A Step-by-step Guide to Starting a Business
Starting a business can be exciting, but stressful. Who to address, where to go, what to start with — these are common questions for any would-be entrepreneur. The good news is that starting your own business is not rocket science. It’s not even necessary to have a college degree or a significant amount of money in your bank account. So, what does a future business owner need then?
To help you find your bearings in an ocean of information, we’ve prepared an ultimate guide on how to start a business from the ground up. If you’re looking to start a business, you can get a Small Business Package of legal documents you’ll need regardless of your state of registration.
Also, US Legal Forms provides a Corporate Records Maintenance Package with ready-to-use legal templates specifically for your home state.
5 Reasons to Start a Business
Certainly, each case is different. In general, however, the reasons for starting a business begin with the following factors:
Complete Control Over the Process
Being a business owner is primarily associated with having the controls for every process in your hands. You decide what to do, when, in what way, etc. However, keep in mind that being in charge of how you do the work that produces your income has two sides:
- your success brings you, as the owner, a more significant financial benefit than your employees
- you bear the responsibility for each failure, which might also include financial losses
Control and flexibility are closely interconnected when you start your own business. You no longer need to be tied to a regular nine-to-five schedule and can redistribute your time however you think is right. You know what you should do, but the time and place of completing these tasks are up to you. Do you want to work from a cozy cafe downtown? No problem.
Feel like staying in your comfy armchair at home? You’re welcome.
Being an employee hardly ever provides such a complete level of flexibility.
Business founders have different opinions on this point. Some of them support this statement, while others claim that starting a business won’t deliver a substantial income boost, at least not within a short period of time. But the majority of entrepreneurs agree that as an employer, you have the potential to earn far more money than an employee. The question lies in the way you make use of this potential.
If you decide to start your own business, you have every chance to design and bring it to life exactly the way you want. As an employer, you work on implementing the vision you’ve created. It’s up to you whether your business product will have a social or environmental impact, if your employees will be happy coming to work every day, etc. Another thing is, if you’re more into social responsibility than making a lot of money, business ownership enables you to do good while living well.
Your Own Environment
When you work as an employee, you’ll most likely have to put up with the environment the company you’re working for has already created. In the best case scenario, some of your suggestions might be taken into consideration. If you work for yourself, you are the one who sets the business culture, communication policy, and other rules that create a work environment. The same goes for the way your place of work looks: casual or formal for you and your employees, or no workplace at all if you’re a solo entrepreneur.
However, the reasons above are not enough to start a company. The would-be business owner should possess certain skills in order to succeed with their startup.
1. Thought Leadership
Leadership is important but thought leadership is crucial in running a business. Any resource with tips for starting a business will include this skill. The difference is that a thought leader has something innovative and disruptive to offer their audience. The main task of a thought leader is to share and motivate, which eventually leads to building a successful team and business.
2. Soft Skills and Emotional Intelligence (EQ)
Hardly anyone would argue that communication is a crucial factor to the success or failure of teams and organizations. A business owner should be an example by implementing a proactive culture and encouraging honest and open communication. Emotional intelligence goes hand in hand with communication. Whether these are customers or partners, the ability to perceive their emotions will help build strong relationships and make your own business successful.
By focusing on the potential issues your business might face and coming up with a number of solutions in advance, you’ll automatically have the advantage over competitors by saving time and hassle when a problem actually occurs.
4. Digital/no-code Skills
The world has already gone digital, and this change isn’t going away. As a business owner, you need to keep up with the times by being able to digitize processes within your organization. Currently, there are quite a few solutions that provide software services without any coding skills required. For example, airSlate, a document workflow automation platform, enables you to digitize and streamline any document-related process while ensuring data security, proper document access permissions, and no-code integrations with the systems and services you’re already using.
Leadership is about focusing on the comprehensive picture instead of monitoring each and every process within your company. Learn to delegate duties that don’t require your authority. Make an audit every month to check how you spend your time. Another thing is building a business requires trust: delegation is much easier when you know you can rely on the people in your team. On the other hand, it’s inefficient and even risky to work with people you don’t trust.
6. Financial Literacy
Know your finances — this statement should be top of mind for every business owner. Being aware of how much things cost, including sales, labor expenses, etc., gives you a clear understanding of your business’s health. Your success depends on numbers, so study them and do good planning for the future.
If we put aside all the technologies at our disposal, knowledge of the self is often overlooked. By searching for solutions outside, we tend to forget about our inner potential. Realize your blind spots and find a trustworthy expert to listen to.
