By Cooper Nelson
Risking it all to start a business is exciting yet inherently stressful. Numerous skills and planning are required to be a successful entrepreneur — not to mention the specific considerations every entrepreneur has to take into account when beginning a startup company, including:
Regardless of the field you are looking to break into, someone’s likely already in the race or at least adjacent to it. In the U.S., upward of 4 million business applications are submitted each year — and that number is steadily rising. Luckily, there are certain steps you may take to be more prepared than your competitors.
Every path to startup success will look slightly different, but there is plenty of overlap. Sometimes, steps are optional depending on your goals and prior experience.
A business degree isn’t something you can magically achieve overnight. However, there are ways to circumvent a long, arduous degree program, such as transfer credits or credit for work experience. University of Phoenix’s Prior Learning Assessment provides an opportunity to apply experience toward college credit. If you don’t already hold a degree in business, you may want to pursue an online business degree program, which can also help save time and money. You can choose from many avenues to take your business learning journey, including specializations such as:
Those are just some of the available tracks, and some are available as certificates in addition to a degree. Plus, there are many things you can do with a business degree. Even if you have previously earned a full Bachelor of Science in Business, you may benefit from earning an additional specialized certificate; you might pick up a Business Analytics Certificate, for example, to sharpen your data management and decision-making skills.
Likewise, if you are still looking into what you can do with an MBA, you could opt to take specific courses that interest you. For instance, taking a course on leadership may help prepare you to oversee employees if you haven’t had experience in that sector before.
If you don’t have time for firsthand experience before diving in, try searching for a mentor. Relying on a professional in the industry for help regarding running your business may be extremely helpful. Your mentor could be someone you know personally or someone you’ve found online. To locate a business professional who has accomplished something at least adjacent to what you are initiating, try exploring these sources:
Ask around, either online or offline. You never know who you may have connections with or who might be able to help you figure out tough situations in the future. Obstacles inevitably arise in any field, and having a seasoned professional to fall back on could save you from some setbacks and stress.
This first mandatory step seems obvious, but there are some caveats. Your business idea should not only satisfy demand, but it should be able to stick out among competitors in the same sector. If it’s not a completely new idea, it should at least put a unique spin on existing offerings. This special twist is known as a unique selling point.
Further, ensure that your idea isn’t just jumping on trends. It’s one thing to develop an idea that spreads from person to person; it’s another to try to piggyback on fads that will fade. For instance, subscription-box demand saw a decline — but innovative marketing during the COVID pandemic has helped drive a resurgence in these services. Not all trendy business ideas will be so lucky. Make sure that your offering will stand the test of time by looking at historical data in the same sector.
In addition to vetting your initial idea, some more research is necessary. A deeper look will include research into:
Of course, the preliminary data you gather probably will change during your business journey, but it will give you a good baseline for determining the feasibility of your business idea. It’s also a good idea to run your business idea by trusted friends or family. This process may unearth obstacles or opportunities you hadn’t considered while immersed in the planning stages.
During research, you identified all possible target audiences for your business. It’s crucial to narrow these possibilities down to a clear target market as quickly as possible. This will inform your marketing budget, campaign, logo design and so much more.
For instance, a vegan bakery may want to target everyone, but focusing on a younger, local vegan crowd may be the best path based on research. A vegan bakery could target a variety of audiences — from wealthy, upper-class event hosts to gluten-free, trendy, middle-class soccer parents.
Picking a single focus doesn’t mean your bakery can’t sell to all demographics, but your target audience should make up the majority of whom you expect to sell to. This way, your resources will be allocated to target customers who will help you realize the highest return on investment (ROI).
Once you’ve determined there’s a market for your idea, you can use the pain points to narrow down which services or products to offer to customers. This step transforms your business idea into a reality. Investing in quality products — or tailoring impeccable services — shows customers it’s worth it to invest in your business.
When picking services or products to invest in, it’s important to calculate your projected ROI. This can be found by subtracting the price of goods — including labor, shipping, tax and other extraneous costs — from the projected sale price. You can accurately predict this after researching historical data from similar products or services in a similar service area.
