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How to Start a Small Business

by Gwen F.

December 18, 2018

Action Guides 11 min read

Ultimate Guide: How to Start a Small Business?

The number of entrepreneurs planning to start a business has risen from 46% in 2017 to 53% in 2018. Yet, the average small business survives for at least two to five years.
With such a reality, you need a solid strategy to ensure your new business survives (in the short term) and thrive (in the long run). Because you’re starting up, let’s first focus on getting your business to survive. And don’t be discouraged.
We’ll stack the odds in your favour with this guide.

Beginner's Guide to Starting a Small Business

1. Ask yourself: Why do you want to start a business?

Ask yourself: Why do you want to start a business?

Think about it. Why do you want to start a business? For flexible hours? For passion? For unlimited income potential? To meet a need in the market?
Weigh the pros and cons for yourself and decide if starting a business is for you.

Pros Cons
Freedom & control – You get to be your own boss and make your own decisions This includes your working hours, dress code, office, and more.
Profits – You get what you earn in full, minus expenses and debt; not a paycheck.
Passion – You get to start a business in an industry or niche you enjoy. This gives you an extra drive to do well in your venture.
Loss of capital – The money you’ve invested in the business could be depleted even before you make any money.
Responsibility & workload – Handling customers, hiring staff, accounting, processing paperwork, and more. You sometimes have to deal with emergencies at odd hours.
Competing against well-known businesses – It could be hard to make yourself known to people who already have their go-to brands.

No matter your reasons, you need to be willing to bear the risks. And making money has to be a priority if you want to survive your first year.
To be clear, all successful businesses have a good business model – a specific plan on how the business makes money to cover expenses (in both the short and long run). Passion gives you drive at the beginning but will eventually be lost if you aren’t making money. And flexible hours are meaningless if you get into debt.

2. Come up with a business idea (and consider profitability)

Come up with a business idea (and consider profitability)

Make sure your business idea is profitable. Even if you’re in it for the thrill and passion of entrepreneurship, your business has to make money.
Think about trends and tech advancements. Could you make use of new advancements to solve a consumer problem? And can you do it before more competitors crowd the market?
For example, Larry Kim (founder of WordStream), jumped on the AI chatbot trend and established MobileMonkey – a company that builds marketing bots for messaging systems. There was a gap in the market for it, especially with Facebook Messenger emphasising on chatbots.
Solve pain points of consumers. Entrepreneurship is about solving your ideal customer’s problem. Can your business solve an existing pain point for a specific industry? Take the time to learn your ideal customer’s needs and use it to your advantage. People will buy products and services that make their lives easier.
For example, the idea of Airbnb came about when Joe Gebbia and Brian Chesky were struggling to pay their rent in 2007. Since a design conference was coming and hotels were overbooked, they decided to rent out three airbeds in their living room.
With that, they created airbedandbreakfast.com the following day and charged $80 each night. This evolved to what Airbnb is today. The founders solved the problem of consumers wanting to rent out their property short-term, and earn some extra dough.

Also, consider these factors...

Is there customer demand for my business?

Without customers, your business won’t survive. Perform market research to find out if anyone is interested in buying what you offer. Talk to fellow entrepreneurs in the industry. If you have a minimum viable product, handpick people whom you think are your target customers to give feedback.

How well do I know the business and industry?

You need to understand the needs of your target customers, and how people in the industry work. If you’re venturing into a new industry, at least have a partner (or some connections) within that industry.
For example, trying to sell an accounting app without knowing industry regulations and the struggles of accountants is a sure way to fail. You won’t be able to come up with a service that solves actual problems of your target customers.

How’s your idea different from existing competitors?

Standing out from the competition increases your chances of success. Being new, people have no incentive to do business with you if you’re offering the same old thing.

Will I enjoy doing this?

Managing a business will be stressful. If you’re passionate about your business idea, you’ll find it easier to stomach the ups and downs.

3. Write a one-page business plan

Write a one-page business plan

Whether you’re an entrepreneur or freelancer, you need to prepare a one-page business plan.
According to Entrepreneur, a business plan is "a written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement."
A business plan can serve different purposes for your business -- so what does a one-page business plan do?
Think of the elevator pitch -- but in written form. Think about how you can explain your business to potential investors in under a few minutes. Or in this case, in exactly one page.
This forces you to communicate your business idea clearly in one single page. This quickly gives you and potential investors a clear idea of what your businesses need to do to succeed.

