Steps To Start A New Business
What are the key steps to start a new business, in what order - and without so much risk?
Below is a list of the key steps – the really important processes – that you will need to go through to successfully learn the steps to start a business and give it the best chance of success.
It might seem like a lot, but don’t worry. Millions of others have gone through these steps and honestly, each one of them can be fun and you will learn a lot as you go. You’ll be a better, smarter, more successful entrepreneur after you understand them! You can do it.
Develop your business idea
First, begin a list of possible business ideas.
Update that list daily or as needed. Always write them down because you’ll forget, trust me on this. Sooner or later you’ll have a business idea that you really like over all the others.
You’ll weigh a number of considerations such as whether you think there’s a good market for your idea, whether you think there’s a good profit available, whether you know enough about target market to build the successful business and many other things.
You need to find a business idea that’s a good match for you. Your skills, your knowledge, your situation. Not every entrepreneur can start an automobile company, it’s expensive and takes many years to build and produce a profit. For many of us, we need to think of something that’s doable for us. That doesn’t mean you should limit your beliefs and close yourself to good idea, but weigh your options with a dose of reality. If the idea is good, you should be able to grow it.
Decide on what your business idea is who your customer will be, how you’ll make money and how it will all work. It’s common to go through many many ideas before landing on the one that seems correct.
This process can take a while. It’s common for new business founders to search for months or even years for an idea that seems right for them, because it’s a big commitment to pour all your time and energy into the process of building the business, not to mention a lot of your own money and time. Be patient, and search actively, every day.
Proper planning and researching your idea is next
After you’ve chosen an idea, the next step to start a successful small business, is to validate your business idea. If you want to know how to start a business you need to ask yourself a series of important questions such as:
Is there a market out there who needs my product?
How can I do the market research?
Do I know enough to build this business?
Can I raise the money to do it, or can I risk my own money?
Will I be able to cover the startup costs?
Will I be able to hire people to help me with design, marketing, advertising, programming and whatever else is needed?
Is there enough profit foreseeable that I will be able to pay myself a salary and pay others to work with me?
… and many other questions
You’ll want to research competitors, get honest and real feedback from potential customers to see what they think, and basically plan the entire thing out on paper – before you start spending money on it.
Do not jump into the building stage before you do all the planning and market research to validate your business idea – this is critical.
Developing a business plan
You’ve heard about the need for a business plan. I have a love/hate relationship with business plans – the reason is that many people think a business plan is a literal map of your entire business timeline and strategy that is in stone – but the reality is that they should be flexible. Entrepreneurs should not be 100% stuck to their business plans. Flexibility and paying close attention to how the marketplace receives your efforts is critical.
In the real world things often change and you should see your your business plan as being flexible. If you need to pivot, or change or alter the plan, do it. Don’t be unnecessarily bound by the original plan.
Your business might not end up the way you originally envisioned it. That’s OK if it’s healthy and making money!
The process of creating a business plan is really the most important part – maybe more important than the plan itself – because it forces the founder (you) to commit to paper what exactly your plans are, who the potential customers are, how you will locate them and sell to them, how you plan to pay for all of this, and who the competition is.
Do you need to stick to your business plan? Is it set in stone? Definitely not. Many entrepreneurs think a business plan is an immutable document or roadmap that must be followed at all costs.
This is incorrect. It’s your “best guess today roadmap”. Next month things could change.
But again, the most important part is that completing a business plan forces you to get real and commit your ideas, plans, strategies, and financial forecasts to paper, which helps them to become real, and helps you to assess whether you really want to create the small business or not.
Creating a business plan is a critical step in assessing your risk. Only after you’ve spent hours or days or weeks putting together your own business plan, will you be able to objectively evaluate your strengths, weaknesses, competition, abilities and chances for success.
There are a lot of excellent business plan templates online – try this Business Plan template at SCORE.org.
Test your business idea to see if the world likes it as much as you do
This is the item that nearly every new business owner misses. Don’t miss it yourself.
