Small Business
Jun 7, 2024

How to Start a Small Business in 2024 [13 Proven Steps]

Are you tired of workplace politics and rules that limit you from reaching the peak of your career?

Break free and convert your dreams and aspirations into a profitable business.

The 2022 Small Business Administration (SBA) statistics showed that small businesses account for 99.9% of businesses in the United States.

This means that small business owners contribute immensely to the growth of the economy.

Starting a business isn’t a stroll in the park. But if you strive and work smart, you can succeed in no time!

From refining your big idea to scaling your small business, we’ll show you how to start a small business in 13 easy steps.

How to Start a Small Business: Step-by-Step Guide

These easy steps will help you become a small business owner:

Step 1: Refine Your Big Idea

Before you start a business, you should know the type of product or service to offer.

Now, it’s normal for people to say, “do what you love.” But sometimes, what you’re passionate about may not be profitable.

For example, you love baking but are not good at it, and there are already 20 pro bakers in your community.

Therefore, starting a bakery business might not be the right idea unless you’re exceptionally skilled.

So, before you jump on an idea, you should ensure that you have the right skill set for it. Also, it should be sellable and scalable.

You may want to check out these profitable business ideas:

Step 2: Conduct Market Research

Now that you have a great business idea, it’s time to identify your customers and competitors.

Doing market research helps you to identify your target market and its characteristics, such as how many people are willing to pay for your product or service and where they’re located.

These details will let you know whether there’s a demand for your offering so that you don’t end up wasting time and resources.

You can use existing data like market trends or conduct direct research using surveys, questionnaires, interviews, or focus groups.

After that, focus on your competitors by conducting a competitive analysis.

This analysis lets you determine who is competing for your target market. It’ll help you ensure your business offers more value than your competition.

For instance, if your competitors are selling frozen chicken, your unique value proposition could be home delivery of ready-to-eat chicken with a shelf life of 2 weeks.

This way, customers no longer have to go to the store to buy and prep the chicken, which is appealing to busy people and those who don’t like to cook often.

Step 3: Determine Your Startup Costs

It’s important to know how much money you need to start a small business.

Besides, your business may not yield profits immediately, so you may have to overestimate.

Legal fees, office space, a business credit card, and other operating expenses add up quickly. And you don’t want to run out of money while setting up your business.

Also, knowing your startup costs will help you write a comprehensive business plan, choose a compatible business model, apply for funds, seek investors, and plan for growth.

Here are a few steps that’ll help you determine how much you’ll need when starting a business:

Identify your expenses

Whether you’re starting a physical shop or an online business, there are certain costs you should have on your list, such as:

  • Business Insurance
  • Advertising
  • Office Space
  • Equipment and Supplies
  • Business License
  • Payroll
  • Website Design and Hosting

Estimate the cost

While some expenses have defined costs like business name registration and license, others don’t.

So, you must research how much similar small business owners pay for similar expenses.

You can also contact vendors to get firsthand information for accurate forecasts.

Organize and add up the costs

It would help if you organized the expenses into one-time and recurring payments.

One-time payments include equipment, logo design, and name registration.

Recurring payments include rent, utility bills, and salaries. Add up the costs to get the total amount required to start a business.

As your business progresses, you’ll discover other business costs that you didn’t factor into the plan.

Hence the need to cushion your budget to accommodate growing needs.

Step 4: Craft a Solid Business Plan

A solid business plan is the roadmap of your new business. It helps you expand your business idea and identify potential problems.

Also, a plan can help you get funding from potential investors or attract genuine business partners.

After all, it clarifies how much revenue you’ll generate as your business grows, including when you’ll break even.

There’s no perfect way to structure your business plan, but it should cover the important elements of your business.

You can check out the full breakdown of how to write a business plan.

Here are some things to consider when crafting a solid business plan:

  • Business model: Your business model should be scalable to accommodate more customers without increasing costs when the business grows. Examples of scalable business models are freemium, franchise, advertising, and subscription.
  • Exit Strategy: You need the plan to move on or retire when the time comes. An exit plan could be selling the company to someone you know, merging with a bigger business, or liquidating your assets.

Step 5: Fund Your Business

Small businesses have different financial needs, and there’s no one-size-fits-all financial plan.

Since you’ve already figured out how much you need to launch your business, you need to determine how to cover those costs.

Thankfully, there are different funding sources available, especially for a new business.

Bootstrapping

This option is also known as self-funding. You can leverage your financial resources, such as 401(k) and personal savings, or capital from family and friends.

But while bootstrapping gives you control over the business, you’ll lose your wealth if the business fails.