4. Decide your budget and financing options

Decide your budget and financing options

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”
--Ayn Rand
Russian-American writer of best-selling novels The Fountainhead and Atlas Shrugged
To save money, list down an expense plan. Prioritize the business crucial ones such as equipment, permits and licenses, insurance, and more. It’s a good way of knowing how much you need to budget, and if you’re spending money efficiently.
Here’s how to create a budget:

Step 1: Tally your income

Make sure that you have enough resources before deciding on how to spend your budget. Tally your sales and other income sources on a monthly basis to get a summary of how much you have.

Step 2: List down your fixed costs

Fixed costs are the set expenses you pay on a regular basis. These include payroll (if you have employees), office space rent, production expenses, and more. This makes it easier for you to come up with the total budget you have to set aside monthly.

Step 3: Allocate for emergency spending

As much as you try your best to follow the plan, there will be times when you have to spend on unexpected needs. Save money ahead for emergencies to ensure that you don’t go broke when they happen.

Step 4: Decide on your budget accordingly

It’s time to estimate your needed budget now that you’ve gathered all the information you need. Sum up all your monthly expenses and the budget for emergency situations. Use this as your monthly business budget. Adjust this accordingly when there are changes in your expenses.

5. Choose your business structure

Choose your business structure

Do you plan on running this business solo? Or will you have partners? The business structure you choose will greatly affect major factors of your business. If you still haven’t figured it out, it’s alright. You can always change and adjust whenever you deem fit once you know what you want.
Get to know the basics of different business entities below. The key similarities are stated, but terms, structures, and other factors may differ for each country.

Sole Proprietorship

For this structure, only one individual operates and owns the business. You are personally responsible for everything that happens to your company. This includes attending to all obligations and possible liabilities. This is what you should go for if you’re the type of person who wishes to work alone.
License needed: General business license
Tax aspect: The income and expenses of your business are reflected on your personal income tax return.

Partnership

In a partnership, the business will be owned and operated by two or more individuals. You and your co-owners will share all the responsibilities and obligations needed by the venture. Major decisions are also reached with the agreement of everyone involved.
License needed: Licenses and permits may vary according to the state or city where the business operates.
Tax aspect: Partners report their individual income tax returns based on their profit from the business.

Corporation

A corporation is bound by more regulations and has a more complex process. The main benefit of this is your company becomes a separate legal identity. This means your personal assets are separate from the business assets, and therefore won’t be affected whatever happens to the business.
License needed: Licenses and permits may vary according to the state or city where the business operates.
Tax aspect: The corporation’s owners pay tax that’s twice the amount of the business’ earnings.

Limited liability company (LLC)

This entity recently became popular to majority of entrepreneurs. An LLC combines some of the features of a partnership and a corporation. Business owners are protected from the company’s liabilities without having to pay twice the amount of tax.
License needed: Licenses and permits may vary according to the state or city where the business operates.
Tax aspect: Each partner is taxed based on the extent of their profit from their involvement in the business.

6. Name your small business and get a website

Name your small business and get a website

A business name is your identity. Customers and potential business partners will be using this name, so be sure to choose one that represents your brand in the best way possible.
Once you have your business name, create your website. Having a website is great for reaching out to a wider audience and marketing your product or service.
Here are the things you should add to your website:

  • An overview of your business. Who are you, and how can you make people’s lives easier?
  • Your list of products or services. Show people what you got!
  • Your contact details. Let visitors reach out to you if they’re interested in what you have to offer.
  • A domain name (i.e. website address). Use your business name for this! This makes your small business more legitimate, as well as make customers and potential investors take you more seriously.

7. Implement a simple accounting system

Implement a simple accounting system

Dealing with expense, profit, prices, taxes, payrolls, and more will take up most of your time, too. With that, it’s essential to setup an accounting system.
Luckily, there’s no need to hire an army of accountants for this. As a small business, you can settle for just one accountant or even do it yourself. In the end, the key to a flawless accounting system is to keep it simple. Start with something as small as keeping track of your revenue and expenses only, then work your way from there.
One great example is QuickBooks Online. It serves as an online accountant that lets you track your income and expenses, manage workflow easily, share documents securely, and manage your clients list effortlessly, among other features.
Try these other accounting tools for yourself and see which ones are a great help for your business:

  • Sage One
  • FreshBooks
  • Xero
  • Sighted
  • Sage 300 Online
  • SurePayroll
  • TSheets
  • WagePoint
  • Gusto

8. Pick your working environment and/or a business location

Pick your working environment and/or a business location

Keep in mind that your work location and environment heavily depends on the nature and needs of your business. For example, if your business involves shipping of products, you’ll definitely need a warehouse. If you can run your venture through a laptop, then work from home.
Take a look at some of the places where you can work on your business:

Home office

Working in your own home is ideal for those who do not have the money yet to spend on office rent. Clear out a portion or room at home and turn it into a place where you can be focused and uninterrupted.

