The 5 Steps to Starting Your Own Business
There are several reasons to start a side hustle or small business. First, having multiple streams of income can be empowering. Second, you can use the money from your side hustle to pay down debt. Third, you can build your savings, and fourth, you may even find a job or career path you absolutely love and can turn into a successful business.
We know that starting a business of any size can be overwhelming, which is why we have outlined the steps you need to take to make it much easier to get yours off the ground. By following these steps, you can turn your passions and interests into a great way to earn extra money.
There is perhaps no better profit than the one earned from doing something you love! And your “lemonade stand” money could help you pay down student loan debt, make a down payment on a car, or just save for the dream vacation you have always wanted to take.
The 5 Steps to Starting Your Own Business
Do you have a great idea in mind? Then you need to act on that idea and reach a bigger audience. To do this, there are some important steps you will need to follow to get your business off the ground the right way and build a solid business structure.
Failure to follow these as a business owner could result in “small” problems that you can fix (i.e., paying a fine to your city if you failed to get the right business license) or big problems that could ultimately sink your business (i.e., failing to attract any customers without a thoughtfully conceived and executed marketing plan).
To start your business the right way, you will need to:
- Make Your Business Plan
- Formalize It: Legal Entities and Business Taxes
- Bank on It: Banking Accounts, Business Credit Cards, and Accounting Systems
- Get Licensed and Get Insured
- Dive into Marketing and Branding: More than Just Websites
Step 1: Make Your Business Plan
There is simply no getting around it: a good business starts with a good business plan. You cannot skip this part (or skimp on it), especially if you need to attract investors to get your business up and running.
Even if you have the funds to cover the start-up costs of your business, a well-thought-out plan will keep you on track and have you poised for success as an entrepreneur.
Your business plan should include:
- A clearly defined target market to reach potential customers
- A list of all start-up costs, with itemized sections for all of the materials and goods you will need as well as costs associated with permits, licensing, advertising, insurance, labor, and all other business-related expenses, including a marketing plan budget
- A name for your business (you may need to come up with a shortlist in the event that some of your choices have already been registered by others)
- A realistic estimate for how and when you expect to turn a profit as a business entity
Business plans can feel overwhelming, especially if this is your first one. Now is the time to call in favors from friends and family who may have valuable expertise in this area: perhaps your uncle sells business insurance policies.
Maybe your neighbor has seen great success with a car detailing business he started on his own. Or perhaps your niece is a marketing whiz who runs social media pages for a variety of brands. Do not be shy about asking for help and advice!
Whatever you do, avoid procrastination when it comes to your business plan. You need to formalize this plan (even if you later change some elements) to give you the springboard needed to get started. And there is no need to reinvent the wheel, with loads of templates available to get you started as you document your steps.
Step 2: Formalize It: Legal Entities and Business Taxes
You will need to take steps to ensure you have created a legitimate (and tax-paying!) entity before you can launch your business. Before you register your business name, you need to check that it is available by looking at these items:
- Domain availability for the website name
- Your state’s business records
- Trademark records (federal and state)
- Social media platforms
Whether your small business is a sole proprietorship or a limited liability partnership or corporation (LLC), the legal entity or legal structure you choose to create is incredibly important because it is what separates you as an individual from the business. In other words, if for some reason your business is sued by another party, you do not want to be held personally liable in the suit as it should be your business only.
(Note: Lawsuits may seem like a stretch for some smaller start-up companies, but you should not rule out what could happen in a litigious society if you accidentally mix up customer deliveries or damage property.
There are plenty of easy and relatively inexpensive ways to form your business online. Then you will also need to register for an Employer Identification Number (EIN) with the IRS.
Remember that the EIN may not be the only way you need to consider how your business will pay taxes. There are tax issues to consider at the state and local level, and it may be worth spending some money to have a local tax attorney work with you to ensure you have covered all of your bases. (Tip: This is why it’s a good idea to build some cushion for start-up costs into your business plan!)
Step 3: Bank on It: Banking Accounts, Business Credit Cards, and Accounting Systems
While it may seem tempting to use your existing bank account and credit cards to manage your new business, this should be avoided at all costs. We understand that it may seem like a hassle to create new accounts (and who wants yet another password to remember) but separating your personal assets and business assets is important for protecting personal ones.
Plus, separating all of the financial matters related to your business will help you keep a clear picture for budgeting and business planning. A business credit card will help you build credit and also may enable you to purchase some of the bigger-ticket items you need to get your business off the ground.
Accounting software is also a must, and fortunately for those just getting started with a side hustle, there are some free options!
Step 4: Get Licensed and Get Insured
Your business license steps will start at a local and state level; the best way to start is to visit the city website where you live and check for a page on business licenses and permits, which will direct you to all relevant information and steps you need to follow.
In some cases, your business could be governed by some federal licensing and permit issues (for example, if you sell alcohol, you are subject to the requirements of the Alcohol and Tobacco Tax and Trade Bureau).
Business insurance is an absolute must, and you should spend some time shopping around for the best coverage at the best prices. Without insurance, you could leave yourself vulnerable to a claim that could easily put you out of business, even if the odds seem slim. This is not an area to take risks!
Step 5: Dive Into Marketing and Branding: More Than Just Websites
Some business owners have the “world’s best idea” but absolutely no marketing acumen whatsoever, and this is how many great ideas never see the light of day.
The easiest way to understand marketing is as follows:
A product is created.
It needs to be sold.
That cannot happen unless people know it exists.
Marketing is the function that tells people, “This product exists.” The best marketing tells people, “…and you cannot go on living without it!”
It seems simple enough, but this is an area that is too often overlooked to the detriment of many small and start-up businesses.
Additionally, business owners who are not savvy regarding social media (you know the ones: they brag about never having created a Facebook page or an Instagram account for personal use, like some sort of badge of honor) cannot carry that same attitude into business endeavors.
Social media statistics show that people are continually using sites such as Instagram to research businesses and products.
A well-designed and user-friendly website is a great tool for your business. Still, beyond that, you will need to tap into creative and effective campaign strategies on social media platforms to define and grow your target audience.
If social media is “not your thing,” this is definitely an area where you need to spend some money to have an expert help you. An ooey, gooey image of a cookie if you are a baker or a freshly manicured lawn if you are starting a landscaping or mowing business can draw buyers in via social media in a flash!
Speaking of help, we will reiterate our earlier point here: now is the time to call in every favor. Do not be shy about asking friends, families, neighbors, and coworkers to lend their expertise when you are learning how to start your business.
Their advice and guidance could save you headaches (and money) down the road as you get your business off the ground, and you may be in a position to pay it forward in the future, helping someone else turn a dream into a profitable side hustle.