How to Come Up with a Business Idea
“Imagination is everything. It is the preview of life’s coming attractions.” – Albert Einstein
Whatever product or service your business will be related to, it’s the idea that comes first. What is the best business to start? If you already have a business idea, congratulations — one of the key stages is completed. If not, you should start by asking yourself, “Why?”:
Why are you launching this business?
Why will your product/service/etc., be useful/attractive/necessary for potential customers?
The number of questions can be unlimited. For example, according to Glenn Gutek, CEO of Awake Consulting and Coaching, it is necessary to differentiate between a Why that meets personal needs and those of the marketplace. Regardless of the industry, the scope of your business will be much larger if your product/service answers the marketplace “Why” as opposed to the personal “Why’.
Also, keep in mind that it requires not only hard work and focus but also passion. That’s why coming up with a business idea that is related to your interests is always a good idea. To identify this opportunity, ask yourself the following questions:
- What am I good at?
- Can it capitalize on it?
- What is my priority: helping people or making as much money as possible?
- Do I have enough expertise and experience in the field?
Just to name a few.
Some more tips on boosting your business idea generator:
1) What’s next?
This thought-provoking question is really helpful in identifying the technology or advancement on the way and how it’s going to influence the business landscape. Is there any possibility for you to ride the wave? If the answer is yes, the idea is worth developing.
2) Old skills, new field
Occasionally, we focus too much on what’s new rather than comparing it with the old. Therefore, it’s not always about mastering new skills but applying the knowledge you have in a new way. Why does this work? Because most businesses do things the way they are used to. This is where introducing a fresh perspective comes in handy. Creating the same type of product or providing a similar service in a new, fresh manner is more likely to bring success, especially to startup businesses.
3) Better, cheaper, faster
A business idea does not necessarily have to be completely new and untapped. You can take an idea that already exists on the market and think of its enhancement by making it better, cheaper, or faster. An additional objective can be to make it easier to use or understand. For example, if it’s a software product, you might develop a similar tool but with a more user-friendly interface.
Examples of Business Ideas to Start a New Company in 2022:
- Online reselling
A reselling business on the internet is a solid business prospect for those into clothes and sales. You can start by using some online shop websites for selling secondhand clothing and then move on to launching your own resale website.
Social media, HR, leadership, communication, etc. — if you’re passionate about any of these topics and have the knowledge to share, consider offering consulting services. You can start as a private consultant and then grow to hire more people.
- App development
If you are a tech person, the idea of starting a business in app development may be right for you. VR software is becoming more and more popular, not to mention there are new mobile apps popping up all the time that people adopt and use on a daily basis.
- Digital marketing
A lot of companies prefer outsourcing digital marketing services instead of establishing an in-house team. Digital marketing is always in demand because it’s an essential part of every brand. However, this field requires expertise in SEO, SMM, web development, PPC advertising, etc.
- Real estate
In a nutshell, this type of business presupposes helping people find their dream homes at a price they can afford. Complete a course over a few months, get certified, and you’re ready to launch your real estate business.
There are many different types of businesses to start, but the above-mentioned examples are the most popular ones.
Checking the Relevance of Your Business Idea
Another thing worth mentioning in this chapter is checking your idea to start your own business for relevance. Look around and pay attention to the trends within the culture around you. Will your product or service fulfill your potential customers’ needs at the moment? Will their needs remain the same tomorrow, or are they going to change? In what way?
Here’s a how-to guide on checking your business idea’s relevance:
- Create a test service or a prototype of your idea
- Build an MVP (minimum viable product) — the simplest form of your idea that can be sold as a product
- Present your idea’s prototype to a group of potential customers or critics
- Customize it to suit your test market
- Build a simple test website for your product/service with a social media tie-in
- Develop a marketing plan and implement it
- Adopt an experimentation approach to check what works and what doesn’t
- Use design thinking to come up with better, more creative solutions
Certainly, no one’s prediction or testing models can be 100% correct. That’s why we’re slowly moving to the next step to opening a business — market research.
Market Research and a Business Plan
What to know when starting a business? Thorough research is an indispensable part of launching a successful business. Check if the product/service you’re going to launch is already on the market.
If yes, market research can tell you whether they’re meeting customer needs.
If not, you’ll discover why and maybe reconsider your business’s direction.
Consider the differences between primary and secondary market research:
Primary research includes data collection by analyzing sales, current practices, and competitors. Also, this type of research includes interviews, surveys, questionnaires, and feedback from customer focus groups.
