8 Steps to Start Your Own Business
So, you’re interested in taking the first steps to starting a business. Work your own hours, be your own boss, have something of “your own” that you can be proud of. Maybe you’re hoping to follow a dream and build something special, pass on a legacy to your kids, or grow your startup and sell for a huge profit. Sounds great right? And it can be. But as they say, if it were easy then everyone would do it.
There’s a lot that goes into starting up your own business and there’s no guarantee of success – and certainly no surefire recipe. To give you an idea of what’s involved, we’ve put together this guide of helpful suggestions, insights and best practices that might just help tilt the odds in your favor.
First – Make Sure You Know What You’re in For.
Owning a business is NOT a 9–5 job. It’s a commitment that will likely require your attention 7 days a week, 365 (or so) days of year, at all possible hours of the day. So before you even think about getting started, you have to ask yourself a few questions:
- Are you comfortable wearing all the hats of a business owner?
- Can you physically and willingly work the extended hours and take no days off?
- Are you able to effectively balance work and your personal life?
- Can you afford to make the initial risks of investment?
- Will you be OK with failures and setbacks?
If your answer is an enthusiastic “yes!”, then let’s get started with how you can start your own business.
Understand How a Business is Different from a Startup.
The next step is to clarify if you’re going to create a small business, or if you’re more interested in a startup company. While both small-business owners and startup owners are considered “entrepreneurs” – there are fundamental differences between the two models that will have huge impacts on your business needs and expectations
|Want to fill a need within a market.||Want to disrupt existing markets or start a new one.|
|Are up and running to generate profits on day one.||Don’t expect immediate returns, turning a profit could take months, or even years.|
|Serve small or regional markets.||Are intended for larger markets and to have a wider, possibly global, reach.|
|Hope for continual, sustained growth over a long period of time.||Have very delayed growth in the hope of eventual exponential growth.|
|Goal of business is to stay in business – ideally last in the market as long as possible and make a steady profit.||Goal of startups is to develop something new, then either go public with an IPO, be offered a buyout, or transition into a larger company. Startups are, by definition, temporary.|
|Are often central pieces of their local community.||May not have any ties to the local community, unless investment and service is part of the business model.|
Major differences to be sure, but one thing in common is that the stakes are high. The survival rate for small businesses after 10 years is about 30%, for startups that number is closer to 8.3% after 10 years. With such odds against entrepreneurs, it’s important to start with a plan, fortunately there are a few recommended first steps you can take to increase your chance of success.
The 8 Steps Toward Starting Your Business
- Start with an innovative idea that can be made into a product or service
Everyone has ideas, but for an idea to become a successful business, it needs a little bit of extra thought put into it. So, the first step in starting a business is to choose something that excites or interests you – after all you’re about to spend a LOT of time with it. If you’re starting something just because it seems like a hot trend, are you going to have the commitment to see it through over the next several years?
From there, ask and explore who your potential market is and if people will even be interested in your products or services. What need(s) are you servicing or what pain points are you addressing? Are you able to make your offering distinct to fill an unexplored niche, do you see an opportunity to expand or improve on an existing service/product? Or, have you innovated an idea that could disrupt a market – or even create a new one?
- Consult with advisor and mentors
Don’t reinvent the wheel – no matter how novel your business idea is, or how unique your approach, there are other experienced entrepreneurs out there that you can consult with for advice and recommendations. Maybe you’re uncertain about how to effectively specify your target market (Step 3), or need guidance in putting together a business plan (Step 4). No matter where you are in the process of starting your business, a mentor that you trust can provide helpful feedback, point you toward useful resources, and work through new strategies and ideas.
Mentors are also excellent resources for expanding your business network. They may be able to connect you with other entrepreneurs looking for people to partner with, or offer direct access to important people who can provide support and funding, such as investors, local authority figures or the chamber of commerce. Look for mentors through non-profit organizations or connect directly in advanced degree programs focused on entrepreneurs, like USD MITE.
- Research and assess the market
You have some support and you have a rough idea of what you want to do with your business, now it’s time to clarify who you’re doing it for. Your initial instinct might be to cast as wide a net as possible – “everyone is a potential customer!” However, “everyone” will have a lot of competing needs and preferences, some which directly contradict each other. It’ll be far easier to define a market segment that you’ll initially serve, with the possibility of scaling to other markets later on.
