If you’re thinking about a new money-making venture, check out our guide to starting a small business, from choosing your niche to various ways to expand and grow your business.
Deciding to take the leap and starting up a new small business can be a daunting prospect, but you can take comfort from knowing you’ll be joining one of the other 30,748,033 small businesses in the United States, a statistic reported by the Small Business Administration.
That’s all well and good, but when it comes to your own business and your future financial security, it’s perfectly normal to feel nervous, especially if you’re not sure where to start.
That’s where we come in.
There are a number of different aspects that are involved in setting up a small business, so we’ve put together this guide to help you learn everything you need to know about how to get started and more, from choosing the right branding to eventually growing your business.
With our help, your business will be set up and you’ll soon be making money in no time.
So, without further ado, let’s get into it!
Brainstorm and Refine Your Idea
Before you take your business any further, it’s important to really define your core goals as this will allow you to have a clear idea of what you want your business to be about.
It can be quite time-consuming to go over every little detail and outline each idea, but the brainstorming phase of starting a new small business is one of the most important stages, so take your time and don’t try to rush through it just to say it’s done.
Here are the key business aspects you will need to consider to refine your business idea.
Nail the Business Name
Not only is the name of your business the first thing your potential customers will associate with your services or products, but it’s also going to be the word or phrase that people will type into search engines to find out more about you and your business.
Try to come up with something that is unique and will be easy for people to remember.
Bonus points if you can work in some kind of joke or pun or something that ties you to your business if you happen to have a personal brand that’s already popular.
Brainstorming ideas is a good way to get everything out and onto the table where you can then begin to narrow down your choices. Check that there is a suitable domain available that’s within your price range, preferably using or including the name of your business.
Define Your Company Ethos
As Todd Schnick rightly points out, you should always care about your business methods because “that’s what people really care about. That’s what your customers care about.”
Inspiring loyalty and repeat purchases from your customers requires more than just offering the right products or services and having great branding. You also need to put a significant amount of effort into establishing your company ethos and the core values of your business.
What do you stand for? What is the main purpose of your business? Do you have a cause?
These are the questions that your customers will want to ask you, so you’ll want to make sure that you have prepared the answers well in advance as part of your business plan.
Locate Your Target Audience
When you’re trying to establish who your target audience will be, think about what product or service you’re going to be offering and then ask yourself who will be most likely to use it.
Compare the target audiences of your competitors and determine which demographics are going to be more interested in your business, then outline a way to capture their attention. To do this, you will need to carry out extensive research on your chosen target audience.
What interests does your target audience have? What are their main wants and needs? Once you’ve learned this, you can work out how to make sure your business meets them.
Make a Business Plan
Writing a business plan is an essential step when you’re starting a new small business.
There are several reasons why you should write a business plan, the most important being that it will act as a roadmap for your business which you can always refer back to.
That’s not to say that you should stick to your initial plans. It’s rarely a good idea to be that rigid in business due to the ever-changing nature of the market. You can allow for flexibility, especially during the growth phase, but it’s still useful to have a plan in your back pocket.
At the very least, a business plan can be a great way to measure your success as you will be able to compare where you started to where you and your business are now.
Market research is any process, action, or activity that helps you gather information about your potential customers’ needs, wants, and preferences.
This is how you will get to know your target market as well as the other competitors within your business niche, so it’s important to be as thorough as you conduct market research.
You should aim to find out more about the demographics that make up your target audience by conducting surveys, hosting focus groups, and researching different SEO practices. Some market research methods are better than others, so it’s a good idea to try a few.
When creating your initial business plan, it’s always wise to include plans for an eventual exit strategy in case you decide to sell ownership of your company. This will provide you with options to potentially liquidate your stake in the business whilst still making a large profit.
On the other hand, having a business exit strategy means you can limit your total losses if your business doesn’t do as well as you’d hoped. Not only does this prevent you from being declared completely bankrupt, but this will also allow you to move onto future ventures.