Even if your reason for starting this business is clear in your head at the beginning, you’ll most likely need a reminder when the going gets tough. For this reason, it’s best to create a clear mission and have it in writing. The mission will change, of course, as you go along — it’s normal and healthy for a business’s purpose to evolve.
A tangible mission statement allows you and your employees to come back to your company’s roots. It also shows potential and current customers what you’re all about. Remember to:
The shorter and more memorable, the better. You want your potential employees, clients and business partners to easily understand and remember your mission statement.
For example, Google’s mission statement is “to organize the world’s information and make it universally accessible and useful.” This appears at the top of the company’s information page. It doesn’t have to describe everything Google does as a search engine, just what its goals and values are.
Getting serious about your startup means picking a business model. Opinions vary about the definition of “business model” — but in this case, the model is the basic strategy and functions by which your business will run. That’s why this is so important to determine ahead of time.
When choosing which model is best for your new business, you must be mindful of several factors, such as:
Each business model will have different considerations, but it’s crucial to keep the context of your business and its idiosyncrasies top of mind. Determining how you want to bring in money will also guide you in choosing between the types of startup revenue models:
Not every business model will work with your business idea, and each model has its pros and cons.
You may even choose to combine different business models now and in the future. This will create opportunities for more streams of income and experiments to figure out what brings in the best profit for your brand. This could change from year to year or stay relatively stable. For instance, your main model could be the reseller model, but then you could incorporate bundling during holidays.
Your business plan will largely depend on the business model or models you choose to follow. You may opt for either a traditional or lean plan and adapt the format to suit your needs. It’s best to have a written copy of the business plan to refer to, even if you’re certain of how you want things to pan out. There will always be caveats, and it will help to have a tangible reminder of your business strategy as you go along.
Much like the mission statement, your business plan probably will change with time. In the beginning, you might opt for a lean, concise plan. However, the core elements of a traditional business plan usually remain the same:
A leaner business plan structure may include:
Each bullet point in the lean structure will include more concise information — possibly in bullet points of its own. Remember that there’s no specific way to go about drafting a business plan. You may want to use charts and graphs to illustrate points for any potential business partners or sponsors.
However you choose to go about your business plan, it should reflect how you want your company to operate, internally and externally. If you aren’t sure about some of the information that should be included as listed above, the next steps will detail how to go about procuring the necessary details.
To write a solid business plan, you have to be acutely aware of how much funding your business will need. Consider all avenues of business finances. It’s tempting just to think about the cost of goods and sales price, but it tends to be a bit more complicated than that — especially when you’re getting started.
Calculating your startup costs will take some attention to detail, but it’s crucial to project as close as you can to the actual funding amount. This way, you’ll be able to have a zero-balance balance sheet to show investors exactly where their money is going. Besides, having a financial plan outlined can help prevent getting in over your head.
Depending on your type of business, you may be eligible for certain tax deductions. Calculating your startup costs highlights those areas and projects how much you can claim when filing taxes for your business. Some costs to consider include:
This isn’t all-inclusive, and it will look different for every company — especially if you’re solely brick-and-mortar or solely online. Universally, however, you want to estimate as close as possible to the actual amount you’ll spend. This can be tricky, but use historical data from similar companies or similar personal purchases. The goal is to project five years of expenditure.
Sometimes, startups can fund themselves — either partially or wholly. This doesn’t include taking out a business loan. It usually derives from the business entrepreneur’s savings or alternate income.
Investors may include individuals or organizations that provide money toward your business. Usually, this is a transaction in which the investors expect to receive financial gain in the end. For someone to invest in your business, you must convince them — as transparently as possible — that the money they put in will be returned to them, and then some.
Types of investors typically include:
If you aren’t confident that your business will make money for your investors, you may want to look at alternative options for funding. Venture capitalists, for example, sometimes offer startup camps to help growing businesses secure seed funding. You’ll need to perfect an “elevator pitch” to sell your idea to any of the above investors.
With the multitude of platforms available, you’ve probably heard of crowdfunding. Formally, it’s the process of procuring funds, typically small amounts, from a large number of people. Fundraisers mostly do this online through various sites.
