You need support when starting a new business.
But there’s your first problem!
Who do you listen to, and which advice do you implement? When much of its unrealistic for a small business with a matching budget.
The last thing you need is more confusion.
You want straight answers on how to start a small business. Ones proven to work by those who’ve made it.
And affordable solutions that you can implement right now without having to become an expert.
That’s what we have for you.
A business set-up guide created from the wisdom, advice, and proven strategies of those who`ve been there and done it.
Allen Blue, the co-founder of LinkedIn, sums it up:
“Focus on just one thing”
“Solve one business problem and find the person to help you.”
Businesses that achieve extraordinary results have this in common: They focus on providing one thing better than anyone else.
Sure, as is true with any business, they evolve and add more products and services.
But it all starts with a single business idea.
Successful business ideas are born out of necessity. These are ideas that either fulfill a need, provide a solution, or offer value.
I’ll let Brian Chesky, founder of Air B&B, explain:
Chesky’s necessity was raising $150,000. His solution was selling three air mattresses to designers for $70 a night in his living room. The rest is history.
If you’ve already chosen your business idea, next, you need to validate it. But what if you’re stuck for ideas? How do you determine what type of business to start?
Proven research can help:
Reddit: Check out Reddit, look at subjects that interest you, see what hot products or services people are talking about, and identify any pain points.
3rd Party Websites: Go where your buyers are, like Facebook marketplace, Amazon, or Etsy. Look at what they’re buying or what’s needed.
Top Seller Lists: Analyze the Amazon bestseller list, see what’s trending, and see how you can improve it.
Copy Others: Inspired by a successful business model? Identify what you like and then determine how you can do it better.
Solve a Problem: What irks you or your friend probably does to most other people, too. Providing a solution to a common problem is the start to a creating a great business idea.
Once you’ve found an idea, you need to confirm whether your business will be profitable.
Market validation will determine if there is a real need for your product in your target market.
Validation provides accurate data on the market demand for your business idea and where and how consumers buy it.
If your validation results are positive, you’ve found your business model.
Meaning, you’ve found something that consumers want and can sell at a profit. And that’s what makes a successful business.
Validation questions you need to answer
1. Is there a need? Sounds obvious, but statistics show that lack of market need is one of the main reasons small businesses fail.
2. Which direction is the market trending? Is the market growing, declining, or stagnant?
3. Who are your competitors? Is there room for another player?
4. Can you afford the initial investment fees? Drafting a business plan is the best way to estimate the cost of starting a business. The SBA’s startup costs worksheet is also very helpful.
5. What are the regulations for new businesses? For example, the Internal Revenue Service website contains business regulation information, such as tax matters.
To get started, there are a few validation tools that can be helpful. There is Google Keyword Planner which allows you to find the online search volume for your business concept. Confirm your market’s growth or decline trajectory using trends.google.com.
Ok, let’s say you’ve found an idea, and it’s cruised the validation process. Now you’re ready to act.
Benjamin Franklin was onto something when he said:
“If you fail to plan, you are planning to fail!”
A business plan (or what some people like to call their “business model canvas”) takes what’s in your head and puts it on paper, so you and others have a blueprint to work with.
If you require funding, want others to work with you, or need to convince your business partner to invest their life savings into the business, you’ll need one.
You have two choices.
A traditional business plan is an approximately 40-page document that includes a company summary, an executive summary, a management summary, your products and services, a market analysis summary, a strategy, implantation summary, and a financial plan.
Small businesses or those who aren’t seeking external funding don’t need a traditional business plan. All you need is an outline of the business concept that enables you to get started.
A one-page plan is a simple elevator pitch style plan that highlights the preliminary requirements of your new business.
Having a one-page business plan is a good idea for a few reasons. It’s easier to share and get the idea of your business across quickly. It also forces you to communicate your business idea in a clear and focused manner.
Your one-page business plan needs to summarize the key elements of your business and should take just a couple of hours to write.
It should include critical information that you need to define the strategy for your business. And as its name suggests, it’s short. Keep each section limited to a few sentences or bullet points.
