How to start a business
Last updated: January 1
Start with an idea
Begin with something you're passionate about, advises Forbes. Then, ask yourself if it's something that you're good at, and if there's an easier way to do it. That'll be the solution around which your service or product is designed.
Conduct market research
To develop and refine your solution, you need to do market research, says The Hartford. A market is typically made up of people with similar habits and interests. Market research helps you get a sense of who those people are—their age range, annual income, hobbies, needs and where they live.
It'll also give you an idea of the competition you're up against and if there is a niche or unmet need in your field that you can tap into. That's where your solution will really take shape.
The U.S. Small Business Administration (SBA) offers a list of free resources that provide statistics in a variety of markets to get you started.
Make a business plan
Market research will help you establish a business plan. It's the cornerstone of everything from the day-to-day operation to how your business will continue to grow into the future, says the SBA.
Drafting a business plan helps you set goals and determine potential weaknesses, adds The Hartford. It's also where you'll express who you are as a company to stakeholders. While there's no one-size-fits all template for a business plan, the Library of Congress outlines important details you may want to include, such as:
- How your business will operate
- Your mission and goals
- Your overall financial strategies and plans for growth
- How the industry may affect your business
- Marketing strategy
- Staffing hierarchy
- Estimations on future sales
Select a business structure
Business structures determine in large part how yours will run and how much financial risk you'll be taking on, according to Forbes. The business structure you choose will also affect your taxes.
Among the most popular business structures is a limited liability corporation (LLC). LLCs offer a lot of flexibility, in that you can operate without the burden of shareholder meetings or a board of directors, says Forbes. They also financially protect you if you have to file for bankruptcy, adds the SBA. That way, personal assets—like your house or savings—can't be seized by creditors.
Another common structure is a limited liability partner (LLP), which resembles an LLC in many ways but is more common among licensed professionals, like lawyers or brokers.
Forbes advises working with a business accountant to determine the type of structure that's right for your particular product or service.
Apply for the necessary registrations and certifications
Small businesses are typically required to have licenses and permits at both federal and state levels, according to the SBA. It offers a list of industries and the specific federal agency that issues permits and licenses.
State agencies, the SBA adds, typically regulate more industries than at the federal level, and require you to renew your license periodically. Go to your state's website to find out which permits and licenses are required. Depending on your business, they can include food, liquor, health or businesses licenses, according to The Hartford.
Open a business bank account
A business bank account allows you to separate your business funds from your personal finances, says Forbes. That way, you'll have an easier time tracking business transactions and expenses. Very important, too, is that a business account comes with personal liability protection. Similar to the way an LLC protects your personal assets from bankruptcy, personal liability protection helps cover them if you're sued.
Get business insurance
As an entrepreneur, it's absolutely critical to have a safety net for all your hard work. Business insurance offers solutions for risks that are unique to your business. If the unexpected happens, protection can help minimize financial setbacks and allow you to pick up where you left off.
Business insurance typically offers a wide range of protection for companies big and small, including:
Shop around and compare business insurance quotes to see which insurer and protection plan is right for you and your venture.