How to Start a Small Business: A Step-by-Step Guide to Success
Starting a small business is an adventure filled with excitement, opportunity, and let's face it, a fair amount of challenges. But fear not, intrepid entrepreneur, because you're not alone on this journey.
Starting a small business is an adventure filled with excitement, opportunity, and — let's face it — a fair amount of challenges. But fear not, intrepid entrepreneur, because you're not alone on this journey.
In this comprehensive guide, we'll lead you through the essential steps of how to start a new business. From performing market research and developing a business plan to navigating the sea of paperwork and the world of digital marketing, we've got you covered.
- Chat-based payroll processing in under a minute
- Automated tax filing
- AI-generated business insights and personalized payroll advice
- Easy raise and bonus management
- Employee self-service for managing pay information
- Support for unlimited payroll runs and multiple states
Ready to get started? This guide is your ultimate cheat sheet, full of practical advice and insider tips to keep you sailing full speed ahead. So, grab your entrepreneur's hat and let's embark on an exciting journey of creating something extraordinary – your very own small business.
How to Start a Small Business
You have a great idea for your business, but now what? Here’s a quick overview of the steps you’ll need to take to turn your dream into a thriving reality.
Perform Market Research
The cornerstone of any successful business is understanding the market. Conducting thorough market research is crucial for understanding the dynamics of your target audience, competition, and industry trends. This step involves gathering data about potential customers – their needs, preferences, and behaviors — and analyzing competitors to identify market gaps and unique selling points for your business.
To get started, ask yourself:
- What is the market like for my product?
- Is there already something like my product on the market?
- Who are my competitors?
- What can I do better than my competitors?
Answering these questions will give you an idea of how you’ll rank against the competition. It also might spark additional ideas that could give you an edge in your product or service market.
Your market research should be a marriage of consumer behavior and economic trends. It should help you get to know your market base and determine whether the market is already crowded with players. Market research will also help you look across the landscape and spy any pitfalls that might lie ahead.
Gather demographic data on potential customers, such as age, income, family size, and interests. Then, spend time learning about the actual market, such as demand, size, location, market saturation, and pricing.
Consider doing a SWOT analysis: Look at the strengths, weaknesses, opportunities, and threats related to your idea. This analysis will help you address the facts of the service or product you intend to provide and decide where you want to take your business. A thorough SWOT analysis can point out weaknesses in your offering and give you ideas about how to improve upon the service or product offered by your competitors.
There’s no sure-fire manual on how to start a business, but doing your research — and following it up with a business plan — is the best way to begin.
Develop a Business Plan
Every successful business starts with a solid foundation: a clear business plan. This document is more than just a roadmap — it's a tool to articulate your business idea, goals, and strategies. Writing out a business plan can help you gain clarity about your venture. To keep moving toward your goal, you’ll need a written description of what you plan to do, how you plan to do it, and what to expect in revenue.
How detailed you make your plan will depend on your approach: Will you finance the launch yourself, or are you seeking investors who will want to dig deep into the details? If you intend to seek funding from outside sources, you should prepare a detailed business plan that gives commercial banks and potential investors a clear road map of the business, including financial projections.
A traditional business plan is comprehensive and includes multiple detailed sections. In your plan, you might include the following:
- Executive summary
- Description of business
- Product or service
- Market analysis
- Structure of the organization
- Mission and goals
- Financial plan
- Marketing plan
With these details in place, you’re ready for the next stage in how to start a small business — finding the money to get your business up and running.
As a savvy entrepreneur, you have an idea that can help solve a problem while simultaneously generating revenue. Gathering the funds to turn that idea into a reality may feel daunting, but don’t let that stop you! There are several ways you can fund the start of your business.
If you’re planning to offer a digital service, such as writing or design, you might already own most of the equipment you need. In that case, you can likely self-fund the startup costs, such as marketing.
However, if you’re aiming to manufacture a product in a location other than your kitchen table, you may have to buy specialized equipment and hire employees. This approach will typically take more capital to get up and going, meaning you’ll likely need to seek a bank loan, pitch to investors, or pursue crowdfunding.