While this is a popular medium, it can be hard to stick out. The saturation of startups attempting to gain traction through crowdfunding means you’ll have to use a bit of finesse to make this strategy work for your business. At the very least, you’ll want to:
Sometimes, people give out of the goodness of their hearts and because they want you to succeed. Other times, though, they are prompted to give only if there’s an appealing reward in it for them. This can be anything from a fun T-shirt to a free service after your business launches. Crowdfunding works, but only if you get creative and can reach a large number of people willing to donate.
We’ve already mentioned banks as a possible source of funding, but other organizations also might provide loans and grants. In fact, a variety of companies exist to fund small business startups. They are typically listed on a register of grant opportunities and may vary depending on your location and field of business.
Loan and grant opportunities will fluctuate but are usually offered on a yearly or quarterly basis. It’s worth it to often check your preferred grant database for updates. There are grants specific to certain demographics or business types as well, so identify how your business is unique and do a quick search. Some of the more popular small business grant sites include:
Also remember that loans need to be paid back — grants do not. Both types of funding may come with stipulations, and these are typically included in the fine print during the application process. Be aware that this process may be lengthy, and you may have to apply to several institutions before one bites.
Most banks offer the option to open a business account, and you’ll need to set one up to receive funds. You may want to do so with a bank you trust and at which you are possibly already an account holder. This way, you can easily transfer any funds that are for business purposes.
You may be inclined to put all the funds in your own account, but there are many benefits to maintaining a separate business account instead. Business banking allows you to:
Setting up a business bank account is simple. You typically only need an Employee Identification Number (EIN) from the IRS. Then, you can start accepting funds into your official business bank account.
If your business is completely online, you can skip this step. However, you still want to be mindful of where you’re technically conducting business, as those rules and regulations will likely apply to your business — even without a physical location. Mobile businesses, such as food trucks, or even home-based businesses, such as bakeries or eBay sellers, are some types of businesses potentially affected by locale.
Online businesses may still have to make physical considerations, such as:
If you do plan to have a fairly stable storefront or office, it’s imperative to choose the location wisely. Of course, you’ll want to determine the commute from your own residence, as well as the market stability for similar businesses in your area. However, there are other, less-obvious boxes to check.
If you don’t own a commercial space, you are likely going to have to lease one. When looking at contenders for your brick-and-mortar spot, consider the lease length first and foremost. If you’re used to renting residential spaces, it may come as a surprise that commercial leases tend to require longer commitments.
The typical lease for a commercial space is three to five years, but they can run anywhere from one to 10 years. These long-term contracts are put in place to protect the landlord from having a vacant property. It’s often hard to find an established business to take over a commercial lease — at least much harder than finding a residential tenant.
In any case, use your financial projections to decide on a lease length. If you project making enough profit to cover three years, don’t extend your lease past that time. There are possibilities of buying out your lease, but this isn’t ideal and could cost you more than you can shell out when it comes down to it.
Unlike residential spaces, commercial buildings often leave repairs, replacements and improvements to the tenant. Keep this in mind when selecting a space. If you have to make substantial adjustments to the space to run your business successfully, you may want to reconsider. Add these projected renovations to the monthly rent to make sure you can safely cover it.
If you get into a longer contract, you have the benefit of not seeing much change in your rental price. If you have a shorter lease, be prepared for your rent to increase if you re-sign the lease. In any case, you want to stick closely to your rental budget. When you’re calculating this budget, include utilities and commute.
It may be hard to estimate what you can afford if this is your first commercial space. Often, the prices are listed per square foot, so this complicates things a bit more. However, there are ways to calculate exactly how much your sales can cover per square foot. Do your research, secure funding and do your best to estimate with a little wiggle room. Make sure to accommodate for off-seasons and times when your sales may be down.
A business model identifies how you plan to bring in revenue, but a business structure is a little different. When registering with the IRS, you have to choose a structure for your business to operate under. This is more than a label — it has an impact on:
It sounds complicated, but each structure has clear-cut distinctions that will help determine where you and your business fall. As a best practice, consult with an accountant or tax lawyer prior to starting a business, as there are key considerations and implications by starting one without a proper plan in place.
