Process of Starting a Small Business: Everything to Know
The process of starting a small business begins with considering whether entrepreneurship will be a good fit for you.3 min read
2. Prepare a Business Plan
3. Set Up Funding for Your Business
4. Choose the Right Business Structure
The process of starting a small business, according to the United States Small Business Administration, begins with considering whether entrepreneurship will be a good fit for you. Some qualities that are needed for starting a small business are:
- Being a self-starter
- Being comfortable with financial risk
- Having good decision-making abilities
- Being willing to put in long hours
When you have that preliminary personal assessment out of the way, you can forge ahead and define the business you want to start and research the market demand for the enterprise.
Before you launch your business, check if the market exists to support your idea. There are some questions you can ask, such as if there's a problem that your business idea will solve, who the ideal customer for your business would be, who your main competitors would be, and if your idea is different from what your competitors offer.
Research is the best way to answer this set of questions and to determine how your business will compare in the marketplace. The answers to the questions you ask yourself can be used to develop a plan and improve your ideas. This will help you get your business off to a good start.
Prepare a Business Plan
A business plan doesn't have to be prepared by an MBA. It can be a short, simple, one-page document. Set it up with the idea that it's going to be a three- to five-year roadmap to guide you through the process of starting and successfully running your company in its first few years.
Some things that should be included in your business plan are what services or products your company is going to offer, who your target customer is, how much you expect to charge customers for your product or service, and how you're going to fund your business and sell your product.
The research you do before launching your business helps confirm that the customer base exists for the product or service you want to offer. Examine the audience you're targeting and make a decision about whether you want to operate in the local or national market or if you're after a niche market. You should also consider if you want to operate an e-commerce business or if you want to have a business with a physical location where customers go to visit you.
Set Up Funding for Your Business
Every business needs funding to get started. You may have to look beyond what you own if you don't have enough cash to start your business. The first step in that is figuring out how much you need to start your business and then figuring out where you can get that much money.
If your plan involves bringing on investors, you need to make sure your elevator pitch and business plan are perfect. Another option would be government-backed loans, research grants, and venture capital. Crowdfunding sites are another fairly new option. With crowdfunding, you share your goals with your family and friends in the hope that they will all contribute to startup costs for your business.
If you happen to be a veteran, you would then have the opportunity to apply for a special loan through the U.S. Small Business Administration. The loan is called the Patriot Express.
Choose the Right Business Structure
Next, you need to choose the form of business ownership that fits your goals. These business structures are sole proprietorships, limited liability companies, partnerships, S corporations, nonprofit corporations, and cooperatives.
The business structure you choose determines the form of income tax you file for your business. Each of the different business structures has their own pros and cons. The best approach is to talk to an accountant or lawyer when you're figuring out this part.
To protect your personal assets from the debts and liabilities that can come from your business, incorporating the business or forming an LLC with the state where you start the business is an important step. Forming an LLC or corporation offers tax advantages, and they both give you better more credibility with your customers, vendors, and business partners.
If you need help with the process of starting a small 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.