They do say one door closes and another door opens… but if you fail to put a decent, well thought through, and fully prepared exit strategy for your business back when you’re first setting it up, you might find yourself in trouble if the business doesn’t do well and you’re ready to cut your losses. With an exit strategy, simply sell this business and move on.
Finance, Finance, Finance
Finances are unsurprisingly one of the most important things involved in starting a new small business, especially when it’s your own involved. Nobody wants to invest their life savings into a business that they haven’t fully thought through, so plan your finances wisely.
As there can be a lot of costs involved in starting a business, it’s important to make sure you estimate and manage your finances well to avoid overspending. You’ll also need to factor in all costs associated with running your business before considering your finance options.
Find the Break-Even Point
In order to understand the amount of work you will need to put into your business before you will start to see a profit, you need to work out what the break-even point of your business is.
In official accounting terms, the break-even point refers to the amount of money you’ll need to earn through your business to cover the total fixed and variable costs of the company, specified either as a monetary value, as a number of units, or as hours worked.
You can calculate your break-even point (BEP) by dividing the fixed costs of your business by the revenue per unit minus the variable cost per unit. Alternatively, you can use one of the many free calculators available online to work it out for you.
You will need to calculate and keep track of your monthly business expenses in order to successfully manage your cash flow to ensure the business’s profitability and viability.
What’s the difference between fixed and variable expenses, you ask? Firstly, fixed expenses tend to be a fixed amount that stays the same each month and cannot be easily changed, typically paid on an annual, quarterly, monthly, or even a weekly regular basis.
Fixed expenses include any type of regular outgoing payments, including the following:
- Rent for offices or warehouse building
- Utility bills
- Insurance premiums
- Paying stockists
Variable expenses are harder to budget for as these represent the day-to-day expenses that are sometimes harder to keep track of and account for. For example, business dinners, coffee runs before meetings, and any expensive outfits that were bought for the purpose of attending company events can all be claimed as variable expenses for the business to cover.
Try to keep your expenses to a minimum as this will increase your profit margins, but don’t do so to the detriment of your product or service quality, customer service performance, and/or your employee morale and productivity levels, as this will only harm the business.
Consider Financing Options
Due to the significant costs that can be involved in starting a business, it’s worth considering a few different finance options to see which of them, if any, your business could benefit from.
Securing the right type of finance for your small business can be the difference between allowing the entire future of your business balancing on those first few months and you being able to enjoy the launch of your brand new business without experiencing the same stress.
Whether from a friend, a family member, or a bank, a loan can be a great option for starting up a business, but you’ll need to factor it into your financial projections as it will need to be paid back as soon as you make enough of a profit or per terms dictated in the loan contract.
Another great financing option for small businesses is grant schemes like the ones offered by the SBA (Small Business Administration), although you will need to check if you qualify before you apply as some are only for specific businesses with conditions that apply.
Persuading an investor to put up the finances you need to start your business is another alternative, although it will usually cost you a percentage of your ownership of the business.
In order to secure an investor, you will need to pitch them your business plan. Make sure you clearly state the terms of how big a stake in the company you’re willing to give and what financial contribution you would expect to receive in return.
Crowdfunding can be a great way to receive a much-needed cash injection for your small business if you’re not confident you would receive a traditional bank loan or investment and if your business doesn’t qualify for a grant.
There are several different types of crowdfunding for small businesses, so do your research and choose the option best suited to your type of business for the best chance of success.
Open a Business Account at a Bank
It’s always a good idea to keep your personal finances separate from your business finances, so we’d recommend opening a business account with a bank for business-related purchases and expenses.
Compare the rates offered by different banks and choose the best ones for your business.
To ensure that your business is legitimate, there are certain legal requirements you must make sure to adhere to when initially setting up or making changes to your business.
Filing the correct paperwork and making sure you’re on top of all the legalities of your business is a huge responsibility and will affect the entire success of your business. So, here are some of the most important things you need to know regarding legal requirements.
After finalizing your business name and the concept behind the company, you’ll need to decide what type of structure your business will adhere to. You can either set up as a sole trader or register the business as a limited company, and there are pros and cons to each.
