Running a business has a big impact on your life and the lives of those you care about. However, before you can run a new firm, you must first learn how to start one.
These 11 tried-and-true steps for starting a successful business can help you with everything from researching and confirming your money-making concept to thinking out your shipping plan to finally releasing your product or service, whether it’s your first or tenth.
1.Look for a business concept/Idea
The first step in launching an online business is deciding what type of business you want to run. Finding small company ideas is a task you may tackle methodically by relying on tried-and-true methods that have proven successful for previous entrepreneurs.
2. Write your business plan
By forcing you to sit down and think things through methodically, writing a business plan can help formalize your idea and streamline the business-creation process. And, while plans aren’t always useful, they are essential.
Having a good hold on your “known unknowns” is crucial since it just implies you’re not actively prioritizing finding a solution right now; that’s a lot better than being unprepared or taken off guard, especially if you’re trying to raise money.
At the very least your business plan should outline the following:
- Company name and description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations plan
- Financial plan
3. Secure financing to fund your business
Your business plan will help you figure out how much money you’ll need to get your company off the ground. There are a number options for financing your company, but these are the most common:
Loans for small businesses. A business loan from a lender could be an excellent idea if you have a good personal credit history and require startup funding.
Grants for businesses. Grants are frequently awarded to businesses that meet certain criteria, such as veteran-owned businesses, minority-owned businesses, specified for-profit businesses, women-run businesses, and so on.
Shopify Capital is a venture capital firm that invests in startups. You might be able to secure funding that enables qualified merchants to access the capital they need without having to wait for long bank approvals or give up a piece of their business.
Crowdfunding. You may always crowdsource donations from a group of individuals online if you don’t want to pursue the regular funding route.
Individual investors. In the early phases, startups can also raise money from VC or angel investors, as well as friends and family.
4. Choose a business structure
The proper structure is one that strikes a balance between the legal and financial protection you require and the flexibility provided by many possibilities. It’s a big decision, and you should think about it thoroughly before you start your company.
The types of business structures vary depending on your country and region, but the most frequent are sole proprietorship, limited liability company (LLC), and corporation.
Sole Proprietorship
A sole proprietorship is ideal if you’re the only person working in the company, and it’s usually the least time-consuming structure to pursue, but it makes you personally liable for the company’s actions. As a sole proprietor, you can hire personnel, but you’ll need an employer identification number, which entails registering your business.
Limited liability corporation (LLC)
A limited liability corporation (LLC) is a common type of business entity for small businesses in the US. It provides liability protection for the business owner(s), so you are not financially responsible if legal claims are brought against your business. An LLC can be formed by one or more owners.
Corporation
A C corporation is a business structure where owners are taxed separately from the entity. Shareholders own the business and each has a fractional share of the company. The benefits of a C corp are normally enjoyed by large, multinational corporations, like Walmart and Apple. However, they can be leveraged by small businesses that want to garner investment by issuing stock.
When it comes to considering the right legal structure for your business, there are a few factors you’ll need to consider:
- Where is your business located? Your country’s laws will outline the different business structures you can form and whether or not you need a business license to get started.
- What kind of business are you running? Some structures are more suited to businesses of a certain scale or within a certain industry. There might come a time when you need to restructure your business in order to work with new partners. It’s not uncommon for large businesses to ask that their suppliers or partners be incorporated, for example.
- How many people are involved? If you’re going it alone as a solo founder, you may be able to look at streamlined options. If you have a business partner or multiple people with ownership in the company, you’ll need to look at more advanced options to ensure everything is set up and shared properly.
5. Get federal and state tax ID numbers
Federal tax ID (EIN)
A federal tax ID, also called an employer identification number, or EIN, is a nine-digit number the IRS assigns to businesses and organizations for tax purposes. Think of it as your business’s Social Security number.
You’ll need an EIN if:
- Your business has any employees other than yourself
- Your business is incorporated
- You have any partners in your business (i.e., it is a multi-member LLC)
- You take over an existing business either through purchase or inheritance
- You have a retirement plan for self-employed individuals (like a keogh plan) or solo 401(k) retirement plan
- You want to open a business bank account (Not all banks require an EIN, but most do.)
