So, you want to start a business? To strike out into the unknown, discover new opportunities, change the world, and make some money along the way?
The road to becoming your own boss can be a long one. But we’ve got you covered.
In this guide, you’ll learn all the steps — from creating a basic business plan to hiring your first employee — that you need to start a successful small business. You’ll learn how to:
So, without further ado, let’s get right to it and learn how to start a business.
The Big Idea
Every creative endeavor has two halves: the idea and its execution.
Many aspiring entrepreneurs can come up with some type of idea but end up struggling with the second part.
Need proof? First, how many friends of yours have revolutionary app ideas? Now, how many have actually developed an app, released it, and built a successful business out of it? Chances are, the answer to the second question is a lot lower.
When you start your own business, you need to have an execution plan ready from the get-go. So, let’s start things off on the right foot and make sure that you break your big idea down into small, realistic steps.
1. Refine Your Business Idea
Few things kill a new business like an idea that’s way too vague. How do you even start building your business if your idea is simply to “make a new type of social network?”
The answer? You don’t. You either refine your idea into something tangible, or you put it to the side.
But most ideas can be saved with a dash of refinement and a bit of polish. The key to doing so is asking the right questions:
- Why are you starting this venture?
- Who is your target demographic?
- What product or service are you offering?
- When will it be available, and when would someone use this product?
- Where will your product be available?
By answering these questions, you can turn a vague idea like “start a new social network” into “start a new social network for US-based professionals and recent college graduates to connect and find job opportunities in their alumni networks.”
Once you get through your first round of questions, ask more questions: Why would this target demographic use this over LinkedIn? What are the features that separate it from the competition?
Refining your idea is like making a sculpture out of a block of marble. Start by cutting away big chunks on your first pass, and then chip at the little details once you’re further along.
But remember that sometimes, ideas simply won’t work, and it’s often more important to know when to give up on an idea than how to refine it. There’s no shame in admitting that a business idea isn’t a good one and putting it to the side so you can focus your efforts on another one.
2. Create a Business Plan
The next step is to start working out the nitty-gritty by working out a detailed business plan. Besides serving as a guide, your business plan can also come in handy when looking for investors or grants.
According to the U.S. Small Business Administration, a traditional business plan should have these elements:
- Executive Summary: Sum up your business. Why will it be successful? What is your mission statement, and what are you offering? In short: Who are you as a business, and why should anyone care?
- Company Description: Expand on some of the points in your executive summary. What problems does your business solve? What is your team like? What’s your competitive advantage? Your company description will likely overlap with your executive summary to some extent, but you need not only expand — you can include new information here as well.
- Market Analysis: Explain how your product fits into the market. What are competitors doing? How can you do it better?
- Service or Product Line: Describe the products or services you’re selling in detail. Include information about patents, the product’s lifecycle, and its benefits. This information will form the backbone of your business model.
- Marketing and Sales: Explain how your marketing and sales strategies work. How will you get new customers? How will you keep them?
- Funding Request: Include information about how much funding you’ll need over the next five years and what you plan to use that money for.
- Financial Projections: Prove that your business is stable and ready for success by projecting what your finances will look like in the next few years.
3. Decide on a Business Name
Chances are that if you’ve made it this far, you already have some type of working name. But if you don’t, make sure you iron one out by this point.
When coming up with your business name, keep these tips in mind:
- Your name should be catchy and sound good when you say it out loud
- You should be able to trademark your name
- The name should be somewhat related to your product or service’s benefits or features
- Make sure you can get a .com domain for it
- Your name should be easy to spell
Some entrepreneurs get backed up at this stage. While it’s definitely important to make sure your business name has some allure to it, don’t overthink it and hold your entire business plan up just because you can’t settle on the perfect name. Give yourself a reasonable amount of thinking time, and go with your favorite option after that time has elapsed, even if you’re not thrilled with it.
4. Define Your Brand
Businesses are like people — they have names and personalities.
Once you’ve settled on a name for your business entity, start to consider what other features you want people to recognize your brand by.
At this point, you’ll want to design a logo and set some brand guidelines. What tone will your business take in its communications? What colors represent it?
Oatly, for example, has defined itself through its playful and irreverent copywriting, its logo, and the colors blue, brown, black, and white.
Ideally, your branding should be recognizable enough that even if you release a new product, customers will immediately realize that it’s a new addition to your product line.
Secure Your Space on the Web
With COVID-19 still raging across the world and society showing no signs of retiring social distancing restrictions anytime soon, maintaining a strong digital presence has become more important than ever.
Luckily, starting a website and building a social presence is easier than ever before. Here’s how.
Related: 11 Ways Small Businesses Can Pivot to Survive a Crisis
1. Register a Domain
Your domain is the address that people will type in when they want to visit your website. It’s essentially your online calling card.
For example, our domain is dreamhost.com. If your business were called Doug’s Donuts, your domain might be dougsdonuts.com.