A corporation, also known as a C corporation, designates your business as a separate legal entity. This makes it the option with the least personal liability — but it’s also the most expensive to form. Additionally, you’ll have to keep detailed records and report more information to the IRS than you would with other structures.
Your business structure should be labeled as a corporation only if it’s:
The business shares should also be able to be easily traded, meaning that shareholders may sell their shares on the market and see a return on investment. A drawback of forming a C corporation is that sometimes you are double-taxed — on personal income taxes and when the corporation sees income. Typically, startups will not choose the C corp business structure.
An LLC is similar to a corporation in that, as the name implies, the person or people involved have limited liability. This means business owners and stakeholders are typically not responsible for any financial obligations the business may incur. However, this type of structure has more relaxed rules for recordkeeping and management.
If you form an LLC, you should be in a position to:
There are certain caveats in the way the IRS treats LLCs during tax filing. Essentially, an LLC is a mixture of corporations, partnerships and sole proprietorships. Most business types can be registered as LLCs, but they should only do so if they are prepared to pay the fees associated with the greater protection if legal issues should occur.
A partnership is a more relaxed business structure. It’s the convergence of two or more people to form a business relationship. They also share responsibility for any losses or issues that may arise — unless they file as a limited liability partnership (LLP). An LLP is similar to an LLC but with fewer restrictions. There are fewer fees to pay up front, but the partners should:
You may choose to form a partnership if your startup is more informal. You may want to test out the business idea before forming a more solid and consequential business structure.
An S corporation is adjacent to a C corp, but it avoids the double taxation that sometimes happens with C corporations. This is possible with special consideration depending on the rules set forth by your state. Again, startups typically won’t file as a corporation, but this is something you may want to look into down the road.
A sole proprietorship allows you to have complete control of your business — and is automatically applied to your business even without registering. However, this means your assets are intertwined, leaving you personally responsible for any financial obligations or debts of the business. The lack of upfront fees is nice, and you may want to choose this option when your business is:
Sole proprietorships cannot sell stocks, however, and this makes banks less likely to agree to funding via loans. You can usually change your business structure easily — especially if you are moving from an informal structure, like a sole proprietorship, to a more formal structure, like an LLC. There are also other business structures to consider, but those listed above are the most common.
At this point, you probably have a business name in mind. If not, that’s also OK — especially because you must consider factors when naming your business. Best practices for choosing an eye-catching, appealing name for your business include:
These aren’t hard-and-fast rules, but they can help you narrow down name choices from your brainstorming sessions. There are also points to consider in using the name for legal purposes, social media, a website and more. You’ll want to do a Google search, social-media search, business-entity search and domain-name search to make sure no one has already snagged your perfect name. This will help avoid legality issues as your business grows.
The best way to establish your business and lay claim to its name is to register it. You can do this several ways, including:
Doing any (or all) of the above will protect your business name from being used by other people and organizations. You’ll also need to register your business name in your state — and sometimes with a fictitious name — to do certain things, such as open a business bank account. The requirements vary by location, so check with your state to see the laws and limitations of registering your business name.
EINs are essentially tax IDs for business entities — and yes, you need one even if you don’t have (and don’t plan on having) employees. Your EIN will allow you to open a business bank account, hire employees, file federal taxes, apply for federal grants and more. If you are planning to run a nonprofit organization, this is also your pathway for applying for tax-exempt status.
An EIN is necessary for any business formation, except sole proprietorships. But while sole proprietorships don’t technically require an EIN, they may benefit from one to perform the aforementioned business practices. The IRS issues free EINs via its website. You just have to:
After an EIN is assigned to you, keep it where you can access it. This will allow you to easily enter it during other applications for grants and business banking accounts.
This step largely depends on the type of business you are starting. Numerous certifications, licenses and permits are necessary for different types of companies and activities. Some of the most common are:
When looking into the licensure for your particular business, it’s best to check your state’s website for its department of business. This will dictate what you need to operate legally in your location.