After you’ve identified who your target customers are, then you’ll need to do some additional market research:
- Determine the type of outreach you need to do. If you’re going to break into an existing market, then you’ll need to survey the landscape to make sure it’s not oversaturated. Your biggest concern will be how you are going to stand out. If you’re innovating something that’s new and unlike any existing product or service, then your concern is how will people even know that you exist – and would they even be interested?
- Determine if the timing is right. If the market is flooded with copycats and knockoffs, then are you too late to carve out your own niche? Or worse, is there a risk that this is a passing fad? After all, no one’s interested in buying netbooks in 2021. Alternatively, could this idea be a bit early and the current economics are not yet quite “right” for this business? For example – the idea of Airbnb as a way to make money likely wouldn’t have been as attractive if it weren’t for the 2008 Great Recession.
- Identify your closest competitors. If there are other companies out there that are similar in both product offering and in location, then you need to establish how your business is going to compare:
- What are they doing well that you want to emulate?
- What areas are you going to surpass them in?
- How are you going to differentiate yourself?
- Learn more about your customers. The best way to conduct market research is to make the effort to talk directly with your future customer base. Whether it’s through online surveys, focus groups or direct interviews, the best way to understand if there’s an interest in your product is to learn their existing buying patterns, determine what possible needs you’re filling, and what pain points or problems you’re solving.
- Write up a business plan
A business plan is a proposal for your business that covers your immediate and future goals, the means of attaining those goals, and the timeline you have to accomplish them. This helps direct the initial organization of your business, specifies how you expect to grow, establishing the viability of your business and is crucial to secure funding from investors (Step 7). Even if there are unknown elements or rough estimates in your plan, be sure to nail your executive summary – aka the overview – to be able to explain your business in the clearest possible terms.
If you’re looking for a starting guide, download a business plan template from the U.S. Small Business Administration or SCORE websites. These guides will walk you through describing your product, developing a financial plan and calculating your expenses. Take specific care with the following points when beginning a new business.
- Choose your business name carefully and make sure you can register it (see step 6). The name shouldn’t be hard to spell (or pronounce), shouldn’t limit your business, and can’t be trademarked or in use by another business. Also, make sure any words you use don’t have negative associations in other countries, or experience the same headaches as the defunct Softcard mobile payment app, which was originally known as Isis Wallet.
- Projecting your costs is important, and a strong financial background will assist in ensuring that the numbers are accurate. By far the most important calculation is to take the time to accurately determine your startup costs. You’ll need to take into account the way different expenses might cost more or less depending on your location, including standard salaries, minimum wage laws, property values, rental rates, business insurance rates, utilities and government licenses and fees.
- You’ll need to determine your business structure:
- Sole proprietorship – you are the single owner of an unincorporated business.
- Partnership – you are in partnership with one or more other people who share ownership of a business.
- Corporation (C, S, B) – an incorporated business is owned by shareholders through shares of stock. Corporations are considered separate legal entities from their owners. For tax purposes, corporations are classified as C-corps, S-Corps, B-Corps.
- LLC – a Limited Liability Company is a specific business structure that can be applied to a corporation, a partnership, or to an individual’s tax return. Rather than shareholders, owners are members, and there are no maximum amounts or restrictions – they can be individuals, corporations or even foreign entities.
For specific tax details on each business structure, review the IRS website.
- Determine your location
You have to work somewhere, and your location can have a profound impact on the type of products or services you offer. It will also determine your initial costs of set-up, fees for renting or leasing, and even laws and restrictions that your company will need to follow.
- Local business – what most of us think of as “small businesses.” These can be stores or offices located within an area that offers products and services to patrons. Being located in high-traffic areas allows for the highest potential for walk-ins, makes it easier to connect with other local businesses, and can make advertising and marketing easier by being part of a collective (such as downtown business associations). This is the most expensive option, as having to lease or rent real estate in large markets can be costly. If you’re looking for space in urban areas, explore sites that host listings for commercial properties:
- Home Business – if you’re looking to save money on renting or leasing a commercial space, then it may be possible to start up your own business within your own home. While this setup may work initially while you develop your business plan and start to form the basics of your business, you’ll need to carefully consider if your available space is viable long-term for the type of business you want to run.
- Does your location work well for your intended business? Is it hard for customers to find or access it? If you’re renting, will your landlord allow it? If you own a home, will it comply with local zoning ordinances?