The vast majority of businesses will want to get a .com name. However, other domain extensions, like .ai, .inc, and .net, may be worth consideration in certain cases.
Purchasing and registering a domain is a simple process. All you need to do is search for your desired domain on a reputable domain registrar’s website and purchase it. Most registrars will guide you through the process.
Once you’ve got a domain, you’ll need to connect it to your website. Most website building platforms offer instructions on how to do this.
Overall, the hardest part about registering a domain is finding one that isn’t already taken. In some cases, you may need to get a bit creative by adding words, i.e., Doug’s Delicious Donuts, or change your name entirely so you can get a better domain name.
2. Secure Social Media Accounts
It’s estimated that there are 3.6 billion social media users in 2020. To ensure your business’s survival in the modern business climate, you need to be where your potential customers are — on social media.
But don’t be intimidated — you don’t need to actually develop your social media presence just yet; you just need to get your usernames. Like domain names, usernames on major social network sites are hot commodities and go fast, so you want to lock them down ASAP.
Unfortunately, it’s fairly unlikely that you’ll end up finding that the same username is available across all social media platforms. Most businesses will need to edit their handles slightly or have different accounts per platform (i.e., @dougsdonuts on Twitter and @dougsdeliciousdonuts on Instagram).
Related: 10 Easy Social Media Tips for Your Hard-Working Small Business
3. Create a Website
What use would your domain name be if you had no website to go along with it? Once you have a domain ready to go, it’s time to start building your website.
These days, there are tons of online website builders that make it easy to get a site up and running quickly.
But if you want your website to run on a powerful, tried-and-true platform, building a WordPress site is one of your best options. WordPress powers approximately 38.4% of all websites, so there’s no lack of support, powerful features, and communities to get involved in.
DreamHost offers a drag-and-drop WordPress website builder with shared hosting that combines the ease of a website building tool with the raw power of WordPress. This gives the business owner the best of both worlds.
We’ll Support Your Dream
Whatever your business goals, we’ll be right there with you, making sure your site is fast, secure, and always up. Plans start at $2.59/mo.
Deal with Laws and Finances
Starting a business can sometimes mean navigating a lot of red tape. Between registering your business, structuring it, and opening a bank account, many entrepreneurs quickly find themselves with their hands full.
Here’s what you need to know to get started.
1. Find an Accountant and an Attorney
If you’re serious about your business’s success, it’s a good idea to start things off on the right foot and hire an accountant and an attorney. Starting a business is a complex process with lots of legal requirements, and this team will be able to guide you through it and answer the many questions you’re sure to have along the way.
If you’re on a very tight budget or starting your business as a side hustle, you may be able to hold off on this step. But keep in mind that you’re running a risk when you don’t have a professional helping you with complex tax, financial, and legal issues.
Plus, an attorney and accountant will help you figure out how to choose a business structure — the next step in your journey.
2. Decide on a Business Structure
Choosing a business structure is one of the most important decisions you’ll make. The legal structure you choose will determine how you pay taxes and how your business is viewed by government entities.
Importantly, your business structure will determine whether your profits are taxed on a pass-through basis or not. Owners of pass-through businesses include their share of profits as individual, self-employed, taxable income. Owners of non-pass-through businesses pay themselves a salary and report their income and the business’s profits separately.
The most common business structures in the US are:
- Sole Proprietorship: This structure can be used by businesses without any employees. All businesses that do not formally register are automatically considered sole proprietor operations.
- Partnership: Have a business partner? Partnerships are a simple structure for businesses with two or more owners. Profits are taxed on a pass-through basis.
- Limited Liability Company (LLC): LLCs are among the most popular pass-through structures for small businesses. This structure separates personal and business assets so that you can’t lose your house or car if your business goes bankrupt.
- Corporation: A corporation is a standalone legal entity. Profits are not taxed on a pass-through basis, so owners need to pay themselves a salary. There are several types, including S Corp, C Corp, and non-profits.
- Cooperative: A cooperative is a business owned and operated by a group of people who use its products or services. These people typically own shares in the company, and profits are distributed amongst them.
3. Register with the Government and the IRS
Most business registration is conducted at a state level, so you’ll need to look into your local laws to see what’s required to legally form your business. An attorney can be a great help here.
Once your business is registered, you might need to file to get a federal tax ID called an Employer Identification Number (EIN). You can think of an EIN as a Social Security Number for your business. According to the Small Business Administration, you’ll need an EIN if your business does any of the following:
- Pays employees
- Operates as a corporation of partnership
- Files tax returns for employment, excise, or alcohol, tobacco, and firearms
- Withholds taxes on income, other than wages, paid to a non-resident alien
- Uses a Keogh Plan (a tax-deferred pension plan)
- Works with certain types of organizations
If you’re running a sole proprietorship or single-member LLC, you don’t need a separate tax ID — your profits are taxed as personal income.
