Considering starting a business in 2024? You’re not alone. There are over 6 million small businesses in the US, and if you’re ready to join them, you’ll need to learn how to start a small business that goes the distance.
Follow along for a step-by-step guide on how to run a small business, with actionable advice and real-world examples.
Starting a small business: 9 things to consider before you begin.
Launching a small business is a daunting task. There’s payroll, scheduling, and compliance to think about, along with hiring and retaining employees while also ensuring employee happiness.
With so much to consider, it’s worth asking yourself whether starting a small business is the right choice.
Here are a few questions to consider before starting a new small business:
- Do I have the right skill set and experience to run a business?
- Do I have the financial runway to support myself or my family?
- Do I have the time to fully commit to starting a local business?
- Am I ready to fail and learn from my mistakes?
- What’s my risk tolerance?
- Do I want to be a CEO?
- Is there a need for my business?
- Am I prepared to learn about marketing, sales, and employment law?
- Do I have a support network?
Once you’re confident in your choice, it’s time to think about your next steps.
What do you need to start a small business?
Whether you’re opening a brick-and-mortar retail store or a service-based business, take some time at the beginning to get organized. This helps build a solid foundation and will help you ensure your business survives in the long term.
No matter what kind of business you’re thinking of, here are some important things to consider:
- Market, competitor, and location research
- A business plan
- Funding
- A bank account
- Employer identification number (EIN)
- Business location
- Business structure (will you function as a corporation, LLC, sole proprietor, etc.?)
- Business insurance
- Licenses and permits as they apply to your business
Do any of these terms sound unfamiliar? We’ll guide you through them. Read on for more details on how to start a successful business.
How to start a small business: 12 steps for success.
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In the creation of every small business, where to start can depend on your business idea. But there are some things that every business will need to do. These twelve actionable steps to starting a business will set you on the right track.
Step 1: Clarify your small business idea.
If you’re wondering, “What is a good small business to start?” You’re in the right frame of mind to begin brainstorming business ideas.
A good small business idea will use your existing skills or expertise as a starting point. This way, your new business gets off to a quick, strong start while you save on the cost of learning something new.
For example, Bill Gates was already experienced with computers when he started Microsoft. It would have been out of character for him to suddenly open a bakery or restaurant.
If you’re struggling to think of small business ideas based on your skill set, try answering a few of these questions:
- What do you love doing?
- What would you rather not spend your time doing?
- What are you good at?
- What are you passionate about?
- When friends and family ask you for advice, what questions are they asking?
- If you had to talk about a topic for five minutes on the spot with no preparation time, what would it be?
Your answers can help you focus your business ideas. And if you already have a business idea, these answers can help you expand on your thoughts.
For example, if you’re exceptional at yoga and passionate about wellness or building community, why not open a yoga studio? Or, if you’re an amazing pizza maker who your friends always call on for advice, you could open a pizza shop—just like Square Pie Guys did.
Step 2: Conduct market research.
Now that you have an idea of the type of small business you want to launch, conduct market research. This will tell you whether your idea can become a profitable, successful business. In 2024, small business ideas need to be supported by useful data.
You will gain insight into how your business will perform in the market, a better understanding of your competition, and you can mitigate some risks associated with starting a new small business.
Market research also helps you:
- Validate your business idea: Market research determines if there’s a need for your business and its products or services, which indicates profitability.
- Understand your customers on a deeper level: Knowing your audience’s pain points, needs, and interests helps you customize and tailor your products and services to meet their expectations. Audience research also helps uncover preferences. For example, do they prefer social media or traditional print when being marketed to?
- Find your unique value proposition: When you look closely at your competitors and their actions, you can find what sets your business apart and makes you stand out in your industry.
- Identify emerging trends: Use market research to find trends and uncover consumer preferences to help with your business development.
Market research is made up of two types of research, primary and secondary information:
- Primary information is any information you gather directly from consumers. This could take the form of focus groups, surveys, telephone interviews, and questionnaires that you administer to your target market.
- Secondary information is any information you gather from external sources. This could take the form of government census data, research reports, polling results, and research conducted by other businesses in your industry or location.
Discovering how to open a small business takes time. While gathering primary information is more time-consuming and expensive than secondary information, the best market research uses both primary and secondary information.
Step 3: Create a business plan.
Now that you’ve tested your idea through market research, it’s time to take everything you’ve learned and create a business plan.
A business plan is a strategic operational plan that defines your business and outlines your business strategy, future goals, and how you plan to reach those goals. Think of your business plan as the map that’ll get you from Day 1 to Day 1,438 as a business owner.
A solid business plan helps you expand on your business idea and uncover any potential issues you may have overlooked.
A lot of people assume that business plans are only for those looking for outside funding from investors or a bank. But every business can benefit from a business plan——whether you’re opening a salon, launching a retail store, or starting a construction company.