Most new SMBs require outside funding to get up and running.
So now is the time to assess your finances. Any good financial plan starts with a financial needs analysis.
A FNA gives you a complete picture of your finances, so you can turn your idea into a business.
To complete an FNA, add up the following costs:
First, write down your one-time costs, such as business registration, permits, licenses, trademarking, initial stock, and insurance.
Next, add running expenses like rent, utilities, marketing, and production. Your end figure is the initial investment you’ll need to start your business.
A general business rule is to have enough funding for one year before turning a profit. Keep in mind that most new businesses survive on a quarter-to-quarter basis until the money starts coming in. But how do you know you’ll start earning? By performing what’s called a break-even analysis.
Let’s get into it.
A break-even analysis is an important tool all business owners should know how to do. It determines at what point your business will be profitable.
When you’ve broken-even, all your costs have been covered, but you’re not making nor losing any money. Finding your break-even point will help you price your products effectively.
For example, a break-even analysis will help you determine how many candles you need to sell- and at what price- to cover production costs.
To perform the break-even analysis formula accurately, you need to determine your business’ fixed costs and variable costs. Fixed costs are any costs that stay the same, so things like rent and insurance. Variable costs are expenses that increase or decrease according to production or sales.
So, let’s say you’re selling candles for $12 per unit.
Your annual fixed cost is $100,000, and your variable costs are $2.
You will need to sell 10,000 units per year to break even.
10,000 units at $12 per unit = $120,000
After calculating the break-even analysis, you need to establish how you will turn a profit. Some ways to earn a profit include raising your prices and reducing product costs by increasing order quantity.
Now is the best time to find funding for your business due to the number of available options. But every dollar you borrow now costs you future profit, and most importantly, your time. If you can bootstrap your business and not borrow, do it.
Note: Bootstrapping is building a company from the ground up with nothing but personal savings.
1. Family: Family loans usually come without interest, but you risk straining relationships if things go wrong.
2. Angel investors: An angel investor is an individual who provides financial investment in return for a percentage in equity.
3. Crowdfunding: Works by raising a set sum of money from a group of people within a specified time. Most run online.
4. Small business grants: Grants are provided by government bodies, large corporations, and philanthropists. But small business grants are difficult to obtain, with most aimed at specific community groups, specific types of businesses, non-profit organizations, and underdeveloped industry sectors and regions.
5. Small business loans: SMLs are loans obtained from financial lenders. They come with interest and must be repaid within a specific time (usually five years). You can apply to the Small Business Administration to help arrange a loan for you.
Remember, if you need funding, either find an angel investor, use crowdfunding, or ask family or friends before approaching a finance institution.
Determining and registering your business structure is an exciting time- your idea is now becoming a legal reality. It’s an important step and you must choose your legal structure wisely.
The U.S. has twelve different business structures. Each entity has its own legal requirements that directly influence your setup costs, how you’ll run your business, which state laws apply, how you’ll file your taxes, and your level of legal liability.
However, small businesses generally use the following four business structures: Sole proprietorship, general partnership, limited partnership, and limited liability company.
Sole proprietorship is the default to starting a business. You can start immediately by using your own name and obtaining the required permits, licenses, and adequate insurance coverage. You’ll find what you need on your state’s website.
General partnerships are similar to sole proprietorships, except it has multiple business owners. Each person actively operates in the business, as well as share the profits and losses of the business.
Limited partnerships (LP) are a partnership between those running the business and a silent investor. Traditionally, silent investors have no day-to-day involvement in running the company. LPs are a good entity option for raising capital investment while retaining the simplified taxation of a general partnership.
But an LP is complicated to set up and requires state-by-state research. And any limited partners’ investments and shares are considered by the law as securities, subjecting them to state and federal security regulations.
NOTE: If you use one of the above structures and your business is sued, or you wind up in debt, you’re liable, and so are your personal assets.
Limited liability company (LLC) is one of the most common business structures for small businesses. It is a good choice if you’re trading in medium to high-risk niches, such as construction or adventure activities, as you’re not personally liable for the business. However, the setup and running costs are more expensive. You’ll need an accountant to register and file on your behalf.
