240,000 new businesses — that’s how many started up in the United States back in the third quarter of 2016. Thanks to them, employment seekers had 872,000 new job opportunities.
Today, the US is now home to 30.2 million small businesses, making up 99.9% of all businesses in the country. They continue to generate new jobs, which is why the unemployment rate has dropped to 3.9%.
That said, becoming the boss of your own is no doubt a great idea. But becoming a business owner takes more than a great business concept. There are many steps involved on how to launch a business, from financial to legal to creative.
Ready to learn how to build a business and start it off on the right foot? Let’s get right into it then!
1. How to Launch a Business: Start with a Solid Business Plan
What is the purpose and goal of the business you want to put up? Who will it serve – regular consumers, other businesses, or industries? What consumer, business, or industry problems do your organization aim to solve?
The first step on how to start a business is having a business plan that answers these questions. Having a solid mission and vision now will let you focus on refining the details of your business plan later on.
It’s not enough to say that you want your business to make the lives of consumers more convenient. It’s a good start, but you need to delve deeper and figure out which exactly they need more convenience for.
If you don’t have an actual business idea yet, consider your current career. Think about the things you’ve learned in your career that you can use to start your own business.
Let’s say you’ve learned so much about traveling at your previous job. You’ve accumulated knowledge on the best ways to travel, with or without a big budget.
Then a good way to expand your career is to start a travel-related business. This may include creating itineraries for budget or luxury vacations. You do the research and booking for your customers’ travels, and you get paid to do something you like.
Unsure how your career can fit into your business ownership? Then read more now about it to get some ideas.
2. Conduct a Thorough Market Research
Your target customers are those who’ll buy the products or services you’ll offer. But how sure are you that they’ll buy it in the first place?
This is where market research — one of the most important business basics — comes into play. By conducting an in-depth review of the market, you’ll find proof people want or need your idea.
For instance, did you know that eight in 10 Americans now shop online? Or that half of them use their smartphones to carry out their online shopping activities?
These statistics point out how US consumers now prefer online shopping. In fact, in 2017, 40% of Internet users in the country reported ordering items online several times a month. 20% did their online shopping on a weekly basis.
Now, let’s say your goal is to make grocery shopping more convenient to average shoppers. Your plan is to do the shopping for them and has their items delivered to their doorsteps. They can send their shopping list to you online, and you’ll take it from there.
The statistics above are proof you have a target market. But that’s only one example, as you still need to research the kind of products they can order from you. You also have to consider other factors, like delivery times and types of payment method they can use.
Remember: You’re starting a business from scratch, so you need as much info as possible. By getting to know your potential clientele, you’ll better understand their demographics. You’ll also have a clearer idea on what they’re looking for in a product or service.
3. Get Your Finances in Order
Of the millions of small businesses in the United States, 69% began at home. Many are still home-based up to now, but a lot have also branched out to actual brick and mortar stores.
If your business plan involves starting at home, then you can likely launch it with $3,000 or even less. Since you already have a “location”, then you’d need less for your initial startup costs. You can even lower your overhead costs with these tips.
The main question here is, do you have $3,000? A 2016 study found that 69% of Americans had less than $1,000 in their savings accounts.
Being in a similar situation doesn’t disqualify you from entrepreneurship. But you should get your finances in order, as you’d still need funds to start your business. Securing a business loan is one of your options.
When determining how much you’d need, consider both one-time and ongoing expenses. One-time expenses or “capital expenditures” include inventory and equipment (including a business car). Some ongoing costs include market research, marketing, salaries, and utilities.
It’s best to overestimate your startup capital, since it often takes time to make profits. A considerable allowance in your capital gives you a back-up source of funds. This way, if it takes longer than you estimated to become profitable, you have a fallback plan.
4. Polish Your Business Plan
Know who your main competitors are, so you can make your business even more attractive. You have the same target market, so learn what these customers say about them. You’ll get an idea on what they don’t like about those businesses, so your business won’t make the same mistake.
For example, many customers complain about the long delivery times of X Company. This bad experience has led to them switching brands. That brand they’ll switch to can be you, if you make sure you deliver their items in less time than the competitor.
Also, learn what your competitors are doing right, and then think of something to improve it. Offer something other businesses don’t, and consumers are more likely to work with you.
5. Choose the Appropriate Business Structure
Determine the kind of entity that best defines your business. What type of business you own influences all its legal aspects, from taxes to liabilities.
Sole proprietorship is for businesses with a single owner. If you’re the sole proprietor, you handle all financial and legal obligations.
This will affect your own credit though. If you miss out on business loan payments, your credit will suffer too.
Businesses owned by two or more individuals fall under the “partnership” structure. Your business partner/s will share all the obligations and responsibilities. They’ll also share the glory once your business booms.
Choose a corporation so you can separate personal liabilities from your business’. This won’t affect your personal credit, as it’s a separate entity from you, the owner.
The Limited Liability Corporation (LLC) is the most common small business corporation structure. It provides corporation-like legal protections to businesses, while delivering partnership-like tax benefits.
Determining which legal structure your business would fall in is up to you. Do your homework to find out which best applies to your company. Factor in your future goals, like growth and expansion, to make the right choice.
6. Register to Formalize Your Business
Official recognition of a business requires government registration. The first major step on how to start a corporation (like LLC) is to provide an “Articles of Incorporation”. It’s a written document where the name of your business, its purpose, and structure appears. It also includes other relevant information, like contact information and stock details.
Sole proprietors and partnerships don’t need to submit this document. But you still need to register the name of your business.
If you plan on hiring people along the way, get an employer identification number (EIN). This further separates your personal taxes from your business taxes. It also prepares you now for future employment.
You can check out this list from the Internal Revenue Service about EINs. This guide will tell you whether you need one before you can start your business operations. If you do, you can apply for the number online, at no cost.
7. Buy a Business Insurance Policy
Homeownership in the U.S. was at 64.4% in the second quarter of 2018. That translates to about 88 million owned houses. Most of these have homeowners’ insurance policies.
But if you’re starting a home-based business, you need a business insurance policy. Your homeowners’ policy won’t cover anything related to your business. That means assets, equipment, or properties of your business.
Some business activities conducted in a home can even void a home policy. Prevent this by informing your insurer about your business plans. Then, ask them about what your options are for a home business policy.
8. Brand before You Launch
Granted, not all 30.2 million small businesses are your competitors. But you still have your fair share of competing businesses, so you have to stand out from the crowd.
Branding early builds up the hype around your products or services. You should already have a solid marketing plan even before your business starts.
Aside from a creative and interesting business logo, prepare a digital marketing campaign. Start by setting up a great-looking, navigable website and social media accounts.
If you’re not tech-savvy, consider outsourcing some of these marketing must-haves. Website development and social media marketing are services you can outsource.
The earlier you brand and advertise, the more reasons for customers to feel excited. Soon as your business opens, they’ll make your doors swing and your cash register ring.
Get Your Business Started Now
Now that you know the basics of how to launch a business, you can start off on the right foot. Comprehensive research, enough funds, and proper planning can help your business thrive. In fact, these will help prevent you from becoming one of the 30% of startups that fail within the first two years.
Need more advice on funding your startup? Make sure you check out this guide then!