Coffee shops and cafes

You can’t deny the fact that sometimes, working at home can be counterproductive because of multiple distractions and the temptation of procrastinating.
Fight this feeling by staying at a coffee shop instead. With caffeine in your system and a productive vibe from other customers, you’ll surely be able to focus on your work.

Co-working space

Co-working spaces are great for you to widen your network. Interact with fellow entrepreneurs to get inspired with new ideas and meet potential customers, partners, and investors. Staying at a co-working space also gives you access to wifi, free-flowing coffee, office supplies, printers, and more.

Furnished office suites

Albeit the costliest option, an office suite is ideal for entrepreneurs who have staff or who have grown their businesses significantly. This option makes your location more permanent, which paves an opportunity for your team to come together or your customers to personally reach you.

9. Hire a team

Hire a team

This stage is something that shouldn’t be rushed. It takes time to find quality people who you can entrust your fort with. For starters, it’s best to ask people who you already know or those who share the same ideals or passion as you.
When your business is ready, entertain interested applicants — but make sure to get to know them on a deeper level.
To know that you’re hiring the right employee, make sure to follow these tips:

  • Clearly define the job opening you offer.
  • Make a checklist that contains the characteristics you want your employee to have.
  • Review the credentials your applicant presents to you.
  • Take time to do a thorough background check.
  • Make them go through an exam that’s related to the available position.

Alternatively, you can outsource work to freelancers and agencies.

10. Market your business

Market your business

You’ve made it this far! Now, the time has come to start getting customers. So how do you do it?
Create a marketing plan. Think of where you can possibly advertise your business. Focusing on just one tactic won’t get you to the top. Do your research on marketing trends and see which ones fit your business best.
Here are some marketing strategies that work for small businesses:

Facebook Advertising

Advertising on Facebook is an inexpensive and a sure-fire way to market your business and reach your target audience. What’s special about Facebook Ads is it allows you to choose the type of people who you want to see your business, by filtering them in terms of location, age, sex, and other factors.

Google My Business

Have you tried googling a phone repair shop or a hole-in-the-wall burger place and saw a list of stores with their locations displayed in the search results? Google My Business makes that possible.
Adding your business in Google My Business makes it easily visible for people who are searching for businesses like yours. All you need to do is list your business name, nature of business, location, contact details, store hours, and other relevant information — voila, your business is now part of Google search results.

Google Ads

Google Ads lets you advertise your website in Google search results so it becomes one of the first items shown. The platform works like an auction — websites bid for the highest spot in the search results.
Get the highest spot possible by investing in these two aspects: the amount of money you bid, and your quality score. Your bid amount depends on how much budget you’re willing to spend. Meanwhile, you get a high quality score when you implement the right SEO measures — using the right keywords for your web page title, applying strategic URLs for your web page, adding engaging multimedia into your website, and many more.

Social Media

Using social media to market your business is a no-brainer. Promote your business in key social media platforms like Facebook, Instagram, Twitter, and others to reach your ideal customers.
Make sure to focus on the key social platforms for your business – places where your ideal customer frequent. Add in your website, store hours, and contact details. Create a posting schedule and respond to comments and messages from visitors to maintain an active, accommodating vibe.

Influencer Marketing

Collaborating with influencers is an effective marketing tactic. With their huge following, influencers hold great influence over large audiences. They could try and endorse your products and services.
Reach out to influencers with niches that are relevant to your business. If your budget is low, consider working with micro-influencers, who can still return significant results.

Get Started!

Handling a small business is challenging on its own, but don’t give up! With this guide coupled with your hard work and passion, see your business thrive and grow from small to grand.

Skip to section

1. Ask yourself: Why do you want to start a business?
2. Come up with a business idea (and consider profitability)
3. Write a one-page business plan
4. Decide your budget and financing options
5. Choose your business structure
6. Name your small business and get a website
7. Implement a simple accounting system
8. Pick your working environment and/or a business location
9. Hire a team
10. Market your business

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Ultimate Guide: How to Start a Small Business?

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