- You file for bankruptcy
Having an EIN will:
- Help you when you file taxes. An EIN will allow you to file business taxes, decrease the chances of an audit when claiming deductions, and help you to avoid tax penalties.
- Protect you legally. If you ever run into legal trouble, your EIN establishes that you personally are separate from your business. Your EIN protects you if your business ever gets sued.
- Help protect your personal information. Instead of giving out your personal Social Security number to vendors and clients, you can just give out your EIN. So your personal information will be kept private and safe, making it much less likely you’ll experience identity theft. Business identity theft does happen, but it’s much less common than personal or consumer identity theft.
- Help you establish business credit. Much in the way that you personally have a credit history, your EIN helps your business build credit. This can do a lot in helping you get better terms on your business loans as well as to qualify for business credit cards, etc.
State tax ID
A state tax ID is separate from your EIN. An EIN is assigned by the federal IRS, while a state tax ID is assigned by your state.
A state tax ID has a similar purpose to an EIN in that it helps your business comply with state business laws. However, each state has different requirements, regulations, and even tax laws. So you’ll have to research your individual state’s laws to see whether your business will need a state tax ID.
Laws vary from state to state. A good place to start is your state’s taxation department, department of treasury, or secretary of state. Get in touch with them to find out any state tax ID requirements you may need when starting your business.
6. Obtain a business license and permits
Look into what permits and government laws you’ll need to operate lawfully once you’ve figured out how to start a firm. Nobody wants to find themselves in legal jeopardy. Your company is subject to local business laws as well as industry-specific laws and regulations. A food service business, for example, must adhere to certain licencing and rules when handling the products it sells, but it must also consider the legalities of its marketing activities as well as trademark and copyright laws.
With so much to learn, much of it relevant to your location and industry, it’s a good idea to seek legal guidance before launching your company. Investing time and money up front to get legal guidance can save you a lot of trouble in the long run.
7. Open a business bank account
Take the time to register a business bank account and obtain a business credit card to make handling your funds much easier. Keeping your personal and business accounts separate makes filing taxes for your business much easier, and it can also help you automate some of the financial tasks involved in beginning a business. This will be very useful if you want to learn how to create a small business on a shoestring budget.
8. Get business insurance
Business insurance safeguards your company’s and personal assets from unforeseen events. When it comes to business insurance, each state has its own set of rules and regulations, but even if your state doesn’t mandate it, it’s always a good idea to protect yourself and your company.
There are many different types of business insurance, and determining what type of insurance your company requires is the first step. Here are a few examples of common insurance:
- Liability insurance covers your business for any legal actions due to accidents, injuries, or negligence.
- Commercial property insurance will help your business if any property is damaged or destroyed due to fire, storm, or theft. It will help pay to repair or replace property, inventory, and equipment.
- Commercial auto insurance will cover any damage caused to or by any vehicles you use for your business. (i.e., delivery vehicles, moving trucks, forklifts, etc.). It will pay for medical expenses, legal bills, and property damage, should one of your vehicles be the cause of an accident.
- Workers’ compensation insurance pays for the medical care and lost wages of any employees who are injured on the job. Most states require employers to have some sort of workers’ compensation insurance based on how many employees a business employs.
- Professional liability insurance protects people who are in service-related jobs. It protects them from liability for negligence or malpractice (for example, estheticians, hair stylists, bartenders, etc.). It is also known as errors and omissions insurance.
- Product liability insurance protects manufacturers, wholesalers, distributors, and retailers. It protects them from liability if a product they make or sell turns out to be unsafe and injures someone.
- Business interruption insurance will cover the operating costs of your business if it has to shut down or move (for example, because of a fire or hurricane). It will cover the cost of relocation, paying employees, and paying rent.