Venture capital

If your startup costs run into millions of dollars, you may need investors. This type of funding is most suitable for high-growth companies.

However, venture capitalists usually request a stake in the company.

So, you should be ready to give up a percentage of your ownership and control over the business.

Crowdfunding

You can launch a campaign to raise funds through crowdfunders.

They don’t have a stake in your business, and if things go south, you’re not obliged to pay back the money.

However, you must offer them perks, such as name recognition or the product you intend to sell.

Small business loans

Banks, Credit Unions, and the Small Business Administration (SBA) issue small business loans provided your business plan shows a five-year projection.

Although you’ll have absolute control over your small business, you need to compare terms and conditions before settling for a lender.

Small business grants

These are offered by the federal government, and you don’t have to pay them back. They aim at promoting innovation and export and are quite competitive.

Step 6: Choose a Legal Structure

Your business structure will determine your business registration requirements, personal liability, and taxes. Common business structures are:

Sole proprietorship

You’re automatically in this category if you run a one-person business and have yet to register as any other type of business.

Although you’ll get a tradename, it doesn’t separate your personal assets and liabilities from that of your business, making it difficult to access external funding.

A sole proprietorship is low-risk but suitable for startups in the testing phase.

Limited Liability Company

LLC members are regarded as self-employed and mandated to pay taxes as contributions toward social security and health insurance.

This structure is suitable for businesses with medium to high risks.

It’s also ideal for small business owners who want to pay lower taxes and protect their personal assets in case of bankruptcy.

Partnership

A partnership is common among multiple owners who want to test the viability of a business before choosing a more formal structure.

If you can find partners whose skills complement yours, this structure would be ideal.

Corporation

This business structure separates the owner from the business. It offers personal liability protection, and the business can have as many shareholders as it deems fit.

However, it’s expensive to form and requires a lot of paperwork.

It’s important to choose your business structure carefully.

Consider discussing it with an accountant or attorney to choose one that matches your current and future business needs and offers adequate legal protection.

Step 7: Register Your Business Name

After choosing a legal structure, you need to brainstorm a business name.

It should be catchy enough to attract attention on social media platforms and reflect the product or service you offer.

Some states require you to get your business name as a legal entity, depending on your business structure. It prevents another business from using the same name in that state.

Additionally, you can register a “doing business as” (DBA), also known as a fictitious name or trade name.

It allows you to operate with a different name from your entity name or personal name, making it ideal for sole proprietors.

A DBA is also appropriate for companies that want to differentiate their lines of business.

For instance, if your entity name is Sarah Bakery, LLC, your DBA could be Sarah’s Cakes.

At the national level, registering as a tradename protects the name of your business and its products and services.

And if you want to take your brick-and-mortar business to the internet, you’ll have to register a domain name, then create social media accounts, such as Instagram, Facebook, and Twitter.

Step 8: Get an EIN and Apply for a Business License or Permit

Your employer identification number (EIN) enables you to pay taxes at the federal and state level, open a business bank account, and hire employees.

Sole proprietors don’t need an EIN. But if they intend to hire employees in the future, it would be helpful if they got it earlier.

Besides, it helps to separate personal taxes from business taxes.

You can get an EIN from the Internal Revenue Service (IRS) website.

Furthermore, most small businesses require both a business license and a permit from the federal or state government to operate.

If your business is in a major industry like aviation, agriculture, or transportation and logistics, you’ll need a federal license and permit.

State licenses and permits, on the other hand, cover a wide range of activities, such as retail, restaurants, vending machines, and plumbing.

The fees and requirements for obtaining a business license and permit vary by state and industry.

You can check your state government’s website for more information about your area.

Step 9: Open a Small Business Bank Account

Whether you’re ready to accept or spend money on your small business, you need a business bank account.

Banks will only issue a business loan if you provide your business bank account details.

Additionally, it’s a good practice to keep your personal finances separate from your business finances for accurate tax filing.

And a separate business bank account comes in handy here.

You can choose a merchant service account, a checking account, or a savings account.

However, a merchant account allows you to accept credit card payments, which is an advantage if you plan to collect payments online.

Here are the requirements for opening a small business bank account:

  • Employer identification number (EIN)
  • A copy of your license
  • A document showing agreement ownership agreement
  • Your business formation documents

Although some people find it convenient to open a business account in the same institution where they have their personal bank account, you should consider these factors before doing so:

  • Minimum requirements and fees, such as transaction and maintenance fees
  • Introductory offer
  • Interest rates
  • Merchant processing services
  • Fund insurance
  • Availability of mobile app

Step 10: Purchase a Business Insurance Policy

Whether you have a simple or complex business structure, your business needs an insurance policy.