Another source of funding for small business owners is the federal Small Business Administration (SBA), but what is an SBA loan? An SBA loan is a small business loan partially guaranteed by the U.S. Small Business Administration, designed to help small businesses access funding. If you’re curious about how to apply for SBA loans, you’ll typically need to gather business and financial documents, develop a business plan, and apply through an SBA-approved lender. Eligibility for an SBA small business grant varies depending on the specific grant program, with factors including the type of business, its size, and the purpose of the funding.
When it comes to funding, the best route for you will depend on factors like the cash you have available, your credit rating, the novelty of your service or product, and the business structure you choose.
Choose a Business Structure
How your business is structured will impact decisions like what kind of funding you should seek, how you will operate your company, how your company will be taxed, and what risks you will be personally exposed to. Here’s a quick overview of your options:
A sole proprietorship is the easiest to set up and operate. You have total control; however, your business assets and liabilities are treated just like your personal assets and liabilities, meaning you take on additional risk.
A limited liability company or partnership is generally used for professional services. This structure can protect your personal assets if something happens with the company. Profits and taxes simply pass through to your personal tax filing.
Setting up a corporation will require more money, time, and expertise than other business structures. There are a few types of corporations, but the most common are the C corporation and the S corporation:
- With a C corporation, you’re considered separate from the business regarding liability, and the corporation can profit and be taxed. In fact, C corporations are taxed twice.
- In contrast, an S corporation allows profits and some losses to flow through to your personal income tax without the double taxation of C corporations.
There are several other types of corporations, such as B corporations and nonprofits, but the C and S corporations are most common for profit-seeking organizations.
Finally, a cooperative is owned and operated for the benefit of those who use its services. It is typically run by elected officers and a board of directors, and those who use its services can vote on the company's direction by purchasing shares.
Complete the Necessary Licensing, Registration, and Paperwork
Establishing a legal foundation is a critical step in starting your business, and you’ll need to determine whether to register your business. The structure you’ve chosen for your business and the state in which you’re doing business will determine registration requirements.
Also, depending on your business location — such as a home office or a brick-and-mortar building — and the service or product you’re offering, you may need to acquire licenses from your local, county, or state government or a licensing organization. For this information, the Small Business Administration comes to the rescue again! Along with many of the required forms to start a business, the SBA website provides links to agencies that issue licenses and permits.
Additionally, the IRS provides a checklist for setting up your small business. Whether you have employees or not, you’ll most likely need a Federal Employer Identification Number (FEIN), which acts as a Social Security number for businesses. The IRS website has information about how to get an FEIN number online, how to apply for FEIN, and how to fill out a SS-4 form for your FEIN.
Protect Your Business With Insurance
Protecting your business with insurance is an essential step to safeguard against unforeseen risks and liabilities. Different types of insurance cover various aspects of your business, from property damage to legal liabilities.
General liability insurance, for instance, protects against common business risks like accidents or injuries on business property. If you have employees, workers’ compensation insurance is often mandatory, covering injuries or illnesses resulting from their job.
Additionally, consider specialized insurance types based on your business activities. For example, if you offer professional advice or services, professional liability insurance (also known as errors and omissions insurance) can protect against claims of negligence or harm due to professional services.
Evaluating and securing the right insurance policies provides peace of mind and demonstrates a commitment to responsible business practices, which can be reassuring to customers, employees, and partners. This step is integral to building a strong, resilient foundation for your business's long-term success.
Get the Business Tools You Need
Choosing the right business tools is a vital step in ensuring your venture's smooth operation and growth. In today’s digital age, there are many types of business applications out there designed to streamline various aspects of running your company. For accounting, tools like QuickBooks® offer robust financial tracking and reporting features. Customer Relationship Management (CRM) systems, such as Salesforce or HubSpot, can help you efficiently manage customer interactions and data.
A key aspect of any business is payroll. The Roll by ADP ® app offers a standout solution with our user-friendly payroll app, specifically tailored for small businesses. The app revolutionizes payroll processing with its chat-based interface, allowing for quick and intuitive payroll management. Automated tax filing, real-time business insights, and seamless integration with accounting software like QuickBooks® are just a few of its many features.