- Cyber liability insurance provides liability coverage to businesses that suffer a data breach. Depending on the insurance, it can also cover the cost of letting your customers know about the data breach, as well as providing services to customers who are victims of identity theft because of a said data breach.
- Umbrella insurance gives you extra coverage to help pay for anything that may have exceeded your policy limits on other types of insurance.
You must first understand the dangers of the business you work in in order to determine what insurance you may require. A dog grooming firm in California will have quite different requirements than a t-shirt printing business in North Carolina. So do your homework and weigh the dangers of the business you’re establishing.
To give you an example, the dog-grooming business in California should probably, at the very least, consider:
- Liability insurance in case a client slips and falls on some soap or water on the ground
- Errors and omissions insurance for any dogs that may get injured in their care
- Workers compensation for any groomers that may get bitten by furry clients
- Commercial auto insurance if they have any mobile grooming vans
- Cyber liability insurance if they’re taking any electronic payments
After you’ve determined what sorts of insurance your company need. There are numerous companies that provide various types of company insurance. It’s a good idea to go through a reliable licenced agent if you find it daunting. A commercial insurance agent can assist you in finding plans that meet both your business’s demands and your budget.
9. Select your tools and software
- Accounting. With numerous options to help you track everything from a meal with your business partner to a big inventory order, accounting software is one of the best ways to start your business off on the right financial foot.
- Email marketing. Most businesses will benefit from setting up cart abandonment and welcome email sequences even before they’ve made their first sale. An email list is one of the few things, alongside your online store, that you truly own on the internet. It provides a direct line to your customers that isn’t dependent on third-party algorithms. Invest early and start for free with Shopify Email.
- Ads. Paying for ads is a cost of doing business, especially online, but there’s marketing software that can help streamline the process and make the most of your advertising budget—no matter how much you have to spend. Marketing in Shopify can help you reduce the time it takes to create, test, and track your campaigns, but if you plan on scaling your paid advertising, it’s smart to familiarize yourself with their individual platforms.
- Project management. Even if you’re a sole proprietor, having one place to plan your work and keep track of important tasks can help you stay on schedule. Tools like Trello and Asana can help you keep your finger on the pulse, and connective apps like Zapier are great for stitching together and automating your most common workflows.
- Website or online store. Choose a website builder or ecommerce platform that allows you to easily manage all the critical tasks involved in running your business. Look for a theme that supports your product lines and gives you the ability to take and manage orders easily. For commerce businesses, site performance, payments and checkout, and omnichannel capabilities are especially important considerations.
10. Build a strong team.
Now that you know how to open your own business, it’s time to dive into building your team.
What kind of work would you have to undertake and what talents will you need to start your company? These are crucial questions to answer because they will determine your launch timeline as well as your degree of expenditure.
If you plan to accomplish everything yourself, you’ll be constrained by the amount of time you have available. You’ll need to factor in those expenditures, as well as the time it takes to recruit and enrol freelancers or employees if you plan on hiring support.
Some roles you may want to hire for, depending on your skills, include:
- An inventory manager to keep your inventory up to date
- A customer service coordinator to solve customer problems
- Social media manager to create buzz and grow your social presence
- Ads specialist to generate traffic to your website
- Graphic designer to create assets for your marketing material
- A marketer to plan and write material for email, website, and other campaigns
11. Promote your company
Building a brand from the ground up is a difficult undertaking, but it is necessary to stand out in a sea of competitors. A brand is more than a logo and a name; it’s how people perceive you when they connect with your company.
Common elements of branding include:
- Brand logo. A symbol made up of text and images that identifies your business. An effective logo expresses your values and communicates what you do. Create a logo today with our free logo creation tool.
- Company colors and fonts. Your colors, logo, and font play a role in your visual identity. Visuals tie into human emotions and can help reinforce your position and brand experience.
- Voice, tone, and messaging. A consistent and recognizable voice across all your touchpoints makes your brand sound more human and helps connect with your audience on a personal level.
- Brand positioning. A brand position makes it clear who you serve. It communicates to your target audience why you are the best choice for them and what makes your products different.
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