Some business structures have their own tax and registration requirements.
I’ll explain next.
No one likes paying taxes (amiright?).
Unfortunately, taxes are an important consideration when it comes to choosing a business entity. You will have to weigh the tax considerations associated with the business structure you choose.
Sole proprietorships are classified as a pass-through entity, meaning your business income is paid through your personal returns. You are also eligible for the 20% QBI (qualified income deduction).
General partnerships are treated the same as a sole proprietorship.
Limited partnerships are also pass-through entities, simplifying taxation and enabling you to claim the 20% QBI deduction. However, LP tax treatment varies from state to state, so check out your state website for more information.
Limited liability company is typically treated as a pass-through entity for federal income tax purposes. However, members can choose for the LLC to be taxed as a corporation instead of a pass-through entity. The way you file and pay income taxes depends on whether your LLC has one owner or multiple owners.
If you’re legally required to pay state taxes, you need a state tax ID number. You can find that out by researching your state’s income tax and employment tax laws on your state’s website. The process of applying for a state tax ID varies from state to state. Contact your state government directly.
State and federal licenses and permits are determined by what business you’re in and your location. State regulations generally cover a broader range of activities than federal. For example, they regulate industries like construction, farming, dry cleaning, restaurants, and retail.
You only need a federal license or permit if your business activities are regulated by a federal agency. You can find out more on your state’s website and the gov SBA’s site.
So, have you given your business name much thought yet?
What about your registration and trademark?
If not, keep reading.
Naming your business involves a lot more than just picking a name you like. It has to reflect your business identity ang goals, be memorable, and engage your target audience.
Your business name is a long-term commitment; it will appear on your website, business cards, social media platforms, and more.
Here’s some tips to get started.
You can find the right business name with a dash of creativity and a deep-dive into market research.
First, decide on which style suits your business: Branded or generic? Do you need a keyword to describe what you do, or would a generic name be more appropriate?
If you’re selling artisan bags and hats through your e-commerce store, artisan bags and hats are relevant keywords. A generic name like ‘artisan bag and hat boutique’ would work well. However, if you plan on extending your range to include clothing and accessories, your name would no longer be applicable. Now a branded name like ‘Guanabana Handmade’ would suit your future vision.
Whichever you choose, keep it short (2 syllables or less) and catchy, so it’s memorable and easy to spell. If you’re trading globally, ensure it’s available as a TLD (.com) domain or state if you’re local.
Still stuck for ideas?
You can use brand name generators that take your ideas and provide catchy, creative, and industry-relevant business name ideas.
Some brand name generators only provide non-trademarked names. Still, even then, you must check your chosen name’s availability and legality to be sure you can use it.
Always run a trademark check to ensure your chosen name isn’t legally registered. If you’re in the US, research your name’s availability on the United States Patent and Trademark Office database.
Ensure its unique. Just because your business name isn’t trademarked doesn’t mean other businesses aren’t using it. This isn’t too big a problem unless they own the domain or are in close vicinity. Check your Secretary of State entity filings and DBA (doing business as) for other companies operating under the same name.
You can start with a general internet search for similarly named businesses. Google will display any businesses online using the same or similar name. If your chosen name is overly popular, you need to go back to the drawing board.
Validate your domain’s availability. A name’s not much use nowadays if you don’t own the domain. Check registrars like GoDaddy or Namecheap to confirm availability.
Last but not least, keep social media handles. If you’re using social media for marketing, use Knowem to ensure your domain name is available on all platforms.
Once your business name is in the bag, it is time to protect it by registering it.
Registration requirements depend on your location and which business structure you choose.
Many small businesses simply need to register their business name with state and local governments. In some cases, there is no need to register at all.
If you trade using your legal name, you don’t need to register. However, if you want to use a separate business name, you have to register as a DBA (Doing Business As, i.e. referring to the name you want the public to call your company).
You register your business name when submitting your business entity application with your state.
There are four different ways to register your business name.
