods must be included.
If you’re operating a home-based business, you must provide your location, proving its operational feasibility.
For an online business setup, an ordering and delivery mechanism and details on addressing typical online glitches must be established.
You’d also want to mention your operating hours and the number of employees you plan to hire.
If you’re running the business solo, you can be as creative as you want and maybe highlight the advantage of operating it at flexible hours.
Sales and Marketing Plan
Many business owners spend the most time in this section for all the right reasons.
This is where you show how you plan to make money.You can have the best product in the market, but without a strategic means of bringing it in front of your customers, you can’t expect to get your projected profit.Include details on how to promote your small business.
Do you use social media or print ads? What about tapping influencers?
This section must include all your anticipated marketing efforts, including the length and projected expense.
Remember that your product cost will be affected by the amount of money you spend on the backend.
The more detailed you are on it, the easier it is to adjust your cost projections.
Organization and Management Team
Who is involved in running the business?
Introduce your team and the roles they’ll play in your venture.Highlight their qualifications and the depth of their involvement in terms of day-to-day operations.
Are they working full-time or on a consultancy basis?
Providing a comprehensive profile of your organization’s members makes it easier for investors to assess whether your team has the qualifications to create and deliver the product you promised.
For solopreneurs, this means detailing all your qualifications and relevant experiences to run the business.
If you don’t think your credentials are sufficient, use this section to describe how you plan on executing your venture.
Writing this section is a two-way process. First, focus on your direct competitors. Then look within your business.
This is where SWOT analysis comes in handy. You get to identify the strengths and weaknesses of your business and compare them to your competition.
The key part is highlighting your competitor’s weaknesses and showing how you’re doing better in those areas.
You can also touch on the potential challenges you’ll face along the way, provide statistics on how the industry addresses them, and offer your take on handling it as your business grows.
Conducting a competitive analysis is a great way to spot loopholes and areas of improvement before product launch.
It’s also the perfect avenue to discover opportunities you’d otherwise miss if you haven’t made any detailed comparison between your product and your competition.
Financial Projections and Funding Requests
This is where you present your business’s financial statements and projected cash flow.
It’s also where you show your funding requests for business loans.
Considering all the factors involved in starting a business, you must be able to present a comprehensive report of your expected revenue.
If you’re lost on how to go about this step, hiring a certified accountant is your best shot at getting it right.
Showing a comprehensive financial projection displays your confidence in the service you’re offering, which is a plus if you want to win investors on your side.
Exhibits and Appendices
This is considered an add-on section and is optional in many cases.
It’s where you showcase samples of marketing materials, photos of your product, legal documentation from the federal government, and more.
You can also add your management team’s resume in this section to boost your business credibility.
Step 5: Decide on a Business Structure
There are four major types of business structures, and they all have their pros and cons.
Identifying which dynamic fits your services is a priority of any business owner.
1. Sole Proprietorship
This is perfect for solopreneurs who want complete control over the business and don’t mind shouldering all legal and tax implications from the structure.
As the owner, you will bear the full financial responsibilities of the business, including its losses.
It may also pose a risk to your personal credit score, especially if you end up mismanaging your business bank account to compensate for any financial loss.
Though you won’t have to deal with any paperwork and set up an employer identification number.
2. Limited Liability Company (LLC)
This is among the most popular picks for small business owners who want protection from personal liability, ensuring their personal assets remain safe amidst potential financial risks like debts.
An LLC’s existence doesn’t expire unless stated in its articles of organization, so you won’t have to worry about your small business stopping its operation when you change owners.
A notable thing to note is the annual mandatory filing fees. Each state differs in cost, so you’d need to coordinate with your locality.
This can fit your operations if you want to own and run the business with a partner without establishing a separate legal structure.
This business structure is popular for licensed professionals like accountants and attorneys who may want to start their practice but don’t need to be registered as a separate entity.
There are no set limits for the number of partners, but everyone is liable by law to address any issues against the business.
This legal structure fits small businesses seeking funding from venture capital groups.
Your venture will be treated as a separate business entity, giving owners personal liability protection.
This one’s a complex business structure, which means more paperwork is involved, and establishment costs can be high.
But with the unlimited lifespan and limitless shareholders’ headcount, this setup can be the perfect fit for small businesses with huge potential for global expansion.
Step 6: Choose a Business Name and Brand Identity
Name your company well by choosing something easy to remember that represents your product and service well.
This name will be used on your marketing initiatives, including your business website, if any.