4. Open a Business Bank Account
Having a bank account for your business can help you keep your personal and business finances separate, making accounting and filing taxes much easier. It also offers an extra layer of protection for your personal assets, maintains a professional image, and allows you to open a business credit card.
You’ll need to have all your business’s formation and tax documents, along with a business license and ownership agreements to open a bank account. Your accountant will be able to help you here — especially if you’re considering applying for a business loan.
5. Purchase Insurance
Many business owners forget this step or simply don’t realize how important it is.
Don’t be one of them. Purchasing liability insurance can sometimes be the only wall that protects you against bankruptcy if you get sued for some reason. Plus, if you hire employees, you’ll legally need to have worker’s compensation and unemployment insurance.
Set Up Your Daily Operations
A business is like a machine. To keep it running smoothly, you need to make sure all the parts fit together and stay well oiled.
Your accounting system is the backbone of your business’s financial operations. Without a good system in place, you won’t be able to process invoices, make payments, etc.
Your best bet here is to speak with an accountant who can help you find a solution that works for your specific needs.
2. Project Management
A robust project management system ensures that projects reach completion in a timely and organized way. Project managers communicate with different team members, contractors, and other external businesses to keep everyone on the same page.
Whether you’re going to be your sole proprietorship’s own project manager or you’re hiring one for your corporation, it can be a good idea to invest in project management software like Asana or Trello.
Related: The 7 Best Web Management Tools for Small Businesses
If you plan to hire employees, you’ll need some type of payroll system. Gusto, Intuit Payroll, and Bill.com are all good options.
If you’re hiring contractors, a payroll platform can also help, but it’s not entirely necessary.
If you’re hiring employees or contractors, you’ll need a way to communicate with each other. While email works fine in most cases, many businesses prefer platforms like Slack, which speed up communication and are more convenient than email.
Businesses that have an e-commerce component will need to set up a shipping system. To figure this out, you’ll need to compare options like USPS, UPS, FedEx, and DHL to see which one best fits your needs.
Related: The 30 Best Apps for Small Businesses in 2020
Build Your Team
A business is nothing without its team members. When building your team, you’ll have to mix and match three types of members.
Employees are full-time or part-time workers. Hiring employees comes with a slew of legal and tax responsibilities, such as paying payroll taxes, unemployment insurance, etc. If things don’t work out with an employee, you can’t just fire them so easily.
However, there are benefits to hiring employees, such as having reliable team members always available at set times. You also get more control over the work produced.
Contractors are typically independent businesses themselves, so you won’t have any legal responsibilities as their employer (outside of what’s covered in your contract). You can hire them at will without a long-term commitment.
However, contractors are independent and not full team members, so you won’t have the same level of control over the work they produce. Plus, they may not be available when you need them — they have their own schedules and businesses to run, after all.
Contractors are useful for businesses that need specific deliverables, like graphic design, writing, web development, etc. But businesses that need operations run around the clock, like customer service, management, etc., will likely want to hire employees.
Some businesses choose to outsource some of their work to third-party vendors. For example, you may choose to hire a third-party call center to field all your customer service requests or for on-site security. However, this is typically only required for larger businesses, so it’s something to keep in mind as you grow.
Grow Your Business
Once you’ve planted your business’s seed, you’ll need to water it so that it grows into a successful startup.
1. Develop a Marketing Strategy
Marketing is essential. Without it, no one will even know your business exists.
Marketing comes in many forms, from content marketing and PPC ads to email marketing. If you’re not familiar with these terms already, it’s a good idea to read up on them a bit.
However, to really get your marketing going in the right direction, you’ll likely want to hire a professional.
Related: 12 Marketing Strategies to Promote Your Local Business
2. Set Goals and Create a Growth Plan
Businesses rarely grow without goals. To ensure your business continues to evolve over time, it’s a good idea to set SMART goals — goals that are specific, measurable, attainable, relevant, and time-based.
What does that mean? Instead of setting a goal like “grow my business,” write something like “increase sales by 25% by January.” Now, your goal fulfills the smart criteria.
To build a growth plan, you simply outline a series of these sorts of goals for a period of one or two years. Typically, businesses divide this period into quarters, so you’ll ideally have eight goals for a two-year period.
Ready to Grow Your Business?
Whether you need help finding a target audience, crafting the ideal digital marketing strategy, or outlining your brand values, we can help! Subscribe to our monthly digest so you never miss an article.
How to Start Your Own Business: Key Takeaways
Starting a business is a long and arduous endeavor.
But it’s also incredibly rewarding! Few things are as satisfying as seeing others enjoy your hard work and benefit from your products and services.
Really, what could be better than running your own business?
If you’re ready to become a small business owner, DreamHost shared hosting is one of the easiest and most affordable ways to get your idea off the ground. For just $2.59/month, we give you everything — a free domain, SSL certificate, professional email address, and privacy protection — you need to thrive online.
While there are no certainties in business, there is one guarantee: Whatever happens, you’ll learn a lot and grow as an entrepreneur. That much is certain.