1. Entity. A business entity name protects you on a state level.
2. Trademark. A trademark protects your business at a federal level.
3. Doing Business As. Registering a (DBA) doesn’t provide legal protection, but it’s required if trading under any name other than your own.
4. URL. Buying a domain name protects your business website address.
You can confirm which registration you require using the U.S. Small Business Association website.
Once you’ve chosen and registered your business name, the next step is to begin the process of turning it into a highly recognizable brand.
Seth Godin, the founder of Squidoo and Yoyodyne, explains branding this way:
“Marketing is no longer about the stuff you make, but about the stories you tell.”
People don’t buy products; they buy brands and the solutions they provide.
When you create your brand, it should be first and foremost tailored towards your target audience. This will ensure that they will organically connect with you and spread the word about your business.
Branding has to instantly convey the message that it provides a result, solves a problem, and brings peace of mind. Because if it doesn’t, consumers won’t buy what you’re selling.
Designers achieve this by creating a brand identity that engages the audience’s emotions using a combination of color, typeface, shapes, and style. Infused into logos, taglines, and content, both written and imagery. And all must be carefully chosen based on your target audience’s pain points and demographic.
First, you must consider your logo. Since your logo is the face of your business, it must be versatile so that it works on all marketing platforms. You achieve this by creating four variations:
1. Combination. Also known as a parallel logo, containing your name, tagline, and icon. It’s a perfect fit for your website header.
2. Stacked. Also known as a vertical (containing name and icon). Looks excellent on printed materials and clothing tags.
3. Wordmark. A wordmark contains only your name, and your font is what grabs the viewer’s attention. Use it when space is at a premium.
4. Icon. An icon is an image that represents your brand (think the Nike swoosh). Icons should contain your brand colors (no more than two). You’ll use it as your website favicon and social media avatar.
Color palette is another important consideration. Colors send strong subliminal messages which connect your target audience’s emotions. It might not seem like such an important detail, but the color helps determine how customers feel about your brand. Choose ones that suits your niche (hint: take a look at competitors) and your brand style or service (think about what message you want to convey).
A third important consideration is style. Every design element you use in your brand must be cohesive and match your overall style. Use fonts that match your tone, visuals that suit your image, and content that fits your brand personality.
You have no shortage of marketing options, so where do you focus your efforts?
The answer: On one thing.
The marketing channel that’ll give you the highest ROI (return on investment) depends on your niche. Every target audience has their preferred way of searching for and buying what they need.
Let’s look at your options.
Your website is your digital shop front. You must design it in a way that provides a UX (user-friendly) experience. But a great-looking website isn’t of much use without traffic.
So, what will be your source of traffic?
The first is SEO (search engine optimization), and it is essential for ranking high on Google. It’s a long game strategy that takes time and some learning to get right. But if you work on it regularly, apply some proven tactics, and use the right keywords, you’ll get results.
The second is paid campaigns. Google Ads enable you to run highly effective paid marketing campaigns to drive relevant traffic to your website. It places your ads in front of consumers search for services or products relative to your business. If running paid campaigns, use Google’s keyword planner to find keywords and Google Analytics to track performance.
If you have a website, email marketing is an excellent way to build a client list you can continuously market your brand to. Email campaigns are affordable to run and regularly see on average a 40% increase in ROI.
The key to collecting customer emails is to have CTA (call to action) on your site that provides benefit. For example, a discount on the first purchase in return for their email address.
If you have a physical product, you can sell it on websites like Amazon and Etsy. Firstly, research each platform to see if similar products are selling, open a seller account, create a listing, and you’re up and running. Of course, it takes time, money, and knowledge to build a successful listing. But millions of sellers use these platforms, and so could you.
Social media marketing involves creating and sharing content on social media networks. It includes posting product updates, videos, and other content that drives audience engagement.
I can guarantee your target audience is already interacting with competing brands through social media. And if you’re not using it, you’re missing out! Because marketing on social media is proven to boost brand reputation, increase awareness, create devoted brand advocates, and even drive leads and sales.
Which social media platform suits your brand?