One of the easiest and most affordable ways to start up a small business is to register as a sole proprietor, as this entitles you to all of the profits the business makes as well as simultaneously making you solely responsible for all debts incurred by the business.
The downside of this option is that it can be hard to raise the capital required to start your business as you are unable to sell a stake in the business taking most investors off the table. It’s also difficult to get a bank loan due to a perceived lack of stability or credibility.
Limited Liability Company
An alternative\ option is to register your business as a limited liability company which would mean you are not personally liable for the company’s debts or liability issues. The legalities and regulations relating to registering as a limited liability company vary from state to state.
Although this is a more formal arrangement than a sole proprietorship, it’s easier to set up than a corporation and your business will have a greater level of protection and flexibility.
Register Your Business
You can register your business yourself and in some cases, this will be as simple as registering your business name with local and state governments.
If you’re using your legal name for your business, you’re not required to register it at all, but this could mean you’re not covered by personal liability protection and tax/legal benefits.
According to the SBA, “small businesses sometimes register with the federal government for trademark protection or tax-exempt status.” You’ll also probably need to register in any state where your business is trading or conducting business. This includes states where:
- Your business has a physical presence.
- You attend frequent meetings with clients.
- You generate a significant portion of your business’s income.
- You have any employees working.
Insuring Your Business
Deciding on which insurance provider to go for is another big decision that small business owners need to make, but it’s important to make sure that you do get business insurance.
Even if you decide to register your business as a limited liability company, you will only have a limited amount of protection for personal property lawsuits so insurance is needed to fully cover yourself against any unexpected accidents that could affect your business.
There are six main types of business insurance options that you can choose from:
- General liability insurance
- Product liability insurance
- Professional liability insurance
- Commercial liability insurance
- Home-based business insurance
- Business owner’s policy
To find the right one, first, assess and establish your assets and compare insurance providers. Make sure to reassess this every year and switch providers if you need to.
Licenses and Permits
It’s vital that you acquire all of the necessary licenses and permits required for you to legally set up your small business, otherwise, you could find it being shut down before you even begin to turn a profit or you could be slapped with a fine or penalty.
The majority of small businesses need a combination of licenses and permits, but the exact licenses and permits that your business requires will depend on the state your business is operating from, the type of business activity carried out, and the agency issuing them to you.
The costs will vary just as much depending on these same factors, so remember to research which licenses and permits are required for your business, and budget accordingly as these will fall under the category of “fixed” expenses that cannot be avoided and need to be paid.
Building Your Team
Although it’s likely that your business will start off as a small, if not a one-person team, it’s important to think about scaling the business and building a team that can support you in your future endeavors.
It’s rare that you will have the physical or mental capacity to take on all aspects of running a business, so building a team that will be able to help with various facets of your business will allow you to focus on the bigger picture. However, the wrong team can be detrimental.
In order to ensure you have the right people around you, there are several steps to follow to build the right team for your business, including the following:
- Everyone must actively participate and contribute to improving the business.
- Foster solid relationships to encourage a positive working environment.
- Incentivize your team with a shared purpose and collective definition of success.
In order to put together a highly functioning, hardworking team, it’s important to make sure that each employee's role is clearly defined. This avoids crossover and confusion between tasks, wasting your time and money, and your team will work together more effectively.
Defining the roles of each member of your team will also help you see which areas of your business may require more attention if there are any areas you could improve on, and it will also help you plan future growth and to work out how you will scale the business.
Choosing a Vendor
The process of selecting the right vendor for your business can be complicated and challenging to navigate, so it’s important to define your business requirements before you begin your search. Here are the two main aspects of this that you will need to think about.
You can look for a vendor by searching for reputable options online if you can’t afford to pay the membership fees to join an association, as some will not be tied to organizations.
However, because there’s a chance that vendors have an online presence where they sell the same products under a different name, which means they could technically supply to your competitors which can compromise your working relationships.
Before entering into an agreement with a vendor, ask them if the company has a retail presence or if it is solely a trade supplier to ensure they cannot undercut your prices.