Project management tools like Asana or Trello can assist in organizing tasks and collaborating with your team. For digital marketing, consider platforms like Mailchimp for email marketing or Hootsuite for social media management. Each tool you choose should align with your specific business needs and goals, aiding in productivity and providing valuable insights. Remember, the right set of tools can dramatically enhance your organization’s capability to grow and succeed in a competitive market.
Marketing is the engine that drives visibility and growth for your new business. It starts with identifying your target audience and understanding their needs, preferences, and behaviors. This informs your marketing strategy, which should include a mix of digital and traditional marketing tactics.
In the digital realm, establishing a strong online presence through a well-designed website, SEO (Search Engine Optimization), and active social media channels is crucial. Content marketing, such as blogs or videos, can engage your audience with valuable information related to your products or services. You can also invest in digital advertising like Google Ads or social media ads to reach a broader audience.
Don't overlook the power of email marketing for direct communication with your customers. Traditional marketing methods, such as networking events, print advertising, or local sponsorships, can also be effective, especially for local market penetration. Remember, consistent branding across all platforms is key to building brand recognition and trust.
Marketing should be an ongoing effort, adapting and evolving as your business grows and you gain deeper insights into your customers' needs and preferences. Check out our blog for tips on how to market your business on a budget!
Hire and Onboard Employees (If Applicable)
Hiring and onboarding employees is crucial in expanding your small business. Start by identifying the roles your business needs to fill and create detailed job descriptions for each position. This helps in attracting the right talent and clarifies expectations. To reach potential candidates, get started with various recruitment channels such as job boards, social media, and networking events.
Once you've selected your team, an effective onboarding process is key. This includes not just paperwork and administrative tasks but also integrating new hires into your company culture and values. Provide comprehensive training to ensure they understand their roles and responsibilities. Clear communication, setting performance expectations, and providing feedback are essential components of a successful onboarding process.
Remember, the way you onboard employees can significantly impact their productivity and loyalty to your business. Check out our guide to the onboarding process for help!
Set Up a Payroll System
Your employees are your most important asset, and making sure they get paid accurately and on time is critical. Setting up an efficient payroll system involves choosing a payroll solution that fits your business needs and budget. This process includes determining pay schedules, understanding and complying with tax obligations, and setting up a system for tracking employee pay.
A good payroll system automates many of these tasks, helping to ensue accuracy and compliance with tax laws. It should also be user-friendly, allowing for easy updates and changes. Many small businesses opt for cloud-based payroll solutions for flexibility and scalability. Setting up your payroll system from the outset can save significant time and resources, helping you focus on growing your business.
Make Payroll Easy With the Roll by ADP app
As you embark on the journey of starting your business, don’t let payroll slow you down. Imagine running payroll in under a minute, with just a few taps on your phone. Roll’s intuitive payroll app offers an easy, do-it-yourself setup with no training necessary! Roll’s chat-based interface puts payroll at your fingertips, allowing you to run payroll anywhere, anytime, on any device.
You can also quickly and easily pay W-2 employees and run contractor payroll across all 50 states. And don’t worry about wage garnishments — Roll handles those automatically, too. You also can add employees, change salary details, and even give an employee an instant bonus!
The app offers intelligent assistance, providing AI-generated business insights and personalized payroll advice. Your teams will reap the benefits with employee self-service access to their pay information, payday updates, and more.
With Roll, payroll becomes less of a chore and transforms into a seamless part of your business operations. Get started with a free trial today!
*Free payroll applies to clients that have not previously purchased or processed payroll with Roll by ADP and are located in the United States. Your free trial begins when you complete the company setup and accept our Terms & Conditions. If you start processing payroll and then cease or cancel during the free trial period, you forfeit any time remaining in the trial and any future free payroll offers with Roll. Once the free trial period ends, starting with the next monthly billing cycle, you will automatically be charged $39 per month (base fee for the whole company) plus $5 per W-2 employee and/or 1099 contractor who is actively being paid by Roll in that month, unless you cancel. There may be fees, including during any free trial period, for added services or features you elect. Cancel within the app through the chat interface. ADP reserves the right to withdraw this limited time offer at any time. This offer is not transferable and excludes any other ADP payroll or non-payroll services and requires the use of direct debit of fees as the payment method