You may face theft, property damage, or a lawsuit from an offended customer or shady employee, so you need adequate protection.

There are different types of insurance for small businesses, and the requirements vary from state to state.

  • General liability insurance protects your business from loss due to bodily injury, medical expenses, property damage, and slander.
  • Product liability insurance protects against loss due to bodily injury from using a defective product.
  • Commercial property insurance protects physical business assets from damage caused by vandalism, fire, or wind.
  • Professional liability insurance covers financial losses caused by negligence and error in service delivery.
  • Workers’ compensation insurance covers medical bills for workers who sustain an injury on the job.

Step 11: Acquire Business Tools

As a small business owner, you need tools to streamline workflow and stay productive. Consider getting these essential tools:

  • Accounting software for bookkeeping, filing taxes, and preparing financial statements
  • Customer Relationship Management (CRM) software for tracking and managing customer journeys from all touchpoints
  • Communication software for connecting with employees, especially if you’re working remotely
  • HR software for facilitating the recruitment process and onboarding
  • Invoicing software for generating billings for products and services
  • Point of sale (POS) for processing customer payments

Although accounting software can help you manage your small business finances, you’ll need to hire an accountant as the business grows.

Also, your POS may come with customer and inventory management tools, reducing the number of tools you need to purchase.

Step 12: Build a Brand and Advertise Your Business

Before you open your doors to potential customers, you should build a brand and create awareness about your products and services.

Design a Logo

Your logo is among the first things people notice about your business because it appears on your products, website, social media, and business cards.

Therefore, it should make a great first impression and visually project the values of your business.

Build a Website

With most businesses moving to the internet, it’s crucial to build a website.

You don’t have to do it from scratch, as most platforms offer drag-and-drop tools for creating beautiful sites.

Also, you can either choose to create an e-commerce store for selling products or an informational site for educating customers.

Whichever option you choose, ensure that potential customers can find information about your opening and closing hours, physical office address (if available), and contact information.

List Your Business in Directories

Listing your business in various directories, such as Google, Yelp, and Facebook, increases its visibility because customers use these trusted sources to find professional services.

Not only does it optimize your website to appear on search engine results pages, but it also provides an opportunity for customers to give reviews and ratings, which adds to the credibility of your business.

Social Media Content Marketing

Your target audience may be on social media. So, you should make plans to reach them through content marketing. This includes short videos, testimonials, and graphics.

Also, when posting content on social media, you should ensure that it’s relevant and interesting enough to make people click on your link to visit your website and purchase your product or service.

Step 13: Grow Your Business

Your business won’t remain small forever. It would be best if you made conscious efforts to increase your customer base, customer experience, and revenue.

You can pick a cue from what your customers like or what your competitors are offering, then add new features to your products and services or create something different but appealing.

Additionally, you can collaborate with more established brands.

They may be willing to promote your products in exchange for a free sample.

You can find most of these big brands during networking events, which is a great time to distribute your business cards and get your name out there.

Volunteering for good causes and charity organizations is another unconventional way of promoting your brand.

Furthermore, if marketing your business on social media is time-consuming, you can invest in an automation tool that’ll assist you in scheduling posts.

Other tasks that require automation include email marketing, lead generation, bookkeeping, sales, and customer service.

More importantly, you should ensure that your products or services offer the amount of value you place on the price tag.

If you’re underpriced, you’ll be shooting yourself in the foot because you may be making losses.

On the other hand, if you’re overpriced, not everyone will be able to afford your products. But offering tiered pricing targets people of different income levels.

Frequently Asked Questions

How Can You Start a Small Business With No Money?

You can start a business with no money or little funds if you’re resourceful and willing to put in the work.

First, you have to validate your idea to ensure it’s viable. After that, you can contact family and friends for capital or seek government grants.

However, if you’re working a 9-5 job, it won’t be a good idea to quit unless you’ve saved enough funds to launch your idea.

What Is the Easiest Business to Start?

The easiest business to start is a service business. In most cases, you don’t need costly equipment and supplies to begin.

Some examples are housekeeping, dog walking, graphic design, and event planning.

Wrapping Up

Starting a small business is no mean feat. It takes time, resources, and a bit of courage.

So, whether you’re still nursing the idea or you’re ready to get started, don’t forget to validate your idea to ensure there’s a ready market.

Also, your startup costs should be clearly stated in your business plan so that potential investors and partners will weigh the risks and benefits of investing in your business.

Once everything is going as planned, make efforts to expand your customer base and keep them satisfied by offering value.

You should also manage your finances to avoid acquiring debt.