People often ask us for a list of steps they can use to start their own business. From business type to business model to physical location, there are so many variables!
However, there are things that every business needs to do to get off the ground. So, here are the eight key steps you need to take to start your own business. Just remember, be flexible. Every business is unique and you may need to refine this list as you go.
Want the full list? Our Business Startup Checklist has over 80 tasks to walk you through starting a business.
1. Conduct a personal evaluation
Begin by taking stock of yourself and your situation:
Your answers to these types of questions will help you narrow your focus.
This step is not supposed to dissuade you from starting your own business. Rather, it’s here to get you thinking and planning. In order to start a successful business, passion alone isn’t enough.
You need to plan, set goals, and above all, know yourself. What are your strengths? What are your weaknesses? How will these affect day-to-day operations? You could conduct a SWOT analysis on yourself to figure this out.
As you get started, your business will likely dominate your life so make sure that what you’re doing is stimulating and challenging, but not completely outside of your expertise. You’re going to be in it for the long-haul. Use what you learn from the SWOT analysis to think through what you want your life to be like, not just what you want from your business.
Some good questions to ask yourself include:
Answering these questions (and many more) about yourself and your abilities isn’t necessarily going to ensure you’re successful, but it will get you thinking about your goals and about what motivates and inspires you. Use this time to make sure that you are matching the business you want to start to your personal aspirations.
Be sure to take our , too.
2. Analyze your industry
Once you decide on a business that fits your goals and lifestyle, evaluate your idea. Who will buy your product or service? Who will your competitors be? At this stage, you also need to figure out .
Your “personal evaluation” was as much a reality check as a prompt to get you thinking. The same thing applies when it comes to researching your business and the industry you’d like to go into.
There are a number of ways you can do this, including performing general Google searches, speaking to people already working in your target industry, reading books by people from your industry, researching key people, reading relevant news sites and industry magazines and taking a class or two (if this is possible).
If you don’t have time to perform the research or would like a second opinion, there are people you can go to for help, like government departments and your local SBDC.
There are also a number of less traditional sources worth turning to:
3. Evaluate your target audience
Validate your business idea by .
To determine how attractive your prospective market really is (your own desires aside for the moment), we suggest doing a market analysis.
It will guide your research as you think about:
If you like, you can even take things a step further and consider the consumer needs currently not being met by businesses in the industry. This is a good time to take a look at potential competitors. And remember, the presence of competitors is oftentimes a good sign! It means that the market for your product or service already exists, so you know that you have potential customers who are willing to spend money on your product or service.
While you’ve got the time, learn as much as you can about your competitors, about what they provide to their customers, how they attract attention, and whether or not their customers are happy. If you can figure out what’s missing before you even get started, your job will be made that much easier when you do finally set up shop.
4. Set up your business
Realistically, registering your business is the first step toward making it real. However, as with the personal evaluation step, take your time to get to know the pros and cons of different business entities.
If at all possible, work with an attorney to iron out the details. This is not an area you want to get wrong. You will also need to get the proper business licenses and permits. Depending upon the business, there may be city, county, or state regulations as well. This is also the time to check into insurance and to find a good accountant.
Types of business formations include:
Spend some time getting to know the pros and cons of each business formation. If you need help, we’ve got a full guide on .
While incorporating can be expensive, it’s well worth the money. A corporation becomes a separate entity that is legally responsible for the business. If something goes wrong, you are less likely to be held personally liable.
Other things you will need to do include deciding on a business name and researching availability for that name.
5. Start the planning process
If you will be seeking outside financing, . But, even if you are going to finance the venture yourself, a business plan will help you figure out how much money you will need to get started, what it will take to make your business profitable, what needs to get done when, and where you are headed.
In the simplest terms, a business plan is a roadmap—something you will use to help you chart your progress and that will outline the. Rather than thinking of a business plan as a hefty document that you’ll only use once (perhaps to obtain a loan from a bank), think of it as tool to manage how your business grows and achieves its goals.
While you might use your business plan as part of your pitch to investors and , and to attract potential partners and board members, you will primarily use it to , tactics, and specific activities for execution, including key milestones, deadlines and budgets, and cash flow.
In fact, the business plan does not have to be a formal document at all if you don’t need to present your plan to outsiders. Instead, your plan can follow a Lean Planning process that involves , forecasting your key business numbers, outlining key milestones you hope to achieve, and regular progress checks where you review and revise your plan.