You’ll also need to consider the principles your small business stands for. What values are most important to your business?
Building your brand identity is much storytelling as it is strategizing. Potential customers don’t only buy for quality.
They also purchase for the story, the experience, and the relevance they feel when they deal with companies.
Other elements to note in branding include your voice and visual branding. This must be reflected in all your promotional materials, like social media posts, logos, banners, and more.
Step 7: Register Your Company and Get a Business License
Getting a business license has varied requirements depending on which state you operate.
Some of the essential items you’ll need to prepare are the following:
- Employer identification number
- Business name details
- Self-employment tax
- Financial statements
A small business can have multiple licenses depending on the location and the industry it belongs to.
More required permits mean more fees, so factoring this in when creating your cost analysis is important.
Step 8: Organize Your Business Finances With a Separate Bank Account
A different business bank account is always recommended regardless of your business structure.
Even if you’re financing it with your money, a business account will prove essential when you start processing business documents.
Banks often require this before they grant business loans. Also, tracking income and expenses as your business grows is easier.
And it ensures your personal finances aren’t mixed up with your business assets.
If you have many employees, investing in reliable accounting software may be a great option to save you time and resources.
Some of the best tools today can handle bookkeeping, invoicing, and small business administration essential for your daily operations.
Step 9: Acquire Startup Funds
Once you’ve laid down the basics, the next step is to find the money to jump-start your business.
If you have enough cash in the bank or some friends and family members who want to invest in your business, that can be a great way to get started.
But many business owners go for external funding like business grants.
This reduces the chance of having internal conflicts with your loved ones in the event of business failure.
Other common sources of startup financing include venture capital, alternative lenders, angel investor, crowdfunding, and subsidies.
Let’s examine some of these options and see which fits your needs.
- Business Loans: Also known as commercial loans, these are widely available through different local and national banks. They’re also more difficult to acquire. Banks often have stringent policies and requirements before issuing loans, and unless you’ve satisfied their terms, your request won’t be approved.
- Business Grants: These are awesome primarily because you don’t need to pay them back. However, it’s highly competitive and may only cover select industries. You’d need to understand the grant’s stipulations to ensure your business fits its metrics.
- Angel Investor: They don’t come often, but it can mean millions when they do. An angel investor provides all the financial backing required to launch and operate your business. This benefit usually comes in exchange for giving them a part of your company’s ownership.
- Crowdfunding: This is all about letting people know about your business using crowdfunding platforms in hopes of gathering funds from multiple backers. Depending on the nature of your business, this may take time, and there’s no guarantee you’ll raise the amount you need to get started.
Step 10: Hire Employees or Professional Services Where Applicable
Unless you plan on running your business solo, you’ll need a skilled team to help you execute your business plan.
With remote setup becoming prevalent, scouting top talents is no longer limited to your area.
You can outsource services in a full-time or part-time capacity depending on demand.
The key is to get skilled people onboard with a balanced combination of technical know-how and attitude to work with you.
Once you find skilled employees, it is important to create an efficient system for your employee scheduling. Create and share employee schedules to keep your employees organized and increase accountability.
Here are some tips you can use to help you pick the best candidate for your business:
- Attend recruitment events.
- Ask for referrals from friends and coworkers.
- Revise your interview process to focus on task results.
- Consider working with a professional recruiter who can do the screening for you.
- Provide detailed and attractive job descriptions and benefits.
Step 11: Create a Marketing Plan
Any solid business plan includes marketing strategies with a definite time frame and result metrics.
Your marketing plan lays the foundation for how your product and services reach your customers’ attention enough to encourage them to purchase.
Marketing initiatives vary, but the most effective ones include the following:
1. Email Marketing
This remains an attractive digital marketing option because it’s timely and concise.
A well-crafted email campaign also has a solid call to action that encourages readers to buy a product or service.
This strategy has four types: newsletters, acquisition, retention, and promotional.
These must be used strategically to keep your email list engaged and informed.
2. Social Media Marketing
Likely the most popular strategy on this list, social media marketing shows no signs of slowing down.
Promoting your business on the appropriate platform can boost your brand reputation regardless of the industry.
The critical item to figure out is the platform for your campaigns.
You’ll know this after writing your business plan and identifying your ideal customer persona.
Though it’s not a requirement to be present on all platforms, you need to be where your market is.
3. Search Engine Optimization
This is all about ranking high on Google. It sounds blunt, but your services only become relevant when people see your brand on Google’s first page.
