How to Start a Small Business [Step-by-Step]

11 min read

Have you considered starting and operating your own business? If so, you’re not alone. The Census Bureau reports that there were 5 million businesses started in 2022. And it might be more realistic than you think. But owning a business is more than just self-employment.

There is a process that you should follow if you want your new business to be successful. Although it can be tempting to just be a freelancer or independent contractor and avoid all the hubbub of starting a real business. But in the long run, starting a business can be very rewarding, and it takes some of the risks out of the equation. Although many businesses fail in the first 5 years, it is possible to achieve success if you do it right.

Here’s what you need to know to start a small business of any kind.

What You Need to Start a Small Business

You need more than just a solid business idea to start a small business. Before you even set up your business there are things you will need to do and data that you need to gather. What type of business do you want to start? What do you have the know-how to accomplish?

If you are lacking in small business ideas, consider these common small business types:

Freelance content writer supporting other local small businesses
Dog walking for the neighborhood
Yoga studio/instruction
Publishing your own fiction or self-help books
Graphic design supporting other local small businesses
Digital marketing and social media management are in high demand
A specific product or service key to the local population

Of course, several of these options could be done online only, which opens up your target market from your local region to the state, the nation, or even the world. The easiest business to start as a sole proprietor is offering subscription digital products or access to valuable resources, particularly in the B2B sector.

This is a great way to earn money with a small business while imparting your expertise to the general public.

Starting your business plan

It is a good idea to download a business plan template right away. The template will give you an outline of what you need to plan before launching your business. Having a solid business plan increases your chances of a successful small business launch.

Parts of your business plan will be easier to write and develop after you’ve done a lot of research, such as the Executive Summary and the Company Description, which includes your mission and vision statements. Otherwise, you should work through your business plan template as you prepare to launch.

The most common sections for a free business plan template are:

Products and services — what tangible or digital products or services you will sell, how you will sell them, the necessary materials and tools you will need, the inventory management system, and your cost of goods/services sold.
Market research and analysis — who your target audience and potential customers are, how your product or service helps them solve a problem, the demographics of your target market, and competitive analysis to know what your competitors are already doing.
Strategy and implementation — how you will launch your business, your marketing strategy, and how you will comply with regulations such as the CAN-SPAM Act regarding email marketing.
Organization, management, and teams — who will run the organization, what management roles are required and how they will be filled, other employees you need and how they will be hired, and other human resources matters.
Financial plan and projections — the initial investment required to start your business and where you will get it, how much it will cost to operate your business, how you will be managing finances as your business grows, reasonable financial projections.

You will also need to do additional research into legal requirements for your business, and what services you will need to procure to make it happen — generally an attorney and accountant.

Starting a Small Business Step-by-Step

Starting a small business using a business plan template is a place to start, but some legal and financial matters will need to be set into motion as you work through that business plan.

Let’s take a look at some of the legal rudiments necessary to start your business, as well as break down some of the steps of a business plan.

Step 1: Choose a business structure

You have several options for your small business legal structure. The vast majority of entrepreneurs are actually sole proprietors, but the LLC business model is becoming much more common.

According to the Small Business Administration, an LLC, S-Corp, corporation, or nonprofit are the best option. When your business is a separate entity it limits your personal liability and gives you many more options for suppliers, vendors, or credit.

Step 2: Choose a business name

Choose a name for your business. Hold a brainstorming session to think of as many possible names as you can, then narrow them down. Your business name should clearly describe what you do or what you sell, while also being catchy to make a lasting impression.

Before finalizing your choice, check with the United States Patent Office (USPTO) to make sure you’re not violating any trademark rights. Additionally, once you have determined your name, it can be a good idea to file a trademark yourself with the USPTO. This can help to protect your business and product/service from infringement.

This may not be an immediate step when forming your business, but it can be a good idea to complete promptly.

Step 3: Choose and secure a business location

If you will be operating a physical business location, finding an available property in your budget and the approximate area should be fairly easy. There are many metro areas across the nation (not to mention, the world) with an abundance of empty commercial properties.

You should also establish your digital real estate, or your online store, domain, and social media accounts. Ecwid offers ways for new start-up small businesses to establish and manage an online store.

If you are going to have an online store, or you are operating only online, you will still need a formal business address to obtain the licenses and permits required to open and operate. There are generally ways around having a physical location, with real street addresses being offered by some services for private PO boxes. Plan how you will set up your home office as part of this step.

Choosing a Platform for Your Online Business

There is an additional preliminary step to starting an online business as well, which is choosing which platform to sell on. Depending on the type of your business, you may have options for third-party marketplaces or platforms that will be good options.

For instance, for selling physical products, you can look into Amazon or Walmart. If you will be dealing in handmade or custom products, Etsy can be an excellent place. The general advantage of these types of platforms is that you gain instant access to a large audience of those who visit regularly.