If you aren’t presenting to investors, don’t think of this as a formal pitch presentation, but instead a high-level overview of who you are, the problem you are solving, your solution to the problem, , and the key tactics you will use to achieve your goals.
Even if you do not think you need a formal business plan, you should go through the planning process anyway. The process will help to uncover any holes or areas you have not thought through well enough. If you do need to write a formal business plan document, you should follow the outline below.
The standard business plan includes nine parts:
If you would like detailed information onto present to banks or funders, there are plenty of online resources, including our own comprehensive guide.
You will also find hundreds of sample plans for specific industries on this very website. Use them at your leisure but be prepared to adapt them to suit your precise needs. No two businesses are the same!
Types of business plans:
If you are simply creating a business plan in order to stimulate a discussion with potential partners and associates, you may want to consider opting for a “startup plan,” also known as a feasibility plan. As your business grows you can flesh out the sections as you see fit.
In contrast to the standard plan and the startup plan, is the . This type of plan is used for internal purposes and primarily reflects the needs of the members of the company. This type of plan is not intended for banks and outside investors. You will use it either to plan your company’s growth or expansion or to set company-wide priorities.
If the latter is true and you are using the plan in order to direct your internal strategy, you are creating a , a type of plan that will include a high-level strategy, tactical foundations of the strategy, specific responsibilities, activities, deadlines and budgets, and a financial plan.
6. Have a plan for funding
Depending on the size and goals of your venture, you may need to seek financing from an “angel” investor or from a venture capital firm. But, most small businesses begin with a loan, financing from credit cards, help from friends and family, and so on.
Investment and lending options include:
For in-depth information on funding, see our complete guide on , which includes detailed information on each of the above-mentioned options.
Note: A beautifully fleshed-out business plan does not guarantee you will get funded. In fact, according to Guy Kawasaki, the business plan is one of the least influential factors when it comes to raising money.
To stand a realistic chance of getting hold of the funds you need to get started, you’d be better off first focusing on your “pitch.” Not only will it be easier to fix because it contains less, but you’ll also get feedback on it—most investors don’t bother reading the full business plan, though they may still expect you to have it.
It’s also much easier to turn a pitch into a business plan than it is to pare back your plan.
7. Set up your space
Your business plan has been laid out, the money is in the bank, and you’re ready to go. If your business is online and you won’t need a storefront, you’re probably looking at building your website and choosing a shopping cart solution. Maybe you’ll be able to work out of a home office or a co-working space instead of renting or buying office space. But if your business needs a dedicated brick and mortar location, there are many considerations.
Finding a location. Negotiating leases. Buying inventory. Getting the phones installed. Having stationery printed. Hiring staff. Setting your prices. Throwing a grand opening party.
Think through each of these steps carefully. Your business location will dictate the type of customer you attract, what types of promotions you can run, and how long it will take you to grow. While a great location won’t necessarily guarantee your success, a bad location can contribute to failure.
As you’re thinking about where you want to set up shop (including the city and state), consider the following:
Your marketing will set the stage for the future of your store. It will set expectations, generate hype (if done well), bring business in from day one and ensure that people know where you are and what they can expect from you.
There are reams of literature on why we buy what we do, all of it fascinating and much of it informative. Begin thinking about how you shop—this will get you to think more critically about your own store.
Consider: placing products low on shelves will mean that people are unlikely to see them and therefore unlikely to buy them, whereas placing them at eye-level will mean they’re seen first and are therefore probably more likely to be purchased.
Your choice of products and how you decide to price them will create a reputation. Rather than stock everything of a similar price range from one or two catalogs, consider only choosing those items that will create the feel you want to become known for.
If you’re a service business, build your services in a similar manner, considering your different clientele and the value they will get from the different options you have on offer. If a very affordable package will cheapen your brand, consider excluding it. If a pricier option will limit your clientele too drastically, maybe cut back on some of the services included.
8. Prepare for trial and error
Whether you’re starting your first or your third business, expect to make mistakes. This is natural and so long as you learn from them, also beneficial.
If you do not make mistakes, you do not learn what to do less of and what to emphasize. Be open-minded and creative, adapt, look for opportunities, and above all, have fun!
The great thing about owning your own business is that you get to decide what you want to do and where you’ll grow.