Facebook: If you need to market to local customers, a specific audience demographic, or re-target visitors to your website, Facebook is the ideal platform. It’s also great for building brand awareness, keeping customers informed, and broadening your reach.
Twitter: You can add links to your tweets to drive traffic to your website’s landing page and increase leads. It’s also perfect for promoting blog posts, press releases, and product updates.
Instagram: If visuals suit your marketing strategy, Instagram is your number one choice. Using Instagram stories enables you to connect directly with your audience. And adding links to your pictures and stickers with shoppable tags drives sales to your website.
Pinterest: Want to create a story around your brand? Using Pinterest, curate a visual narrative that organically drives leads and traffic to your website. It also has the highest user purchase intent of all the social platforms!
TikTok: If you post the right video on TikTok, it can be a goldmine for audience engagement and increasing global brand awareness.
Now you can use social media management tools that help you conduct market research, create your strategy, organize content, schedule postings, and run advertising promotions.
Still unsure which platform to market on?
Then just ask yourself:
Where and how does my target audience search for (and buy) what I’m selling? It might sound simple, but that’s the beauty of it. Go online and type in your keyword. If page one of Google is full of similar business listings, you know a website works well. Then look at which social media links they’re using. That’s where you’ll find your audience.
The key to growing a successful small business is knowing where you want to go and what`s required to get you there. You don’t need to be perfect at everything, but you sure need to surround yourself with people who can support you.
Let’s hear from Brian Chesky, co-founder, of Airbnb again:
“Having the right people who can support you is the most important thing.”
But there’s a catch!
People can only help you scale if you know what’s working and where you need them. Finding a team takes time and can be costly.
Which begs the question if a team is needed.
Are you a one-person show? If so, you can sub-contract.
But if you do need staff, can you outsource your employee needs from staffing agencies or outsourcing platforms? And even then, you’ll have to manage schedules.
So, when is the right time to build your team?
When your business is up and running.
When you know your value proposition, target audience, marketing channels, break-even date, and profit margins. And you are confident that every dollar you invest into your engine will provide a $2 return.
Only bring your first employee on board when you have some demand and built your MVP (Minimal Viable Product). Build and sell some more, then hire another employee. And if things go well, consumer demand will tell you if your product validation was correct and you’re onto a sure thing.
At that point you can think about sales managers, marketing managers, and developers.
Congratulations! It’s time to cut the red ribbon and pop the bubbly because your business is officially open.
Now the real work of monitoring and growing your business begins. It’s important to regularly track analytical data to ensure that your strategies are working.
Start by reviewing your marketing strategies every quarter. Once you’ve established which are working, you only need to check them whenever you change a product or service, expand your business, or there is an increase in competition.
Use free analytical tools to ensure your SEO, online content, and social media campaigns perform as required.
Run A/B testing (split testing) to monitor your website’s performance by comparing two variants of your landing page, CTAs, and email marketing campaigns.
When conducting local marketing campaigns, you can track sales, bookings, inquiries, and revenue on each different strategy. Confirming which ones are providing the best ROI on your investment.
After all the work you’ve put in, taking your business from a SMB to a successfully established brand should be a breeze.
Collaboration, also called co-marketing, is when two complementary brands share resources and audiences to run marketing mutually beneficial marketing campaigns that rewards both parties and their customers. Collaboration also helps reduce costs, reach a wider audience, and increase brand awareness.
If you use social media as a marketing strategy, you can hire an influencer relevant to your niche (micro-influencers work best for small businesses) to promote your brand and increase consumer awareness. Not only can this raise your brand awareness by adding links to their posts and videos, but you can also drive traffic and sales to your website.
The takeaway is starting a business takes planning, making important financial decisions, and completing the various legal requirements.
Focus on one step at a time.
Find that one person who’ll support you.
And use the knowledge given by others to grow your small business into a great company.
As Warren Buffet said:
“That’s how knowledge works; it builds up like compound interest.”
So don’t guess about the future; use the advice here and create it.
This portion of our website is for informational purposes only. The content is not legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information as well as has not been evaluated the accuracy and/or completeness of the information.