Secondary research focuses on analyzing data that’s already been published. Having secondary data allows you to establish benchmarks, identify competitors, and target segments (according to lifestyle, age, behavioral patterns, etc.)
Data collection plays a vital role in market research. Data collection can be quantitative and qualitative.
Quantitative data collection requires mathematical analysis and helps determine statistical aspects such as where leads are coming from, how long visitors are staying on your website, and which page they exit from.
Qualitative data collection makes use of quantitative methods to help business owners identify problems and get customer opinions using interview methods.
Quantitative data collection requires a large sample size while in qualitative research methods, the sample size is usually small.
Whether you are starting a service business or developing a product, comprehensive market research helps you to determine:
- The latest products/ services on the market
- Market trends to capitalize on
- Current gaps on the market you can fill in
- Your potential customers’ needs
To prevent business newbies from making the most common mistakes while conducting market research, here are the top three things you should NOT do if you want your research to be objective and efficient:
1. Do NOT stick to secondary research alone
Research conducted by somebody else may not be a completely reliable source of information. It can be either outdated or missing some important information for your business.
2. Do NOT only rely on web resources
Same as in the previous paragraph — these sources of information are available to anyone and should not be considered highly reliable. For more impactful research, you might need to address specialized institutions or experts in the field.
3. Do NOT limit your survey participants to those you’re familiar with
It’s doubtful that such a survey will be objective. To get accurate information, you need to talk to real customers about their needs and expectations.
Once your market research is completed, you can proceed with writing a business plan. Even the simplest business requires a plan. This is a description of your product/service’s evolution from the start to a finished product. As a rule, a business plan contains up to 30 pages of text and an additional ten pages for other details, such as management resumes, monthly projections, etc.
A good business plan consists of:
- Executive summary
- Business description
- Marketing strategy
- Competitor analysis
- Development plan
- Management plan
Also keep in mind that your business plan will be evolving with your product, that’s why it will absolutely be changing with every product update.
Starting a Business from Home: In-state vs. Out of State
You’ve selected a business idea, checked it for relevance, conducted market research, and prepared a business plan, so your project is ready to be launched. What’s next? Make it official. Take care of the legal aspects from the very beginning and you won’t have to worry about someone stealing your idea or suing you for anything unexpected.
A quick checklist of what to take into consideration includes:
- Business name and structure
- Business registration
- Federal and state tax ID
- Permits and license
- Bank account
- Copyrights, patents, and trademarks
In this paragraph, we’ll focus on two of the above-mentioned points: business structure and business registration.
Which legal business entity suits your needs? There are several types of business structures to choose from: LLC, DBA, sole proprietorship, and corporation.
Starting an LLC, or limited liability corporation, is relatively easy and is characterized by separating your personal assets from company finances.
DBA stands for “doing business as”, that’s why it’s a suitable structure for those who plan to operate under a different name from their business’s legal name.
A sole proprietorship is the simplest form of building a business and provides the owner with complete control over their business with no government forms or annual reports to fill out.
A Corporation, like an LLC, separates a business from its owner. However, a corporation must have shareholders and a board of directors. Learn more about the difference between a C corporation and S corporation in one of our recent articles.
The basic differences in business structure are presented in the comparison table below:
|Limited Liability Corporation
Another key point to consider in terms of registering a business is the location. If you register a company in the state where you live, in most cases, it will be the financially savvy choice. However, if there are reasons why you’re considering out-of-state registration, here is the gist of each option and their pluses/minuses for your business.
Regarding fields of activity, there aren’t many ideas that are easy businesses to start at home. However, the convenience of registering your business in your state is based on your familiarity with the local laws and regulations as well as the proximity of governmental offices. Also, even if doing business out-of-state, you might still be required to register your company in your home state. This is why many startups are looking for tips on how to start a business from home.
Registering your business out of state will also entail extra expenses. Since you’ll have to register as a foreign entity, you’ll need to appoint a registered agent in your home state. On the other hand, you can select a state with lower taxes.
|Out of State
|– Familiar laws and regulations
– Government offices nearby
– Might need to do it anyway
|– Possibly lower taxes
|– Additional expenses (registering as a foreign entity and appointing a registered agent in your state)
The bottom line
Starting a company from scratch is not as scary as it may seem. Develop your idea, create a business plan, and make sure you understand the laws and regulations of the state where you’re going to register your business. Get a Small Business Package of legal documents you’ll need regardless of the state of registration and a Corporate Records Maintenance Package with ready-to-use legal templates specifically for your home state.