How to Build a Small Business from the Ground Up
Small businesses play an essential role in the United States economy. With more than 33 million small businesses in operation as of 2023, they make up a significant chunk of the total number of organizations operating in the nation. Additionally, small companies employ nearly 62 million people, which represents over 46 percent of the private workforce.
Even when you have a great idea for a business (and see an area that’s lacking in the market), getting started can feel daunting. A lot of steps go into starting a small business, and this guide can help you get through the early stages.
Do Your Research
The first step is researching what already exists in the market and whether your business would serve a need. Market research will offer insights into whether the opportunity exists to turn your idea into a successful business. During the research process, identify who your target market would be and what competitors exist. Gaining this information will give you a competitive advantage and help you go in with as much knowledge as possible.
Create a Business Plan
A business plan is the roadmap of any successful venture. When creating this plan, identify how you’ll structure the business (sole proprietorship vs. LLC vs. corporation), as well as how the day-to-day operations will be handled. Business growth is also something to address in your plan, along with where you plan to operate (home-based vs. virtual vs. brick-and-mortar locations). This document will become your go-to when securing funding and convincing others to work with you.
Determine Funding Needs
Nearly any type of business requires some upfront capital to get started, so your next step is identifying how much money you will need and where you plan to get it. You may be familiar with the concept of “bootstrapping” or self-funding, which involves using your own money to launch a new venture. Some small business owners seek financial support from family and friends, while others go directly to investors (venture capital firms, angel investors, etc.). Crowdsourcing investments has grown in popularity in the recent past, with some startups offering benefits to those who are willing to make contributions.
Securing a business loan can be difficult when you’re first getting started, as lenders often want to see proof of success before taking on additional risk. But a personal loan could be another option, depending on your financial situation and how much money you need.
Register the Business
After you have determined the basic framework for your business, the next step is getting it registered. Each state has its own requirements, so review what’s needed in the state your business will operate, usually found on the Secretary of State website. You can also utilize the Small Business Administration (SBA) site to find out what’s required.
Part of the registration process also includes securing a federal tax identification number or employer identification number (EIN). You can complete that process online.
Protect Intellectual Property
Depending on what you plan to offer to customers, you may need to take steps to protect any intellectual property. In the ecosystem of innovation, IP serves as the distinguishing factor between your organization and a slew of competitors. IP can include products and prototypes, business plans, the company name and branding elements, customer lists, and anything else that is proprietary to the organization. Take steps to protect these items to avoid being beaten to the market with your invention or fighting against others.
Secure Required Permits and Licenses
Ensure legal compliance by securing any necessary licenses and permits in your industry. The requirements vary by state, location, industry, scope of work, and other factors. Research what lawyers, tax lawyers, and documents you need to avoid cutting corners, as non-compliance could shut your business down.
Address the Business Finances
When you start spending money on business necessities, you need a way to track these expenditures separate from your personal finances. Opening a business bank account is typically the easiest way to ensure that all transactions remain separate.
As funds start coming in through customer purchases, you also need to manage and track them. You may opt for a software program that offers bookkeeping tools and the ability to manage inventory, create journal and ledger entries, and produce financial statements or invoices. Figure out how you plan to track business expenses and income and set up a system that you can rely on consistently.
Hire Employees
The need to hire employees depends on the type of business and its growth. Some business owners remain as the sole worker for years, while others build teams right away. If your company does need employees and has the funds to support them, building a strong team increases your odds of success. A well-structured team is vital in handling various aspects of your operations, and effective project management plays a key role in ensuring that your employees work efficiently towards achieving business goals.
It’s also critical to determine how employee time will be tracked and managed. Labor laws are strict around classifying and paying employees accurately, so incorporate a time and attendance system that helps your business stay compliant while avoiding unnecessary costs. Examples include unplanned overtime, buddy punching, and inaccurate manual processes.
Get the Word Out
After you have completed the necessary steps to start your business and protect any IP, it’s important to inform others of what goods or services you offer. Marketing your business is a must, as people can’t support you if they don’t know the business exists. Although marketing a small business could be its own full post, you can get started by setting up a website and optimizing it for search engines. Produce and share relevant content and establish a presence on social media sites and online directories.
Of course, every industry has its own unique regulations and must-dos, so this isn’t a fully comprehensive list for every small business. But taking these steps can help you establish a company that complies with legal regulations and has a good chance of success. Make sure to take advantage of all available resources and get ready for the twists and turns that are sure to come on your business adventure.
Author: Allie Blackham
Allie Blackham is a content creator and manager, bringing over 15 years of experience in the industry. Her work has been published on CareerBuilder, SHRM, Indeed, and many other sites. She earned a B.A. in English from Brigham Young University.