On the other hand, you may prefer launching your own store from a website. This can be an excellent option as well, but just may take a little more work to begin driving traffic to your site. However, the primary advantage is that you don’t have to worry about the additional fees that third-party platforms would take out of your sales.

Step 4: Establish your business as a legal entity

Your business needs to be a legal entity for you to open a business bank account or engage in any other business activities.

What you need to do to legally establish your business depends on what legal business structure you have chosen, your industry, and other factors relating to your actual business location.

Most locales require a business license to operate in their city or county. The state may also require licenses and permits depending on the products and services you will be selling or how your business will be operating.

If you will be operating a vehicle for your business, most states and the federal government require that you obtain a commercial driver’s license. Be sure to look up your state’s particular requirements for starting and running a business to stay in compliance.

The federal government requires everyone to pay taxes, so you will also need to register for an Employer Identification Number (EIN). If you are going to be operating as a sole proprietor without employees, you can opt to use your social security number instead.

Step 5: Open a business bank account

As soon as your business is a legally operating entity you need to open a business bank account. The business account will be used for all of your start-up and operating costs. Even if you are a sole proprietor, you should still have a business account to separate your personal and business finances.

This should be done very early on to avoid using your personal account to cover any business costs. Using your personal account for business expenses can make filing taxes a bit more difficult, depending on your business type.

Step 6: Hire employees and start producing your product or service

Hiring the right employees is a must when opening a new business. You need to have people on board that match your values and believe in the vision for your new company. The hiring process should be fair, meet all legal requirements, and result in quality hires that can bring your mission to life.

You can open your doors as soon as you are ready when you have completed these steps. Keep in mind that as your business grows, you will need to adapt the business plan and step up your game for your online store or online presence.

Ecwid’s solutions are scalable to your business, allowing you to start small with a free account and increase your budget as your customer base grows.

Step 7: Develop Your Marketing Plan

Once you have created your product or service, the next step is to ensure that your audience sees it through a successful marketing plan. Many factors can go into a marketing plan depending on your particular type of business.

However, some key steps should go into virtually any marketing plan, such as:

Define the Target Audience

This was briefly mentioned above. Simply put, you need to identify who your ideal customers are. This includes their demographics, purchase habits, interests, and common pain points. Identifying your audience helps create more effective marketing strategies to connect with them.

Choose the Right Channels

The next step is deciding on the channels you will market across. This step can largely depend on your type of business and goals, but common channels include email marketing campaigns, social media, content creation, and digital ads.

However, there are also physical options like flyers or mailing campaigns. These can be good options for brick-and-mortar businesses.

Set Goals and Expectations

When launching any marketing efforts, it is important to set measurable and achievable campaign goals. This could be the amount of visitors to your website or clicks on an ad. Setting goals will help you determine the direction for marketing efforts, as well as a standard to track down the line.

Determine Your Marketing Budget

Based on the goals you’ve set and the channels chosen for marketing, set a budget for your marketing strategy. Ensure to include all spend within the marketing campaign, including ad cost, graphic design, content creation, etc. This will help you to determine the true return you are getting on your marketing efforts.

You can always adjust or shift your budget as needed. For instance, if you find one of your channels is producing better returns than another, you can redirect marketing spend toward that direction. Marketing is an active process, so be sure to stay on top of it.

Monitor and Track KPIs

One of the most vital parts of any marketing strategy is to monitor and track your efforts through key performance indicators (KPIs). Depending on the marketing channel, this includes stats like impressions, clicks, traffic, and conversion rates.

You can analyze this data manually, but numerous tools can be incredibly helpful, including Google Analytics. Even better, using a platform like Ecwid, you can see many of your KPIs at a glance from your primary dashboard.

Optimize Your Strategy

As you proceed with your marketing efforts and track performance, the final step is to optimize. Take all of the data you collect and determine what channels should be strengthened or supported and which ones may need an overhaul. This will help to ensure that your marketing spend is going to the right places with the best returns.

Step 8: Understand Your Taxes

When starting a business, you must understand how to file your personal and business taxes properly. This can vary depending on your particular business type. We won’t be breaking down the ways to properly file your taxes here, but rather recommending that you do some research or consult professional tax advice. This will help you to avoid significant difficulty down the road when it is time to file.

We hope the above steps to starting a small business help you kick off your own. Good luck in your new and incredibly exciting adventure of entrepreneurship!

Don’t forget to share your experience of starting a small business in the comments below!

Ecwid Makes it Easy to Launch Your Online Business

If you are looking to launch an online store for your business, then we are here to help.

Our selling platform makes it easy to see all of your important metrics at a glance. Even better, it can be integrated with various other platforms, including Instagram, Facebook, TikTok, and more. This way, you can see all of your storefronts from one simple dashboard.

The best part about it? You can get your store started today for free.

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Jul 22, 2024

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.