If we had a magic wand, we’d be able to know if the whole business model will work before we spend all the time, energy and money to test it in the real world. If it turns out to be a success, then yay, we build the business. If not, we don’t build it and we’ve saved ourselves a year or two and probably thousands of dollars minimum.
Luckily, there are numerous ways to test and validate your business before you commit to it and spend all that time and resource.
Some businesses are harder to validate than others, but the bottom line is that you want to validate your idea in as many ways as you can, knowing that the more affirmations you get, the greater chance that you have a winner of an idea.
Click here for a list of ways to validate your business idea before you commit to it fully.
Decide whether to go forward or not
So you’ve done a lot of research.
You’ve taken the Business Validation quiz we have here on the site. You’ve reviewed the results of your quiz closely to learn the strengths and weaknesses of your idea.
You’re working your way through the steps to start a small business and trying to remain calm, and not get overwhelmed! 🙂
You’ve created a spreadsheet and run the numbers to see if the business looks like it will meet your needs financially.
You’ve completed a business plan and given it an honest review and tightened it up as best you can.
You’ve run through the Startup Checklist here to make sure you understand what you’re getting into.
You’ve done a lot of validating tests to see if the real world cares about your idea as much as you think.
You’ve carefully evaluated your chances in many different ways.
It’s time to decide: Do you move forward and build the business, or do you stop and find another idea?
Perhaps revising your current idea is the answer?
I believe that building a successful business that works well and makes money is not very easy, so my advice is to only move ahead if most of your validating steps are encouraging.
More on deciding whether to go ahead with your small business idea here >
Financing your business: how to and how much will you need
Put together a spreadsheet to guesstimate how much money you’ll need to launch your business and get through the first 6-12 months. Here’s a spreadsheet that will help you do it.
Most people use their own money, not business loans or grants, particularly when they are small businesses run by the founder. If you’re shooting for something on a larger scale and have a business idea with huge potential, you might seek investors (learn more here).
Crowdfunding is a popular option these days. Sites like Kickstarter or GoFundMe give you a chance to show off your idea to see if you can get people online to each invest some small amount which eventually adds up to the amount you need.
If you fund the business yourself, remember: only use money you can afford to lose since up to 33% of small businesses fail within 2 years.
It’s very hard to find investors for a small business because the potential returns aren’t enough for them to take the risk normally.
Here’s the cardinal rule of financing: DO NOT, I repeat DO NOT quit your day job because you are relying on your new business to start paying your bills anytime soon. It takes time to build up enough profit to pay yourself and I see far too many people who are desperate for cash trying to start a new business, with no available capital. Do not do this.
Incorporating and legal stuff
Most new business owners will want to incorporate legally before starting to conduct business. There are tax benefits to incorporating, and there is also something called a ‘corporate layer of liability’ which protects you personally from any personal liability, that the company may be subject to.
In plain English, if someone sues your company for whatever reason and wins, they can’t come after your personal bank account or your personal assets, they can only come after the assets of the company.
For most small businesses the choices are:
sole proprietorship
LLC, or
S-Corporation
There are other choices too, such as the much more simple Sole Proprietorship, you can learn more about all of them here.
What other business filings, registrations, licenses do you need? You should Google this for your city and state to see what local permits or licenses you may need, it can vary by business type. For the most part, your city will want you to get a business license (inexpensive). The state may want you to file your incorporation papers (in California, an LLC will cost you $800 annually! Note: The first year is free, as of 2022.).
Never do this on a handshake without proper paperwork because if things get sticky, and they often do, you will undoubtedly have a difference of opinion about what the agreement was, so the paper contract will be key.
Building the actual business
Here comes the fun part – finally!
It’s time for what I think is the best of the steps to building a small business – to be a small business owner and begin building the actual business.
Get your financing ready.
Figure out who your team is or who you need to hire to get everything done.
Write all the text for your website and plan out the pages. This will save $ with your web developer.