- Is your space suitable for your business? Do you have access to the equipment that you need? Will you have the space to store it? Are you able to separate out your living areas and work areas?
- Online Business – working from home isn’t just for telecommuting. If you’re offering products that can be easily shipped, or digital services that can be downloaded, then the bulk of your business can be located online. You only need servers to host your website and other digital content and the computers and internet access for your employees to manage content. Your business doesn’t even have to be centrally located, as you could potentially coordinate with people from anywhere, provided they have access. You just need to ensure that:
- The services/products you provide are available entirely online.
- You have the infrastructure (servers, computers, bandwidth) to support this model.
- Ensure that you’re licensed, registered and insured
This is the “red tape” step that can be onerous for starting a business, especially if it’s your first. Don’t overlook the importance of following through with licensing and registering, as you might not only be missing out on valuable tax rebates, you could be putting yourself in serious financial risk.
- Federal Requirements: Your business can register with the federal government for trademark protection or tax exempt status. In some cases you won’t need to register your business, and if you conduct business as yourself under your legal name, then you won’t need to register anywhere. But remember, if you don’t register your business, you could miss out on personal liability protection, as well as legal and tax benefits. Federal requirements and fees will depend on your business activity and the agency issuing the license or permit. It’s best to check with the issuing agency for details on the business license cost.
- State and Local Requirements: After you’ve reviewed any federal requirements, you’ll have to research your own state, county and city regulations. The licenses and permits you need from the state, county or city will depend on your business activities and business location. Your business license fees will also vary so be sure to visit your state’s website to find out which permits and licenses you may need. If your business conducts its activities in more than one state, then you might need to form your business in one state and then file for foreign qualification in other states where your business is active. Choosing which state to form in will determine your state and city tax payments as well as which regulations you’re required to follow.
- Business Insurance: You’ll need to purchase business insurance to ensure that both your personal assets and your business assets are fully protected from unexpected catastrophes. In some instances, you might be legally required to purchase certain types of business insurance. For example, the federal government requires every business with employees to have workers’ compensation, unemployment and disability insurance. Determine the type of business insurance you’ll need, and then find a reputable agent and shop for the policy that best suits your needs.
- Secure capital
No business ever started without capital to back it. If you happen to be independently wealthy, or have a rich relative, then you’ve got a leg up on perhaps the most challenging part of starting a business. However, if you’re like most of us then you’ll need to find a source of funding in order to get your business started. Here are some of the more common ways you can acquire the capital that your new business will need.
- Business loans. Most small businesses will need to apply for a commercial loan through a bank. A business plan is instrumental here, as banks will need to see how you plan to use their investment money, the general level of risk, and when they can expect their loan to repaid. Securing a business loan may also often require putting up collateral (personal assets, inventory or property) as well as a personal guarantee on your credit to repay the debt. If you are unable to take out a bank loan, you can apply for a small business loan through the U.S. Small Business Administration or an alternative lender.
- Business grants. A business grant is money that is essentially gifted to a business – it does not require collateral and does not need to be paid back. Grants can be awarded at the federal, state or local level and often have very specific requirements in order for a business to qualify. Additionally, business grants are very competitive and can require the business to adhere to certain stipulations. Grants are often used to offset inequality and lack of opportunity and so are set aside for women, minority groups, immigrants and veterans, or are meant to develop overlooked areas or serve at-risk communities.
- Investors. New businesses that require significant funding upfront, such as a tech startup, may want to bring on an investor. This capital can be a personal investment from wealthy individuals known as “angel investors” or money pooled by private equity investors, or venture capitalists. Similar to securing a business loan, an investor will need to be sold on the viability of a business plan before committing capital. Investors often provide much larger amounts than most loans, up to millions of dollars, with the idea that instead of repaying the loan, the investor now owns a stake in the company and will receive a much larger payout when the business goes public or is purchased by a larger corporation.
- Crowdfunding. Digital platforms now provide the option of crowdfunding as a viable means of raising capital. Rather than going to a single investor or bank, a company can publish its business plan online and use a crowdfunding service to raise smaller amounts of money from hundreds or thousands of backers. Crowdfunding has helped numerous companies in recent years, and there have been a growth of crowdfunding platforms – including Indiegogo, StartEngine and SeedInvest – designed for different types of businesses. Crowdfunding campaigns aren’t always successful, and those that fail to reach a certain threshold of required capital won’t receive any money.
- Get your name out there!
