How To Start a Business in 13 Steps

Written by Katie Ziraldo +2 more

Written by Tara Mastroeni +1 more

Edited by Dawn Daniels

Figuring out how to start a business can feel intimidating. Luckily, no matter what type of business you have in mind, the process is largely the same.

We’ll walk you through the process from start to finish, from refining your business concept to scaling your business later on down the road.

1. Pick a business concept

The first step in figuring out how to start a small business is to come up with a business concept. Ideally, you want to land on a business idea you’re passionate about that also serves an unmet need in your community.

If you’re unsure about the type of business you want to open, here are a few questions to help you start coming up with ideas:

After you’ve done some brainstorming, take time to research your potential business ideas. Consider the types of businesses that are in demand and the industries that are expected to grow in the coming years. Ask family and friends for feedback on your concept and scope out any competition in your local area. Then, leverage your findings to select the most viable option.

2. Choose your business name and structure

Next, it’s time to choose a business name and select a legal business structure. The type of business entity you choose will determine how you pay taxes, the type of paperwork you’re required to file and the level of personal liability you may face if you default on a small business loan.

Changing a business’s structure can be difficult, so it’s important to do your research early to decide which type of business entity makes the most sense for you. You’ll typically pick from one of the following options:

3. Create a business plan

A business plan is a document that’s meant to serve as a roadmap for your new business. It illustrates how you’ll turn your business idea into a thriving venture by providing explanations of each facet of your organization, from marketing to finances.

A business plan helps lenders and investors know that your business idea is feasible and profitable. However, as a business owner, creating a business plan can also help you identify your strengths and any potential pitfalls before you hit the ground running.

In general, your small business plan should include the following:

4. Register your business

Once you have a business structure in place, the next step is to register your business with the appropriate governmental agencies. Often, this means registering your business name and important documents, like your articles of incorporation, with your area’s governing bodies. You’ll also need to get a federal tax ID. This employee identification number (EIN) will be required to file taxes, open bank accounts and perform other essential tasks for your business. 

It’s also important to note that you’ll need to keep up with any registration requirements on an ongoing basis. For instance, soon after you register, you may be required to send additional documents to your state or franchise tax board.

5. Apply for licenses and permits

Operating without the proper licenses and permits can lead to hefty fines and legal complications, so it’s important to apply for business licenses and permits right away. Aside from your general operating license, the specific licenses and permits you need will depend on your industry, location and business structure.

For example, restaurants typically need health permits and food service licenses, while construction businesses may need building permits and contractor licenses. Federal, state and local agencies each set their own requirements for licenses and permits. To find out the specific requirements for your business, check with your city or county clerk’s office as well as your state’s business licensing agency.

6. Organize your business finances

Now, it’s time to organize your business finances. It’s crucial to keep your business and personal finances separate from the start to minimize your personal liability. That’s why taking steps like opening a business bank account and getting a business credit card — if you plan to use credit — are so crucial when you’re just getting your business off the ground.

To keep things organized, many businesses choose to centralize their accounts with one financial institution. Some business owners prefer to stick with the same bank they use for their personal finances, but it’s always a good idea to shop around to compare your options.

Consider the rates, fees and benefits offered by different banks. How convenient are the online and mobile banking features? Are there any introductory offers that might help you get your business off the ground? If you need to borrow money in the future, does the bank offer business loans? Considering these factors ahead of time can make your life easier down the road.

7. Fund your business

After you’ve put the right financial systems in place, it’s time to figure out how to fund your business. Accessing traditional types of funding, like long-term business loans, can be difficult for a newer business. However, there are plenty of methods available to get the money you need.

For one, there are business loans for startups. Once you’re a more established business, you might want to consider SBA loans, which can provide large amounts with relatively low interest. There are also small business grants that you could apply for, but competition can be steep. You could also try to find investors, whether they end up being family and friends or more official venture capitalists.

8. Protect yourself with business insurance

You’ll likely need to have insurance for your business, even if you’re a sole proprietor who works from home. There are several different types of business insurance available that you can customize to fit your needs. But in general, you may need liability protection for lawsuits, property insurance for any brick-and-mortar locations, and business interruption insurance to help you and your employees stay afloat in the event of an emergency.

While you can certainly shop for coverage on your own, it may be helpful to talk to an insurance agent, who will likely be able to point you in the direction of the policy or policies that will suit your needs.

9. Invest in tax and accounting software

At this point, it can be a good idea to invest in some tools that will help you run your business more smoothly. While you don’t want to spend too much money upfront as a startup, investing in some key tools, such as accounting and tax software, can make a big difference in the ease of your day-to-day operations as well as your year-end fiscal planning.

10. Decide how to take payments

Whether you’re selling a product or service, you’ll need to decide how to take payments from your clients and customers. If your business has a physical location, you may need to invest in a point-of-sale (POS) system. Many small businesses start out with a simple card reader that connects to a phone or tablet via USB or bluetooth. 

Peer-to-peer (P2P) payment systems, such as PayPal, Venmo and Zelle, can also be used for business purposes. Regardless of the specific systems you choose, it’s important to give your customers multiple ways to pay.

11. Hire employees

If you’re starting small, you might be able to run your business on your own. But many business owners need help to create, refine and deliver high quality products and experiences that will motivate customers to come back for more. 

Before you start hiring employees, you’ll need to do some research into employment laws and regulations in your state. You’ll need to understand your legal and tax requirements before bringing on any employees or contractors.

You’ll also need to decide whether it makes sense to hire part-time, full-time or temporary staff. Different types of hires have different tax and insurance requirements, so consider the scope of work and the size of your budget before you start making job offers.

12. Market your business

Too many business owners get so focused on perfecting their products or services that they forget the importance of coming up with a cohesive marketing plan. After all, a marketing plan outlines the steps you will take to draw potential customers to your business and encourage them to make a purchase so you can turn a profit.

Start by researching your target audience. Learn which marketing channels they’re utilizing most heavily and develop a strategy around those channels. For example, if your competition runs a successful blog, you may want to invest heavily in search engine optimization (SEO) efforts and develop your own blogging strategy. 

Keep in mind that you don’t need to wait for your business to open to start marketing. It’s important to start building an online presence before your launch day to create brand awareness and generate buzz.

13. Scale your business

At some point, you may want to consider scaling your business. Scaling involves replicating your business operations for a larger customer base with the goal of increasing profits. As the business owner, it can give you a chance to step outside of that key owner-operator role into a more hands-off, managerial position.

The first part of scaling is developing a strategy for how to do it. Again, it can be helpful to look toward your competitors to do this. Then it’s about putting the right team in place, focusing on specific metric goals that facilitate your growth and finding the funding to make that growth possible.