Although your startup might not require a team at first, it’s something to keep in the back of your mind. If you want to grow, you’ll likely need to be prepared to hire employees in the future. When you are ready, hire a basic team comprising a:
Chief executive officer (CEO) and/or chief operations officer (COO)
Of course, when you are first starting, you’ll most likely fill these roles yourself as the business owner. As your business grows, you may need to expand so that everything continues to run smoothly.
When it’s time to hire, follow state and federal laws. You can find these on your state’s department of employment website and on the U.S. Equal Employment Opportunity Commission (EEOC) site. It’s important to be aware of which practices you are prohibited from as an employer. Generally, employees are protected from unfair workplace discrimination based on:
This list is updated accordingly with societal changes, so check back frequently. To be safe, avoid any language in job postings, interviews, onboarding and day-to-day operations that excludes members of groups.
When creating your first job listing, it may be tempting to use buzzwords to sound on trend. However, it’s much better to avoid buzzwords — such as “guru” or “ninja” — and home in on the purpose of the role. Search for terms used frequently to describe the role you are looking to fill. Think about how a job seeker with the qualifications you are looking for would search for a job.
Especially as a startup, it’s important to be clear about the responsibilities a new hire will take on. Explain that your company is new on the scene but ready to take off. This won’t give them false expectations about pay, benefits or longevity.
You can balance this possible lack of security by highlighting the unique benefits your company might offer, such as:
Professionals who are interested in joining a startup will likely be entrepreneurial themselves. Identify the qualities that would work well in a slightly unstable environment with room to grow. Make those clear when outlining the qualifications preferred for the role. Remember that a fit with the company culture is just as important — if not more so — than education and experience.
When vetting possible new hires, use an accredited background-check service. The potential employee will have to fill out the information, including references. Companies tend to skip cross-checking candidate claims with previous employers, but this can be a make-or-break tactic.
Everyone wants to put their best foot forward when applying for a new role, but it’s imperative to make sure the candidate is honest and trustworthy to move forward with confidence. Especially when starting a new company and hiring a team, you don’t want to take chances.
This step is purposely intermixed with all the other steps. Of course, you are going to have the most passion for your new business when it’s just a glimmer of an idea in your brain. However, this passion should stay aflame throughout the business’s life cycle. This is possible through:
A lack of passion will not only lead to burnout and stress, but it will also affect sales. If you aren’t kept abreast of trends and innovations in your field, you can’t grow. Your customers will take note of your passion for the business, and your income will reflect this. Increasing your satisfaction in the business will undoubtedly increase employee and customer satisfaction along the way — boosting productivity and sales.
In your business plan, you delineated space for the marketing strategy. To delve a little deeper, you must consider different types of marketing when presenting your new business to potential customers, investors and even employees. It doesn’t matter if you don’t have a marketing team just yet. The following are still important aspects of the business that you, as the business owner, should be well aware of and able to propel forward.
Digital marketing is an umbrella term for all internet-based activities that create visibility for a business. Any kind of online content creation falls under the category of digital marketing.
Content, in this sense, is loosely defined as any piece of digital media — videos, blog posts, pictures — that is designed and shared to disseminate information and draw people in. As a business owner in any field, you should be aware of the basic content funnel:
Everyone builds out their content in a different way, but all aspects of the funnel are crucial to drawing people in. You prompt discovery during TOFU by providing useful information that appeals to a wide audience, and you funnel these interested viewers down to purchase or conversion by offering more resources in MOFU and convincing them that your product can solve an existing pain point by BOFU.
Similarly, email marketing is used to attract customers and lead to conversions. It may be considered part of content marketing — and the way your email messages are crafted will accordingly place this tactic in different parts of the funnel. For instance:
You might start out emailing potential leads one by one, but there are platforms designed for streamlined email marketing — such as MailChimp. You can also use split-testing to determine the efficacy of different email content. This may be as simple as changing the graphics, or you could change the content of the email entirely. Email marketing is a craft in and of itself, and the marketing plan associated with it should reflect that.
When most people think of marketing, they picture ads. This is possible online through what is called PPC marketing. As the name suggests, you pay the platform on which you placed the ad each time a viewer clicks through to your target link. Usually, it’s just a few cents per click — making this a great way to dip your toes into marketing as a fresh startup on the scene.