Even if you’re not starting out but, say, looking at a second location, a business plan is an important step to validate your decisions.
Every business plan is different, but you can create a well-rounded business plan by following these 8 steps:
1. Write an executive summary.
Think of this as a paragraph or two that condenses everything you’ve written in your business plan. While this should be the first part of your business plan, most people leave it as the last thing they write.
2. Craft a compelling company description.
What is your business? What problem are you solving? Why is your solution to this problem the best on the market? These are the questions you should be answering in your company description.
3. Summarize your market research.
Here’s where your market research comes into play. This section is where you position your business against competitors. It should include your target market, market size, growth rate, trends, and other relevant statistics.
4. Solidify your company mission and goals.
It’s time to start thinking about your business’s mission. Include a brief mission statement and describe what you hope to achieve as a business. Make sure the goals you include are SMART goals.
5. Outline your products or services.
This section explains how your business operates. Are you selling a product or offering a service? Get into the details and include what you’ll offer, how much it costs, who creates the product/provides the service, and how much overhead you have.
6. Include a background summary.
Here’s where you’ll include all the historical data, research, and articles you’ve collected. Summarize this information and outline how your findings will positively or negatively affect your business or industry.
7. Share your sales and marketing plan.
How will you promote your business? This section of your business plan should outline your unique value proposition, marketing campaign plans, and the expected cost for all marketing efforts.
8. Forecast financial predictions.
Arguably the most important part of any business plan. After all, without money, it’s unlikely you’ll have much of a business. This section often includes a proposed budget and projected financial statements for five years, like a balance sheet, cash flow report, and income statement.
Step 4: Decide on your business structure.
Choosing a business structure isn’t a decision that should be made lightly. How you structure your business will affect the tax you owe, your daily operations, and the personal risk you assume, and may have other legal implications down the road.
Here’s a rundown of the most common business structures:
Sole proprietorship
A sole proprietorship is the most common business structure for solo entrepreneurs. In this business structure, the company and the owner are considered the same. Therefore, if the business fails, the owner is personally responsible for all business debts.
Partnerships
Partnerships are used when starting a business with more than one individual. A partnership requires a partnership agreement, and partners have limited liability for the debts of the LLP.
LLCs
Limited liability companies or LLCs can be owned by one or more people/companies and limit your personal liability for business debts. They’re one of the easiest business structures to establish.
Cooperatives
Cooperatives are businesses or organizations that run to benefit those using the services. Industries that fall into this category include, but aren’t limited to, health care, retail, restaurants, and agriculture.
Corporations
Corporations are more complex from a legal and tax point of view. Because of this, they’re more common in larger companies but can still be used by small businesses.
Consider speaking with a lawyer or accountant to ensure you’re making the best decision for your business.
Step 5: Organize your small business finances.
Now that all your ideas are on paper, it’s time to think about how you’ll finance your small business. Depending on the type of business you’re opening, you may be looking at anywhere from a few thousand dollars to a few hundred thousand dollars to get started.
How hard is it to start a business? According to Shopify, the average cost for a small business to start and run for its first full year is $40,000.
No matter what your start-up costs are projected to be, don’t let this stop you yet.
There are lots of funding options available to small businesses, including:
- Self-funding or bootstrapping: A lot of small businesses start off using their personal funds. But if your financial needs are high, there’s a lot of financial risk that comes with bootstrapping your business.
- Small business loans or lines of credit: There are a lot of great small business loans and lines of credit that you can use to get your business off the ground. You’ll need your business plan along with personal financial statements when you apply.
- Small business grants: Small business grants provide funding you don’t have to pay back. It can take some time to research and apply for grants, but it can be worthwhile if you can secure a grant. The Small Business Administration is a great place to start looking.
Make sure you open a separate account that’s strictly for business use. For example, accepting payments, paying employees, and making business purchases. This way, you can keep your personal and business finances separate, which makes accounting easier.
Explore the banks in your area to find an account type that meets your business needs.
Consider whether you need to get a business credit card and hire an accountant or bookkeeper, especially if you have multiple employees or locations. Outsourcing areas that require certain expertise helps you focus on the parts of your business that need your personal attention.
Step 6: Register your business.
By now, you should have landed on a small business name that represents your brand, your mission, or the products or services for sale. Make sure it’s memorable and not difficult or confusing to pronounce.
You can’t choose a business name that’s already registered, so it’s best to come up with alternative choices in case your first pick doesn’t work out. It also can’t be too similar to a trademarked name (e.g., Bubble Wrap, Apple, or ChapStick.)
Once you’ve landed on a business name that’s available, register the name with your state’s business registration office.
Sometimes, you might operate under a different name than your registered, legal business name. This is known as “Doing Business As” (DBA). For example, Google is the DBA name, and Alphabet Inc. is the legal name of the company.