Finding Your Work Space
When you’re looking for a workspace for your business, start by narrowing it down to the region, city, or town you would like to work from and go from there. Then, find the area you’d like, somewhere close to the center or perhaps on the outskirts of town to avoid traffic.
Consider what will be around you, including transport and local amenities, and most importantly, decide on a maximum budget early on in your search. You can look for premises to rent or alternatively establish a home workspace for you to run your business.
Branding Your Business
Branding is hugely important to small businesses. As explained in an article by Forbes, a customer cannot purchase your products if they don’t remember your brand and therefore aren’t able to find you in the sea of other small businesses clamoring for their attention.
In order to ensure your business stands out, here are some of the key things to remember when branding your business:
- Define your brand identity early on.
- Get visual with your branding.
- Establish yourself as an authority on a specific subject.
- Seek out partnership opportunities.
- Give your customers what they want.
These days, it’s pretty much the first response to search for something you need online. Creating a company website for your business is therefore essential for its success.
Don’t panic and think that this is going to hike up those business expenses we told you to cost up earlier, because there are plenty of website builders available such as Wix or Squarespace that will allow you to build your own website for a much cheaper cost.
If you want your business to rank highly on search engines, make sure that your website is up to date with any new products or releases, brand information, blog posts (if you have one), and any events that your business is hosting so that customers can easily find them.
Social media has become the modern-day equivalent of when radio advertising first became popular and is now one of the fastest ways of growing your business reach and audience.
Knowing your audience and using the right platforms is key when branding your business through social media. It can be a great way to connect with customers and you’ll be able to stay ahead of any new trends which you can then use to influence your branding.
The downside is that social media can be time-consuming and the algorithms don’t favor the inconsistent. If you can’t afford to hire someone as your social media manager to run your accounts and engage with your audience, you can use apps to schedule pre-planned posts.
Your logo is how your customers can recognize you and it’s something you can imprint on your products, business cards, websites, social media accounts, and newsletters.
A good logo encompasses text and imagery or graphics that embody your company’s values and the vision behind the business. It should be memorable, unique, and should differentiate you from your competitors in the minds of your customers.
How to Grow Your Small Business
There are different stages of small business growth that you can focus on, but the following strategies are some of the best ways that you can grow your small business.
In order to inspire loyalty from your customers, you’ll need to do more than just provide an excellent service or sell high-quality products that are highly on-trend and in demand.
Understanding your customers will allow you to get to know them better and engage with them more, and this will help them develop a connection to you and your brand.
Another good way to encourage customer loyalty is to offer rewards in return such as discounted products or special promotions only available to your most loyal customers. This will show your customers that they’re appreciated and will further inspire their loyalty.
Getting Noticed on Social Media
Social media is an undeniably powerful tool in business and it can be used to reach an incredibly large audience, and having a successful social media presence will help your business to stay relevant and engage your audience so that they become customers.
You can grow your business through social media by using it to generate a buzz about your brand or products and services. The bigger following you have, the bigger audience you will have to show off new collections, lines, or products. You can even offer sneak previews or show special behind-the-scenes to followers to encourage and boost your engagement.
Refine Your Approach as You Grow
The key to growing a small business is being able to refine your approach as you grow. This entails spotting any problems that arise and monitoring your customers’ activity and engagement so you can adapt your marketing strategies to focus on what achieves results.
Like we mentioned earlier in this guide, you should always plan to be flexible with your approach to your business strategies to reflect the successes and challenges you’ve experienced along the way to the position you and your business are in now.
Pay Attention to Analytics
You can conduct thorough research on your customers to yield detailed insights into their likes, dislikes, and other preferences using services such as Google Analytics.
This can track the number of site visitors you attract each day, spotting trends in traffic patterns and seeing how successful your marketing efforts have been in terms of sales.
As you can see, there’s a lot that goes into starting a small business, but it’s important to keep your long-term goals in mind and to continue to work towards them, even if it feels like it takes a while to see the results of your efforts. Eventually, they should pay off!
We hope you’ve found this article helpful and that you’re less daunted by the prospect of starting up your own business. Let us know how you get on in the comments!