As you learn more about PPC marketing, you can also do a/b and split-tests, fine-tune your funnel and tailor your demographics to your optimal target audience. This will be the best allocation of your marketing funds, which should be increased only after you fully understand how to do PPC marketing effectively. Most ad platforms, such as Facebook Ads, have integrated data reporting to allow you to check on your progress and conversion rates.
Social media marketing is the current epitome of digital marketing. In addition to the ads that pop up in personal feeds, other social media marketing tactics are at play, such as:
Your social media presence will depend heavily on what type of business you are running. If it’s highly creative, such as a photography business, you may want to focus your efforts on Instagram and create an aesthetic feed to showcase your work. If you are a more straightlaced, professional brand, LinkedIn may be your best bet — sharing case studies and reports to those who care most.
Marketing originated with physical copies of marketing materials, such as:
Even though digital marketing has dominated the advertising scene, that doesn’t mean print is dead. It depends on your target audience and where it’s likely to see your marketing efforts. Newspaper ads could work for a small landscaping business, but mailer ads may work better for a furniture business that targets new homeowners.
One of the most unique ways to increase brand awareness is to host events. This can be something as quirky as an art festival or as formal as a trade show. It depends on your business goals, but you’ll typically require marketing materials such as:
Before launching the event and spreading the word digitally, make sure you have the budget to pull off the event. You’ll have to find a space to rent, get caterers or other service professionals, and pay for the marketing materials listed above.
Getting people talking about your brand is the ultimate goal. This is called word-of-mouth or referral marketing. This typically happens when you have at least a few established customers who can then go to their networks and tout your quality service or products. You can speed this process along by offering incentives, such as referral codes or discounts on their next purchase.
You may start out handling these marketing aspects by yourself. However, if you notice gaps that could significantly increase profits and visibility, it may be time to hire a marketing team.
You’ve already checked to see if your company’s name is used as a domain name, and hopefully you’ve snapped it up by this step. Typically, you’ll want to choose a .com domain extension, but depending on your structure, you can use .org or .net. Then, start building your site so people have somewhere to land after viewing your marketing efforts.
Whether you’re tech-savvy and building a website from scratch or using a beginner-friendly website builder, you’ll want to include the following fundamentals on your startup’s site:
A user-friendly, clean interface is crucial to get website viewers to stay on your page for a longer time. When testing out your website design, you can use tools like Hotjar to see visitors’ activity on your site. In any case, you should think of your business website as the first impression you present to potential customers, employees and investors. Make space for your mission statement, and make calls-to-action clear.
Regardless of your business structure and current accounting department, you’ll want to keep a record of your business activities. Bookkeeping includes taking note of any and every financial transaction. It’s typically done by a financial professional with an accounting degree and high levels of expertise.
If you don’t have an accounting degree and can’t afford to hire an accountant just yet, you can maintain business records on your own. Research bookkeeping software to find an affordable option that offers the necessary features for logging activities you need to report to the IRS.
Additionally, these logs are important for tracking your business’s losses and gains. Bookkeeping programs usually have features that allow you to generate reports. These will let you see where you are financially and make future projections.
If you haven’t come across insurance during the licensure step, now is the time to look into the kinds of insurance your business needs. Again, this will vary greatly depending on your type of business — but here are common insurances that you’ll most likely need going forward:
Sometimes, you can work with your insurance provider to bundle several into a small-business package. This is typically called a business owner’s policy, or BOP. It packages together general liability, property and income insurance. Depending on the nature and location of your business, you may need extra coverage in certain areas — such as workers’ compensation for a riskier workplace.
The first functional day of your business may feel less than functional — or it could go off without a hitch. Either way, it’s an important first impression that you can easily make into a positive one. Customers of small businesses typically care more about excellent customer service than they do a perfect appearance.
While cleanliness and aesthetics are great, mishaps are bound to happen during the first go-around. If you can, offer free snacks or drinks to patrons. This gives them an incentive to attend — and something to keep them occupied if things go awry. Prep yourself and any helpers for the day by focusing on keeping a smile on and remembering why you started this venture in the first place. This will leave a lasting impression and create lifelong customers.
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