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Would you like to start your own business? Would you rather be the boss than take orders from one? If so, you’re in good company. Each year, hundreds of thousands of people in the United States alone turn their dreams of being a business owner into reality.
These business startups are as varied as the people who start them. They’re hair salons, software development companies, retailers, social media consultants, HVAC services, and health coaches. They build backyard pools, put up fencing, and build websites. They include private investigative services, digital marketing services, carpet cleaning services and just about every imaginable type of business.
Like you, they started with a desire to start their own business, but in most cases, very little practical knowledge of how to go about achieving their dream. True, there are a myriad of resources out there that provide startup tips, do’s and don’ts and success stories. But trying to weed out the sales pitches from the practical information is time-consuming. That’s why we created this guide. Use it to help you determine if you’re cut out to run your own business, and lay the groundwork for your new venture. Then, when you’ve completed the steps in this guide, use our business startup checklist to make sure you complete all the important steps to launch the business.
How to Start Your Own Business
The best way to start a business is to break the project down into small steps and complete those steps one by one. The first step is to know whether you’re cut out to run your own business.
1. Self-Evaluation – Are you cut out to run your own business?
Dreaming about starting your own business is easy. Setting up a small business and working at it until it becomes profitable isn’t so easy. It’s going to require time, money, focus, persistence and a whole lot of things no one talks much about. In fact, if you ask experts “what does it take to start a business,” the standard answers you’ll get will usually focus on skills, interests, and experience.
While those things are important (they are first on the bulleted list below), your personality, attitude and soft skills are equally as important. Before you start your business be sure you ask yourself and honestly answer all of these questions:
- What skills, interests, experience and industry knowledge do I have?
- Am I a self-starter or do need to have other people tell me what to do?
- Am I good at planning, making decisions and carrying them out?
- Am I open to suggestions, criticism, and change?
- Am I able to set goals and deadlines and meet the deadlines?
- Will I be able to stay focused even when things are difficult?
- Am I both optimistic and realistic?
- Am I honest in all my dealings with other people?
- Do I learn from my mistakes and make changes based on what I’ve learned?
- Am I self-confident?
- How much time will I be able to devote to starting and running the business?
- How much money can I afford to put into starting a business?
- Am I willing and able to take on debt to start a business?
- How soon do I need it to make money from the business?
- How supportive will my family members be?
- How much money will I need to get out of the business to keep a roof over my head and food on the table?
- What kind of business would best match my interests and skills?
If you aren’t sure what kind of business you want to start, think about your interests and skills, and the types of businesses that may be related to those skills. Use our business ideas section and our list of 300+ businesses to start to help you generate your own ideas.
2. Do research to evaluate your business idea
Once you have a business idea in mind, you need to research the business so you can determine the likelihood that customers will want what you sell and so you know what will be involved in operating the business.
Market research will give you insights into who your customers will be, what they are looking for, and how you’ll need to sell to them.
A few of the market research questions you should investigate include:
- How many people or businesses need the product or service you have in mind?
- Who are those people (identify your target market — what characters they share such as age, location, gender, etc.)?
- How do those people learn about this kind of product or service now?
- How will you reach those people to promote your business?
- Who will your competitors be and how many are in your selling area?
- What will you have to do to convince customers to buy from you instead of a competitor? (Tip: Undercutting the competitor’s pricing might not leave you enough profit to survive or grow.)
FREE Market Research Worksheet from Business Know-How
Figure out who your customers are and where you can find them with this free, fillable Market Research Worksheet.
Business operational and industry information you should research includes:
- What are the average annual sales for this type of business in your part of the country?
- How much profit do they make?
- How much money is needed to start this type of business and keep it going long enough to start making a profit?
- Where will I get that money?
- Is the need for this product or service growing or declining?
- How many businesses offer similar products in the area I want to serve?
- Are people buying this product or service online instead of shopping locally?
- What are all the income streams for the business, and which is most profitable? (For example, will foot traffic provide enough income for that bakery you want to open in town, or will you need to sell to local diners, coffee shops, and hotels? If so, where are those places getting their cakes and muffins now? )
- Do you need any special licenses or permits to operate the business?
- How much knowledge do you have about the operational details of a business you are considering? For instance, if you want to open a boutique, do you know where to find products to sell, how to figure up your markup, what your inventory turnover rate should be (ie, how fast will it sell out)?
- Where will you get your inventory and how much inventory will you need to stock?
- What other suppliers will you need to deal with?
- How many employees will you need?
- What local laws will you need to comply with?
Industry publications and local resources such as a local office of the Small Business Development Corporation (SBDC) or SCORE can often help you locate much of the research information you need. If you need more specific data than you can find for free, or if you don’t have a lot of time to spend hunting down sources of information, you can purchase a variety of research reports from Bizminer. The company is an excellent source for industry and location-specific financial analysis and market research data, as well as other data helpful for writing business plans. (Note: BusinessKnowHow is an affiliate for Bizminer and will make a small commission if you buy through our links.)
