The United States’ economy may be the largest in the world, but it’s largely a mass of small businesses. There are more than 30 million small businesses, accounting for 99.9 percent of all businesses in the country. Moreover, some 400,000 new small businesses are started each year.
Many entrepreneurs have successfully started their small businesses, although some began their businesses more smoothly than others. Whether you’re starting an LLC in California or a corporation in New York, here’s how to launch a small business efficiently if you’re about to join the ranks of the country’s small business masses.
Step 1: Write a business plan
Begin by writing a business plan, as this document provides your business direction. It both shows potential investors and partners the path forward and helps guide you as you face decisions along the way. At the very least, writing a business plan forces you to think through various aspects of your business and its operations.
Sometimes new entrepreneurs are uncertain about how to write a business plan, but it needn’t be a complex process. Keep the writing concise and clear, and be as forthright as possible. Cover the six main areas that you should be addressed when starting a business:
- Overview
- Messaging
- Marketing
- Product/service
- Production and delivery
- Business goals.
Gillian Perkins explains each of these in more detail in the following video.
Step 2: Secure financing
With your business plan complete, you’re ready to secure the startup financing that your new business requires. By completing the business plan first, you’ll ensure your business is viable, know what the required initial investment is, and be able to explain the business to potential investors/lenders.
Depending on your business’s financial needs and your situation, you might use any of several potential financing sources:
- Own savings
- Friends and family investments
- Business partner investments
- Angel investments
- Business loans
- Equipment loans/leases
Many entrepreneurs begin with their savings, a small outside investment, or a nominal loan, and you might not need more than what these financing options afford. There can be more financing available if you have larger funding needs.
Step 3: Form an LLC
Incorporating your business is an essential step in making the business legitimate. Incorporation gives you more credibility when applying for bank accounts, loans, leases, and other necessary documents. More importantly, though, incorporation gives you some personal protection against liability lawsuits.
Your business might be sued. A sole proprietorship provides no personal protection, meaning the suing party could sue you for your assets. Incorporation provides a “corporate veil” that prevents anyone from suing you.
Many small businesses incorporate as a limited liability corporation (LLC). While there are other options, an LLC provides the corporate veil, yet is simple to manage. It has the ideal combination of protection and legitimacy without making paperwork too complicated for business owners.
Forming an LLC for your business is an official process, and the process varies slightly from state to state. However, tailor Brands has a good video that takes you through each step of the LLC formation process. The process is easy to understand if you have a helpful tutorial or guide.
Step 4: Obtain licenses/permits
Many businesses are required to obtain licenses and permits before beginning operations, and business owners are sometimes surprised that even seemingly simple businesses may need these.
Licenses tend to grant general permission to carry out regulated activities, whereas permits tend to permit businesses to operate at specific places/times. For example, a commercial driver can drive trucks per their driver’s license. They might still need local permits for specific loads.
Unfortunately, no one entity oversees all licenses and permits. You’ll have to check with several sources to determine whether your business needs any. You can contact the following:
- City Clerk
- County Clerk
- State regulatory body
- Federal regulatory body
Clerks will be familiar with any local permitting requirements. Regulatory bodies will oversee licenses and permits related to their field. You should already know what regulatory bodies oversee your business’s activities (if any do).
Step 5: Open a business bank account
Business finances should be kept separate from personal finances so that all transactions are more easily identified as one or the other. To keep finances separate, your business needs a business bank account.
Business bank accounts are similar to personal bank accounts, with slight adjustments for businesses rather than individuals. You should open a business checking account and might also want a business savings account. Mike Rosko has a tutorial that shows how to open either account type in less than 10 minutes.
Step 6: Get insurance
Almost all businesses have valuable assets (e.g., buildings, equipment, inventory, products, etc.) to protect, and all businesses are susceptible to liability lawsuits. For these reasons, all businesses should have at least some insurance.
A business owners policy (BOP) is designed to meet the specific needs of small businesses. A BOP may meet your business’s insurance needs, which is the first type of policy to consider. It usually comes with commercial property, general liability, business income, and some optional coverages such as commercial auto insurance.
Talk with an insurance agent to find out whether these coverages are all your business needs to carry or if there are other protections to consider. If needed, an agent can help you get more technical protections, such as professional liability insurance or tenants’ betterment insurance.
Step 7: Hire a team
Working alone will place a significant limitation on your business’ potential. Although you might start by yourself, you’ll soon want people supporting you in various roles. You’ll want to hire a team.
Your business’s operations depend on who you hire or what positions you should offer. Those are decisions that you, as the business owner, must make.
Be prepared to hire before starting operations or soon after that, though. Hiring at least one other person will enable you to focus on the activities that’ll grow your business rather than the menial tasks that must be done.
Step 8: Outsource & use tools
Further, improve your business and personal efficiencies by intelligently outsourcing and using tools.
Many different aspects of businesses’ operations can be outsourced online or locally. For example, you might hire a bookkeeper, accountant, social media marketer, or administrative assistant. Spending a little on some outsourced professionals could pay for itself in the time that you save (not to mention professionals are probably better than you at their specific jobs).
There’s also no shortage of online tools and apps that you can use to streamline and simplify. From planning your business to creating its website, you can find easy-to-use tools for many tasks that would otherwise take excessive time. Slide Business has a good list of recommended tools that almost every business can use, in case you don’t know which ones are most useful.
Set your business up for success
Starting a business might be an unfamiliar process, but these steps will help you form a strong foundation for future success. If you follow these steps, you’ll avoid many common mistakes and be better poised for profitability and growth. Take the first one, and the rest will naturally follow.
