How Does an Entrepreneur Start a Business?
An entrepreneur must write a successful business plan and take the necessary steps to register a legal entity in his or her state.3 min read
How does an entrepreneur start a business? He or she must write a successful business plan and take the necessary steps to register a legal entity in his or her state.
New Business Checklist
For your new business to be legitimate, you must complete the following steps:
- Choose the right structure, such as a partnership, limited liability company (LLC), or corporation
- Choose a business name
- Register with the state
- Obtain federal and state tax identification numbers
- Obtain required permits and licenses for your location and industry
- Open a business bank account
- Protect your company's intellectual property (IP)
Determining Your Mission
No company will thrive without a successful statement of purpose. When crafting your mission statement, think about why you want a start a business and what type of company you want to operate. Do you want a side business to make extra money, or are you ready to leave your day job so you can devote all your time to a new venture?
Once you've decided what type of business you want to start, researching the industry is important due diligence. Read books about the industry and seek trade organization resources. Go to conventions and contact business owners in other geographic locations for advice. For example, if you're starting an ice cream shop in New Jersey, an experienced Delaware ice cream shop owner could serve as a mentor.
Ideally, your research should answer the following questions:
- What type of space and equipment do I need to run the business?
- What type of staff will I need?
- What are the major setup and monthly expenses?
- What are the potential income sources?
- What are common mistakes made by those new to the industry?
- What qualities do I need to succeed?
Writing a Business Plan
Your business plan is a comprehensive description of your idea and how you plan to successfully carry it out. A good business plan must give the reader answers to these questions:
- What is the purpose of the business?
- What problem does it solve?
- Who does it serve?
- Who are the competitors and what is my unique market advantage?
- How will the product be priced?
- What's the marketing plan?
- What are the business finances for the next five years?
Elements of the business plan are as follows:
- Title page with the name and contact information of you and your business
- Executive summary that briefly sums up the information in the plan
- Business description
- Market strategies
- Competitive analysis
- Operations and management plan
- Development and design plan
- Financial projections
Financing Your Business
To fund your business, you need startup capital. A guaranteed loan backed by the U.S. Small Business Administration (SBA) is often a good place to start for new entrepreneurs. Investigate programs at both small community-oriented banks and large corporate banks to find financing programs that fit your needs.
Many entrepreneurs raise money from family and friends. You can also keep track of personal loans with an administrative service like CircleLending.
Seek investors that will join the company in exchange for stock options or will provide seed money.
Some intrepid new business owners save money to finance the business themselves. Though this bootstrapping method can take time, it also puts you in complete control of your enterprise.
Look into small-business grants using federal resources such as Grants.gov. This database includes more than 1,000 federal grant programs.
Try raising money through a crowdfunding campaign on a site like Indiegogo or Kickstarter. If your product or service has wide appeal, you may gain fans who are willing to chip in to fund the venture.
Look for local angel investors through networking and online platforms like AngelList and Gust. Ideally, they should have a passion for your industry or idea.
If you have a big idea but need more than a million dollars to make it happen, pitch your business plan to venture capital investors.
Try the barter system to get startup help by trading the equity or services you can offer.
Building a Team
Successful businesses are often group endeavors. If you want your business to grow, you need to recruit a trusted team of professionals to whom you can delegate responsibilities.
If you need help with starting a business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.