This takes time before you can see results and is recommended for startups who don’t mind several months of link-building before finally seeing organic website visits.
4. Influencer marketing
Given its growing impact on younger consumers, this one’s the rising star in marketing. Quality influencers leverage their solid following to promote products.
Before tapping any influencer, you must ensure the person’s background or focus is relevant to your services.
You don’t need to invest in everything; you can always scale as your business grows.
Choose a marketing strategy that can attract customers within your niche.
Step 12: Consider Getting a Business Insurance
Purchasing business insurance policies is essential to protect you from issues like lawsuits, property damage, loss of income, natural disasters, and anything that may derail your business operations.
If you have employees, then workers’ compensation insurance is appropriate. This gives them benefits when they get injured while on the job.
Business interruption insurance is another practical option, covering the loss of income for periods when you can’t conduct your usual operation. A recent example is the emergence of COVID-19.
Companies forced to close but have business interruption cover can use the money to get back on track when restrictions are lifted.
Professional liability insurance also comes in handy when trying to defend your company from a lawsuit initiated by a client about your product or service.
For physical damages to your personal assets, commercial property insurance can you compensate for the losses, provided it’s within their terms and conditions.
Questions to Ask Yourself Before Starting a Business
The steps we’ve listed should put you on the right trajectory for starting a business, but if you’re left wondering if you must pursue your dream business, these questions may help you decide.
1. Why Do I Want to Start This Business?
Knowing and understanding the ‘Why’ isn’t a philosophical mantra handed to you by motivational gurus. It’s the core of everything you do.
In business, your ‘Why’ can be the real deal-breaker. Are you starting a business because you genuinely want to build something helpful to people? If not, what’s the motivation behind it? Is it the money, the prestige, or the connections?
Your ‘Why’ will keep you going for the long haul, and if it’s not grounded on something personal you believe in, you’ll probably need a bit more time to think about it.
2. What’s My Product or Service’s Unique Selling Proposition?
There needs to be something that makes your product different from the rest. Are you adding more features than what your competitors provide?
Your unique selling proposition can mean specs, user experience, cost-efficiency, lifetime warranty, superior customer service, and more.
3. Can I Be My Own Boss, or Do I Need a Team?
You should have an answer to this when drafting your business plan.
If you want to run the business alone, but your strategies and feasibility study demand external help from other professionals, you’d need to rethink your priorities.
4. What are My Goals?
This one’s tied closely to your ‘Why.’ In an ideal scenario, your reason for starting the business and the goals you wish to achieve must align.
For example, if your reason is wealth-building, your goal should be to get this specific profit figure in the next year or so.
If there’s a disconnect between why you’re starting a business between what you want to achieve, think again.
5. How Soon Do I Want to Start?
Working at your own pace is one of the best benefits of running a business, but you must be honest about your preferred timeframe and capacity to stick with it.
It’s crucial to understand the timetable required to set up the business.
Frequently Asked Questions
Do I Need Licenses and Permits to Start a Business?
Few states don’t require permits to operate, but there are licenses you’ll need to acquire from your local government.
So yes, you’ll need licenses and permits, but as to what type and how many, you’ll need to contact your state government to get a complete list of requirements.
How Do I Identify My Ideal Target Audience?
Conducting your market research will give you this information.
You can use a combination of surveys, interviews, and focus groups to understand your customer profiles better.
How Do I Finance My Business?
You can use your savings, ask friends and relatives to invest in your business or use external funding like bank loans, business grants, and crowdfunding.
Choosing the funding option often depends on the amount you’ll need, and you can always use a combination of different types for as long as it’s within your business plan.
Business Formats and Scenarios to Consider This 2023
Building a business can be overwhelming, especially if it’s your first time.
If you have an idea but are unsure about the format or avenue to start, these suggestions may help you prepare the basics.
- How to Start an Online Business: What about making your products readily available online? You don’t have to find a location, and you’ll reach more customers.
- How to Start a Small Business at Home: If you have a decent place at home that can handle simple business operations, you can start earning without renting a separate office.
- How to Start a Business With No Money:Many small ventures started with less to no budget but ended a success. You need to know where to find the money and convince the owners to let you borrow.
Building a business from scratch takes time and money, but with a solid plan, you can save a lot of both in the long run.
We hope you found the confidence to start taking baby steps towards your dream business. The market’s vast and ripe for opportunities.
Which step do you find most interesting? Let us know in the comments!