If you wait until your doors are open before you start your marketing efforts, then you’re way too late! One of the key aspects that your business plan should account for is your marketing campaign, which should start in earnest in the months leading up to the release of your product or service. As part of that plan you’ll need to determine which resources will work the best to fit your brand and reach your audience. Every business needs a website, but will you also choose to invest in social media outreach, local flyers, web ads, or radio and television commercials? Modern strategies for outreach include pay-per-click advertising, partnering with influencers, and even directly paying your customers to advertise for you!
These eight steps are only a starting point of how you can start a business. There are lots of additional considerations for any entrepreneur, including managing and retaining personnel, developing a minimum viable product (MVP) and scaling a business for future growth. Any successful business needs to combine innovation with tried-and-true practices and the ability to recognize opportunities when they arise. For anyone looking for experience in launching their own startup business in the tech industry, the University of San Diego’s Master of Science in Innovation, Technology and Entrepreneurship (MITE) could provide the education and resources that will help you succeed in the first steps toward starting a business.
Explore USD MITE
In the MITE program, our distinguished professors bring a depth and breadth of immediately relevant hands-on experience and insights to share with aspiring entrepreneurs looking to start their own business. We’ve developed our curriculum to focus on personalized learning to better guide our students toward developing their own startup companies. All learning is contextualized for individualized development, which helps save you time and provides a focused program of study.
Our goal is to provide you the skills you need to recognize opportunities and lead innovation to better thrive in the business and technology space.
FAQs About Starting Your Own Business
Q – Should I consider franchising?
If the thought of being your own boss seems like too large of a task, but you’d still like to own a business, then you can consider buying into a franchise. You’ll get the benefits of a more structured system that you can follow and a product that’s likely already tested and proven. The drawback is that you’ll have little autonomy to make and act on your own decisions and so have less room to innovate.
Q – What type of financing is best for my business?
It depends largely on the type of business you’re starting. A brick-and-mortar or similar style of small business is more likely to secure financing from bank loans or grants. That’s because, provided you have a solid business plan, the bank will be assured of steady repayments for their loan (plus interest of course). Angel investors and venture capitalists are less interested in steady returns and more focused on a possible big payout. If only one out of 10 tech startups makes it big, that pays for the investment into all the other companies plus a hefty return for the investor.
Q – Do I need a website if I’m not an online business?
You need a website. These days it’s more rare NOT to have one. Definitely look into claiming a domain relevant to your business – otherwise someone else will! This includes a presence on the social media platforms that make the most sense for your business. Consider the most popular choices like Facebook, Instagram, Twitter and YouTube and decide which ones will connect more to your audience and which you’ll be able to keep updated on a regular basis.
Q – How important is a social media presence?
Very! You’ll want to be on the social platforms that your target audience use. But, your posts and updates need to be strategic and directed. Don’t start accounts across multiple channels that will languish without content for months. Choose the ones that are a best fit for your target audience and you know you can commit to updating on a regular schedule.
Q – Do I need to hire employees for my business?
This is largely dependent upon the business, but you can only get so far doing everything yourself, and so eventually with growth you’ll need additional support from new employees. Hiring people that you trust will allow for faster growth and a greater capability to address different issues. Just make sure that you’re up for managing the culture and work styles of your business – and if you’re not, hire someone who is!
Q – Do I need a lawyer or an accountant?
Yes! You’ll definitely need a lawyer to consult with on legal matters, and even if you have a strong background in finance, at some point you’ll need the services of a dedicated accountant. Ask your mentors or associates for recommendations if you don’t know where to start.
Q – Are these steps applicable for an existing company or organization?
Yes! “Intrapreneurs” are business developers and innovators who work within a company. If you’re interested in starting a new product line or initiative within a company, then many of these same principles apply, though some may vary depending upon context. Formulating a business plan will still be essential for getting management to buy into your idea, though you’re likely arguing for the appropriation of a budget rather than a loan or investment.
Q – Is there a way to master this process?
Yes! USD MITE is set up to constantly walk you through the process of creating a business plan and provide you the opportunity to develop and pitch your own startup business. The more you learn about the entire process from experts who have valuable, real-life experience to share, the more you can develop the entrepreneurial mindset to successfully:
- Recognize problems and solve them from a first principles approach
- Understand how to target and serve a particular market of customers
- Nourish a constant curiosity about how to approach business and development
- Learn and practice persistence in the face of setbacks and challenges