10-Step Guide to Starting a Small Business

April 20, 2021

1. Conduct Market Research for Your Startup Business Idea

You’ve thought long and hard to come up with your business idea. Now you need a strategy to give your idea the best chance at succeeding. That’s where market research comes in.

You might be asking yourself, “why do market research?” Is it worth your time? It’s actually more important than you may think. It can reduce your business risks, while giving you the opportunity to:

Identify potential customers’ habits, trends and needs
Figure out if your type of business meets customers’ wants
Determine the best way to market your product or service
Get feedback on your business idea

Market research involves collecting data to help you better understand your industry. You’ll likely collect two types of data while you go through this process using primary vs. secondary techniques:

Primary comes from a direct source, like a person or company.
Secondary is from an existing resource, like a published study.

Quantitative vs. qualitative data are both valuable for your startup and serve different purposes:

Quantitative uses math and data analysis to inform you on important stats about your business and market.
Qualitative consists of more people-focused information, such as their needs or opinions about products and services.

2. Write a Business Plan

If you already have a vision for how to bring your business idea to life, you may be wondering, “why do I need a business plan?” When you create a business plan, you’re describing every aspect of your business in a formal document. This lets other people understand what you do, what your objectives are and what strategies you have in place to achieve your goals.

Your plan doesn’t have to be elaborate, but it’s important you write a readable business plan. The main components of a business plan include:

An executive summary
Business description and structure
Market research and strategies
Management and personnel
Financial documents

Your industry and market are always changing, so you should revise your plan as needed. Regularly revising and refining your plan is a good idea to ensure your business remains competitive.

3. Finance Your Business

You can’t start your business without money. Your market research can tell you how much you’ll need to get your business up and running. If you don’t have enough saved to start, you may need to raise more money or borrow capital.

Before you start business funding, it’s important to have the right foundation. You may need to open a business bank account to separate your personal and company assets. You may also need to buy record-keeping and accounting software to keep your business finances in order.

When you’re ready, here are some methods you can use for your startup financing:

Apply to local angel investors
Request a small business loan or grant
Use a microlending program
Ask friends and family for a startup loan
Borrow from your 401(k)
Become a member of a startup incubator
Read about alternative funding for startups, like crowdfunding or peer-to-peer lending

4. Determine a Business Structure

Whether you operate as a sole proprietor or a C corporation, it’s important to choose the correct business structure for your startup. This impacts several money matters, such as your:

Taxes
Financing
Compensation
Insurance

Some common business structures you can choose are:

5. Find a Business Location

Part of the process of beginning your startup includes finding the right business location. Before you can start setting up your office, you need to determine what makes the most sense for your business. Depending on how your startup operates, you can either:

Work from home
Lease or buy an office
Create a virtual office if you have an online business

Don’t forget the office-related tax that can come from your business’ location. It may be a good idea to work with a tax professional or accountant while finding a space, because it can impact your tax liability. For example, if you have a home-based business, you can claim your home office space as a deduction.

6. Develop the Brand and Marketing for Your Startup

Startup marketing is an important part of your business’ success. We’re here to help small businesses understand the importance of marketing and small business advertising.

Whether it’s social media marketing or word-of-mouth advertising, you need a marketing strategy to help your startup expand and grow. Part of your strategy should also include branding your business. You’ll need a name and logo, and you’ll also need a business website to maintain a digital presence with your customers.

7. Register Your Business

Your business needs to be official. Aside from giving your startup more credibility with potential customers and clients, registering can also help protect your business’ name.

You’ll have to apply for any necessary business licenses and permits to register your business with your local government, as well as the IRS. After you register your business, you’ll get an Employer Identification Number (EIN) and a state tax ID number. You’ll use these numbers to file your business taxes.

8. Build Your Team

Recruiting and retaining talented employees is key to your startup’s growth and success. Building your team starts with you. As the founder, you’re startup leadership. That’s why it’s important to have the right team building, managerial and communication skills to lead your employees.

Finding startup talent and hiring your first employees can take time. So don’t feel like you should rush through the process. And be sure you’re following federal and state employment laws, because if you don’t, you risk a fine or lawsuit.

9. Safeguard Your Business

You’ve invested a lot into your startup. While it’s exciting when you first open your doors for business, it also makes your company vulnerable to different risks. Whether it’s a customer injury or property damage, having the right safeguards in place is important to protect your business and investment.

Business insurance for startups can help protect your company from various risks. Businesses in the United States must have some type of business insurance, and getting the right coverage can help you build a comprehensive protection plan. If you don’t know where to begin, start by customizing your business insurance by its industry.

Consider working with an insurance company or local insurance agent to research the kinds of risks your business may face. This can help you decide which coverages are right for your startup. For example, if you and your employees regularly travel for work, you may need to get commercial auto insurance or business travel insurance.

Other types of business insurance that can help your startup include:

Data breach coverage, which can help cover your costs if your startup loses confidential information about customers or employees.

Commercial umbrella insurance to extend your coverage limits on certain liability policies.

Errors and omissions insurance, which can help your startup if you or an employee makes a mistake in professional services.

10. Grow Your Small Business

Setting up the right foundation for your startup puts it on the path to be a growing business. Whether you create a sophisticated marketing strategy or work with vendors to help you expand, growing a business takes dedication and resources. When you’re ready, you’ll want to make sure you have the right team and safeguards in place to protect your business and help it mature.

Source: The Hartford Insurance