How to start the business of your dreams
8 min read
February 01, 2021 • Block Advisors
Wondering about what starting your own business is all about? Launching your own company can be a rewarding experience and a great way to make money and build a dream. But before you launch your small business, you need to be aware of a number of things that are critical to reaching your goals.
The steps to starting a business are not as easy as you think—it includes important details that you have to put in place. The more you know going in the more control you have to become a successful entrepreneur. Start off on the right foot by learning the proper steps to starting a business.
What do you need to start a business?
One of the good places to begin is answering the question: “What do you need to start a business?”
Make sure you cover all bases before starting your business and remember to stay organized and prepared. Planning is a vital part of a successful business.
With that being said, here are some tips for starting a business:
1 – Get feedback on your business idea
Before your business can get off the ground, the first thing you need to do is validate your idea. Will people want what you’re selling? Research the competitive landscape to learn more about the market and how to differentiate and price your product or service. Seek out prospective customers and ask them about their purchasing habits and preferences, or better yet, have them test out your product or service.
Then, ask for their feedback to see if they’re satisfied or if you should adjust accordingly. You can also consult a mentor or expert in the industry to gain valuable insights about the business landscape and collect tips on how to overcome certain obstacles.
2 – Create a business plan
Next step to starting your own business – creating a blueprint through a small business plan! A business plan is an essential tool to outline a roadmap for your company. It is a written guide that helps you project the future of your business and gives you a clear direction of what to plan and expect.
Make a business plan that guides your business’ growth. It should include the following:
- Audience/customer base
- Business structure
- Company description
- Employee plan
- Financial predictions
- Growth plan
- Market analysis
- Marketing strategies
- Product/service details and market differentiation
3 – Develop your pitch and spread the word
Learn how to tell your unique story by understanding what makes you stand out. What is different about your personal brand and why do people like working with you? Start out strong by building awareness with friends, family and your community. This is not the time to be shy—get out there and show people your capabilities and the many great reasons they should be doing business with you.
There are many things to consider when you start a business but following these 15 steps will provide you with a strong foundation to tackle any challenges that come up along the way. Remember, becoming an “overnight success” is rare: Instead, it may take a year of planning.
4 – Build your business’ brand
We sometimes think of “brands” as household names. But every business, no matter how small, can work at creating and reinforcing a unique brand. It can consist of many elements, including:
- Visuals: Be consistent with brand iconography. Use the same colors, fonts, and graphics on everything that comes from your business, whether it be on social media, sales forms, business cards, or written communications.
- Copy: The copywriting on your website can pack a punch and persuade people to buy your product or service fast. Think wisely about the words you want to use and develop the right tone.
- Customer service: Excel here, and your company will be associated with an exceptional experience.
- Product and/or service quality: How will customers come to know and love your brand?
5 – Obtain financing for your business
According to data from the Small Business Administration (SBA), small businesses secure $600 billion in loans each year. When you’re getting started, it’s particularly important to have enough money put away to account for potential downturns, especially if you don’t already have income flowing in.
Despite this, most new business owners report getting started with a few thousand dollars in financing, which isn’t much, especially if you have recently left a job to start a company. Spend the time to project all your upcoming expenses for the first six months of your business and evaluate whether you’ll need to go beyond self-financing.
Financing can also come in the form of small business grants, loan programs offered by the Small Business Association, or online funding platforms. You can consider borrowing from friends and family, but just keep in mind that this sometimes complicates matters.
6 – Decide on a business structure
As you begin your own business, you must think about the right business structure for your company.
Examine and research all the different business structures that exist and decide the best option for your business:
- Sole proprietorship
- S corporation
- Limited Liability Company (LLC)
Based on the future you envision for your company (like how many employees you plan to hire and if you plan on keeping or selling your business in the future), you’ll want to choose the business structure that provides you with the best legal protection and least amount of tax responsibilities.
Learn more about the advantages and disadvantages of each type of business entity structure.
7 – Register your business with the government
You need to register your business with the government so you are assigned a state and federal employer identification number. You can obtain an Employer Identification Number from the IRS and with your state revenue agency. The legal name you use to register your business will also be used to legally operate and obtain financial help if needed. Need help obtaining an EIN? Consider using using a document filing service such as MyCorporation. They can quickly and easily file for an EIN with the IRS on your behalf.
8 – Find out your tax requirements
Your business structure determines the type of tax return you have to file with the IRS. At the federal level, business taxes include the income tax, the self-employment tax, employment taxes and excise taxes.
At the state level, business or corporate taxes depends on the legal structure of your company and the state where it does business. The more organized you are with your taxes, the fewer fees and penalties you will pay.
9 – Separate your business and personal finances
Upon starting a business, you need to open a separate business bank account. With this account, keep track of the money received from your business and you can establish a good financial history for future funding requests.
Separating your business and personal finances—regardless of what business structure you choose—is a must. It’ll make your accounting, quarterly and end-of-year tax filings easier if there is a clear divide between your business and personal funds. It’s also important to separate your business from your personal life to avoid money issues and financial consequences.
Before deciding to open a business bank account, you should evaluate your options to identify banks that specialize in helping new and small businesses. You’ll also want to consider account minimums, servicing fees, available interest rates on credit lines and current new account promotions.
10 – Register for a sales tax permit if you’ll be selling products
Find out what your state’s specific requirements are and how you can register. To register for a sales tax permit in your state:
- Go to your state’s Department of Revenue site
- Look for the Sales and Use Tax area or section of the state
- Follow directions to obtain your sales tax permit (States require the purchase of a bond as part of the process)
11 – Register for other business permits, licenses, and insurance
The Small Business Administration (SBA) site contains links to information about federal and state requirements for specific types of businesses. You’ll also want to find out what types of business insurance you should have. The SBA is a good resource here, too.
12 – Seek legal advice
It’s smart that entrepreneurs seek legal advice before starting a new business. Most business owners think of legal counsel only when they run into a problem, but legal consultation is the best way to prevent trouble and set the company on the right path. Keeping your business out of trouble or preventing business issues with the help of an attorney is the best proactive preparation. A legal problem can critically impact the operation of a company. Depending on the structure they choose it is likely they will need some documents drafted such as bylaws for a corporation, an operating agreement for an LLC or a partnership agreement for a partnership.
13 – Build a business emergency fund
An emergency fund can cover your expenses in a time of a business “drought” and help you avoid financial disaster. It can also help cover your tax requirements. Move money every month into an emergency fund to build your savings and be prepared for any financial situation so you can focus on developing and growing your business.
14 – Watch out for your own best interest
Starting a business means many more demands on your time. You’re less likely to succeed if you run yourself ragged and don’t look out for your own personal needs. Maintain balance in your life, and your little-business-that-could stands a better chance of flourishing.
15 – Find help
Managing and tracking money is difficult. If you only need to create invoices and track expenses, for example, there are websites that will accommodate that functionality. Others help you estimate the quarterly estimated income taxes that you must start paying now based on your income and expenses. Cloud-based solutions like Wave can help with this!
How to start your own business – Final thoughts
Anyone can start a business, so it’s up to you to educate yourself by answering the age-old question of how to start your own business…
Point blank: read the above steps to understand the process of launching a new business. Whether you’re starting an e-commerce site selling jewelry or starting a consulting firm, the steps will be similar.
And get help!
Our small business certified tax pros can help answer your tax and business entity questions. Learn more about how our tax pros can help you.
If you want to handle accounting on your own, explore Wave software. With Wave, the small business accounting and invoicing software, you can easily manage your finances online.