3. Should you buy an existing business, buy a franchise or start your own business?
Buying an existing business or a franchise can be advantageous for starting your own business in some cases. If the business you want to buy is doing well and gets repeat business, your initial marketing chores will be easier. Your startup will be less stressful, too, if the existing owner is willing to show you how they run the business. If you plan to buy a well-known franchise, your new business will have immediate name recognition, and the franchise will provide some training.
Despite the apparent advantages, there are still no guarantees of success. In either case, you’ll be laying out a lot of money up front and possibly incurring a lot of debt. Thus, before you proceed, look carefully at issues like these:
Questions to ask before buying an existing business or a franchise
- If you’re buying an existing business, why is the owner selling it?
- What are their annual sales?
- What is their profit?
- What is the owner’s salary?
- Have you worked with an accountant to learn what due diligence you should complete before buying the business?
- Are there any changes in the works (new shopping malls, big box stores, highway or other construction for instance), that could have an adverse impact on the business you’re thinking about buying?
- How many similar businesses exist in the locality you plan to serve?
- If you’re thinking about buying a franchise, what is the purchase price?
- What additional expenses will be incurred for constructing or renting the franchise storefront, vans, equipment, etc?
- How big will your territory be?
- Are there competing franchises that might open up nearby?
- How much training and operational guidance will the franchise you have in mind provide? How successful are they and their franchisees? FranchiseGrade.com is a site that rates many franchises.
If you are thinking about buying a franchise, we suggest purchasing The Franchise Buyer’s Manual. The book is written by industry expert Ed Teixeira and is sold by BusinessKnowHow in the Business Know-How store.
Before you go ahead with the purchase of either an existing business or a franchise we suggest you consult your own accountant and attorney.
4. Write a business plan
To be honest, a lot of one-person startups skip this step or gloss over it. But that’s not a good idea. A business plan forces you to look at all the marketing, operational and financial information you’ve collected, and to lay out specific plans, goals, and timetables. Once it’s written, it will serve as a roadmap to keep you on track and help you reach your business goals. That’s why it’s important whether you’re planning a business that will require a lot of money to start, or just want to be a one-person business.
Business plans typical include these elements:
Executive summary Written last, this summarizes the key points in the plan. It’s critical if you are seeking investors. If the summary doesn’t excite potential investors, they won’t read the rest of the plan.
Business description This section describes the nature of your business, the industry it fits into, and the need your business will fill.
Products and services you sell
Sales and marketing information and goals (how big is the market you can reach, why will they buy from you, how will you reach them, what competition you’ll face)
Operational information (location, equipment, employees, management, production, distribution, form of business and other operational details)
Financial details (projected startup costs, financing, projected monthly expenses and profits and break even point)
No matter how big or small a business you’re planning to start, be sure that all of the information and projections are based on facts you’ve researched. If you won’t be seeking investors and won’t be spending a lot of money to start your business, your initial business plan can be fairly short and simple.
If you will be investing a lot of money into your startup or seeking investors, you’ll need to include enough details to support your assumptions and show how the investment will pay off. In either case, business plan software such as LivePlan can make the process of writing your business plan easier. [Note: BusinessKnowHow is an affiliate of Live Plan and Palo Alto software and will make a small commission if you buy through our link.)
5. Get your startup ready for business
Now you’re ready to deal with the nuts and bolts of launching your new business. The specific tasks you’ll need to complete will depend on the nature of your business. Among them will be naming the business and making sure you have the right to use the name, registering the business with appropriate authorities, choosing a form of business, getting business licenses and certificates, getting a tax ID if you will have to collect sales tax, renting space (if necessary) and getting an accounting system set up. You’ll also want to get a website and social media accounts set up for the business.
The easiest way to keep track of all of these startup tasks is to create a checklist. This startup checklist will help you decide what should be on your own list.
Free Business Startup Checklist
Starting a business can be overwhelming! Use this free Business Startup Checklist to make sure you don’t miss any important steps. This downloadable Word document lists the steps you need to take to get your business up and running, and includes space for you to note your own comments and deadlines. You can get the checklist free when you subscribe to the free Business Know-How Newsletter.
6. Launch your new business
Now it’s time to let the world know you’re in business and welcome customers. Even if you are opening a shop in a busy downtown area, you can’t expect customers to miraculously show up on your doorstep. You have to start marketing and selling. Do everything you can to build word of mouth. Send out publicity. Create fliers and brochures. Get to network meetings. Tell all your friends. Ask for referrals. Get on social media. Place ads you want to place. If you need more suggestions for finding customers read these articles:
Most businesses don’t become successful overnight. So don’t be discouraged if it takes time to get a steady stream of customers. Keep marketing and talking to potential customers. Ask customers and prospects for feedback (and referrals!) and make adjustments to your business plan if necessary.
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