Decide on your business structure. Incorporate if that’s your plan.
Open a business checking account. After you incorporate you’ll have an EIN (Employer Identification Number). Take that along with your articles of incorporation to your bank to open the account.
Create a plan and a timeline. Decide who has which responsibilities.
Execute, execute, execute. Get everything done. Move quickly.
Better to launch with a slightly imperfect product than to delay for too long.
Get that product into your customers hands and get feedback, then revise as needed.
If you have advisors or mentors, check in with them monthly to see if what’s happening sounds right and to see if they have any helpful ideas. Mentors and advisors can help you fast track things immensely while you learn how to start a small business.
If there are areas where you need to hire help, do it. Often a new founder will try to save money by doing the design or programming or marketing on their own with little knowledge of experience. This is a sure fire way to end up with a sub-par business or product.
How to market your business
Marketing is the effort you put into telling others about your business. Typically you do this in a number of ways including advertising, word of mouth, email marketing, building and driving traffic to your website, direct mail and social media to name a few.
Your marketing strategy is your overall plan for how you will let the world – and your target market – know that your new business exists.
Many new founders think that running paid ads will be the thing that will drive all the business they need… but in the real world it’s better to focus on non-paid methods first, and once you have a lot of your social media and email marketing campaigns in place and running, that’s a good time to try paid ads.
Before you begin running ads, you need to be sure to learn all about the best practices and best methods/strategies when running Google, Facebook or Instagram ads.
The biggest reason why you should spend a fair amount of time reading up on this topic is that it’s really easy to waste all kinds of $$ if you don’t know what you’re doing!
Lean into social media platforms – it’s the cheapest and often most effective way to market these days. Instagram, YouTube and Facebook are the big ones to pay attention to. TikTok is getting pretty huge also, and don’t forget Twitter if you have extra time.
The bottom line with social media and email marketing is to provide something of value to your customers. If you are delivering little nuggets of wisdom, or inside info, or tips, hints, market trends, how-tos, money saving tricks and other pieces of value – your clients and potential clients are more apt to open your emails and not to unsubscribe.
Daily operations
If you’ve never run a business before you’ll find that “wearing a lot of hats” as they say, can be a little daunting. But don’t worry. Everyone has to go through this, and you learn.
The best advice I can give you is to make a short list of your three top priorities each morning, and do your best to knock out those three items. You won’t succeed many days, but having a focus can really help keep you making progress, and stop you from chasing yourself in a circle.
Learning time management and learning to create efficiency in your systems is huge also. By “systems” I mean that processes such as creating marketing ads, or shipping products, or responding to customer support emails or whatever else. There are slow, inefficient ways to do all these things and highly efficient fast ways to do them. You need to figure out the methods that are the most efficient, and leave the least margin for error.
A great place to begin as far as creating efficiency in your system is to use checklists that you can share with others working in your business, to make sure everyone is getting things done at the same quality standard. You can Google this topic for more info.
Growing your business
After you’ve managed to get your business planned, financed, built, launched, marketed and profitable, you’ll want to grow the business.
Growing your small business means looking for ways to boost profits, cut costs, grow your customer base, increase sales, increase efficiencies in your work (leading to lower cost), increase distribution and partnerships, maximize advertising, and other things.
Entire books are written about each of the steps to building a small business that I just listed, so there’s a bit to learn, but keep a list of ideas on how you can improve, consult experts and mentors, and decide which of the methods you’re considering will yield the best results with the least amount of time and money.
Ultimately you want to know what kind of business you’re really trying to build – are you hoping to sell your company to a larger firm? Or are you trying to create a small business that you can run which will cut you a nice paycheck or earnings distribution each month? It’s a good idea to consider where you are really going to help make sure you get there.
I help people with their business questions and goals. I've helped hundreds and I can give you the guidance and mentoring you need to figure out every step. Why learn the hard lessons yourself, when you can consult with an expert who can save you valuable time and money?