While it’s not always necessary to register your small business at a federal, state, or local level, doing so may help with your personal liability protection, and it may have some legal and tax benefits.
Step 7: Dig into the legal must-haves.
Learning how to become a business owner is a steep curve. One of the most important aspects is dotting your i’s and crossing your t’s when it comes to the legal ins and outs of starting a small business.
Before you launch a new business, make sure you have the following small business processes in order:
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- Insure your small business: Even if you’re a home-based business or don’t have any employees, you need to have insurance for your small business. The kind of insurance you need depends on your business model and what risks you—and your customers—may face. Reach out to an insurance agent to get the full scoop on what kind of insurance is best for your business.
- Understand compliance: Your small business must operate within the boundaries of local and federal laws, regulations, and industry standards. Otherwise, you run the risk of legal penalties and fines. Ensure that you’re registered with the right government authorities, obtain all the must-have licenses and permits, and familiarise yourself with employment law.
- Apply for an employer identification or tax I.D. number: Your employer identification number (EIN) is issued by the IRS. You need one so you can file federal taxes, hire employees, and open a business bank account. You can apply for an EIN on the IRS website. Some states also require a state-level tax I.D. number, so check if one is needed in your state.
Step 8: Find a brick-and-mortar location.
No list of things needed to start a business would be complete without considering your business location. Finding a brick-and-mortar venue takes more than a few casual Zillow searches.
Conduct additional market research to understand the demographics of an area before signing a lease. Do they align with your target audience? For example, if you want to open a luxury beauty salon, look for a shop in a high-end neighborhood where your clientele is located.
Consider how much space and layout you’ll need to start a small business. For example, a veterinarian will need a different setup than a restaurant owner. Will your chosen space scale with your future plans? Look at the bigger picture.
Do you need a space for customers to park their vehicles? Is there roadside parking close by? Is the location near public transport links? Think about the convenience of a location and remember to consider accessibility options for people with disabilities.
If you’ve found the spot of your dreams, partner with a real estate agent to explore leasing options. And don’t forget to negotiate!
Step 9: Hire the right team.
As an old proverb goes, “It takes a village.”
So, unless you’re a solopreneur, you’ll need to hire a team to help start your small business.
Kick off the hiring practice by identifying the roles you need to fill. For example, a catering company would need to hire a driver, a chef, and servers. Then, create a job description that outlines responsibilities, skills, and qualifications for each role.
Pair this description with company information to create a job posting.
Share your job postings on job boards, your social media channels, or any place where you think likely candidates will see and read them. For example, a local beauty and wellness business might share a job ad on TikTok, a community notice board, and a beauty-specific job board.
Assess candidates during an interview to see if they fit your company culture and the role expectations, then check references to verify the candidate’s work history.
If you’re happy to proceed with a job offer, let the candidate know, and be prepared to negotiate on areas like salary, benefits, and paid time off (PTO).
Step 10: Get the right tools to run your small business.
The right small business tools will save you time and money and make you a desirable employer. The tools you need will depend on your small business, but looking for tools that automate repetitive tasks and lessen your workload is a great place to start.
With Homebase, you get everything you need to start a small business.
Designed for hourly work, Homebase will help with employee scheduling, tracking hours, and running payroll seamlessly. You’ll also have a team communication app that keeps you and your employees on the same page.
New business owners can especially benefit from the expert H.R. guidance available on Homebase. We have advice for small business owners to help you comply with government regulations without an in-house H.R. team.
Step 11. Plan your first marketing campaign.
It’s time to start some buzz for your small business.
Create a strategic marketing plan to create awareness, raise interest, and make your first sale. Without promoting your new small business, your target audience won’t know you exist, which makes generating revenue tricky.
Look to your market research for information on the marketing channels where your target audience is most likely to be. For example, if your audience is people aged 25-44, Facebook is most used by that demographic, so you can begin sharing campaigns there.
If you have a brick-and-mortar store, invite people to a launch party or opening event. Aim to make the event special by creating a memorable experience. For example, a new bookstore could promote book signings, author readings, live poetry, or discounts at the event to entice a book-loving crowd.
Unsure what tool or platform to use? Learn the best online marketing tools to help you get started.
Step 12. Set goals for the future.
Your launch party was poppin’ and everyone was posting about your small business on their social channels.
But now what?
Focus on long-term success. For example, outline the steps to building a sustainable business and set yourself goals to help achieve them. Not only will this keep your small business on track but it also provides a level of accountability.
Jump start your small business today.
Small business owners need all the help they can get—especially when you’re just getting started. Take control of your business with Homebase, the all-in-one platform built specifically for small businesses. Why start a small business without help? You don’t need to do it all alone. Sign up today to get started.
