Steps to Start a Small Business

For many, turning a hobby or passion into a full-time gig is the epitome of the American dream. You're going at it alone; you're the captain of your ship, the creator of your own destiny. Deciding to start your own business might be easy, but knowing what to do to open the doors can be a bit more challenging. Take things one step at a time; we've put together a list below to help you take the next steps.

In this article:

Identify Your Niche

First things first—what is it you want to do? Your business idea should be something you're passionate about that also has market potential. What are your skills and interests, and how could those meet someone's needs? Research trends, attend industry events if you can, and look at what's available right now to see if you can find a gap that needs to be filled. For example, a company started providing pet bowls that only opened for specific pets using Bluetooth technology. They recognized a need that was not currently being met (keeping other pets out of each other's food) and developed a product to fit the need.

Conduct Market Research

Do your research thoroughly and vet out your business idea. Find potential competitors, identify your target audience, and take the time to understand the demand for the product or service you'll be offering. You could use surveys, focus groups, interviews, and other methods to gather intel. Try to go beyond people you know (unless they fit your target audience) to get a variety of information. At the end of the day, it will be most helpful to hear opinions and needs directly from the people who will hopefully be your customers one day.

Choose Your Business Name

Look at trademarks to see if the name you're thinking about has already been taken. You cannot use a trademarked phrase or name, especially if you're in the same industry. If you find the name you chose is available because another business closed, look up past reviews and ask around to see what kind of standing they had in your community. You want to avoid associating your brand-new business with another that has a less-than-stellar reputation. Try to find a name that hasn't been taken yet and won't be confused with another company.

Choose a Business Structure

The structure of your business can depend on what your business does, but it also affects the taxes you'll pay and how your business operates. Review and compare business structures carefully before making a final decision. Most businesses are either a sole proprietorship, partnership, limited liability company (LLC) or a corporation. In addition to affecting taxes, there are legal implications for you personally and your business. For example, as a sole proprietorship, you're legally personally liable for things that happen to or in your business.

Register Your Business

The steps to register might be different depending on where you live. You will need to register your business structure, name, and address with your state, but you may also need to file other paperwork locally with the city or county. You can register and learn which forms to fill out through the Small Business Administration.

Outline Your Business Model and Write a Business Plan

This step can take the most time because you'll need to do a lot of research to have a solid plan. If you're not sure where to start, check out our Startup Business Plan Template. Think of a business plan as a guide for your business. It has goals, strategies, and tactics to succeed. Include answers like what you're selling, your target market, and how you'll reach them. Be detailed and include sections for your company's mission, vision, values, organizational structure, product line, and financial projections. Remember to include information about your marketing strategy; a well-thought-out plan can also help you get funding from investors!

Get an EIN and Necessary Licenses and Permits

You'll use your employer identification number (EIN) for just about everything to do with your business, including paying taxes. Some states require you to get a tax ID as well, so check with your state to see if that's something you need to put on your list. The licenses and permits you get depend on what your business does and where the company is located. To operate legally, you might need a general business license or health permit, among many others. Contact your city or county office to find out what you'll need to open your doors and comply with any and all regulations to prevent fines or potential legal issues.

Open Business Accounts

Having business accounts helps you manage the business' finances and keeps things clear between your personal and business funds. It also helps during tax time; you'll have clear records of where funds were spent. This can also help when you adjust operations and how you run your business. Consider investing in accounting automation or other services to help you keep track of income and expenses so you can focus on running things. WaFd Bank offers accounting automation and other business services so you can focus on running your business (or getting to your kid's soccer game).

Funding

Many entrepreneurs will fund business ventures from personal savings, but you can also find funding from investors and grants, among other potential sources. As with any other choice, there are pros and cons, so choose the one that suits you best. Whatever option you choose, it's a good idea to create a solid business plan you can present to any would-be investors or at least to reference when you need to for motivation. Make sure to include how you'll use the funds and how and when you plan to turn a profit.

Choose a Location

If you're opening your business online, that can be much easier than finding a physical location. There is a lot to consider when finding a location, and that means asking the right questions and finding the right fit for your business rather than taking the first place that comes along. Consider who you plan to sell to and try to choose a location that would appeal to that audience.

Develop Your Brand

Think of your brand as your business' identity and personality. It's the face of your business, so you want to ensure it fits your vision. Invest in a professional to create your logo; that's what customers will recognize one day as they see more and more of your products and services. Keep your target audience in mind as you create your brand so it resonates with them. When building your online presence, showcase your expertise to build credibility and do your best to stay transparent to build trust.

Get Insurance

This is one of those things we all would rather not pay for, but when things get interesting, you'll be glad you have it. It's important to protect your business and your personal assets, and general liability insurance could help in case of legal claims. Data breaches and hacks are becoming increasingly common, so consider getting cybersecurity insurance as well since that is usually not covered by general liability policies.

Launch Your Business

This is the really fun part, so get creative! Consider offering promotions, discounts, or freebies to attract new customers. You can do this for free with social media or use paid social and email marketing to spread the word. Consider partnering with other businesses that complement your products or services and working together to increase sales and grow awareness of your business. For example, if you're going to sell candles, a popular spa or boutique can be a great place to start. Also included in this step is setting up payment processing systems and how customers will place orders from you. Think through the customer journey and how they'll hear about you, buy, and receive their goods or services.

Monitor and Adapt

Keep an eye on critical metrics, gather as much customer feedback as possible, and be prepared to adapt. Your strategies should continuously change as needed to achieve growth and success! If it works, keep doing it, but as soon as things start to get stale, think of ways to change it up and keep your customers coming back for more.

WaFd Bank is Here to Help

At WaFd Bank, we believe in keeping business local. We first got our start in Seattle's Ballard neighborhood by a group of community members who believed banking should be done a little differently. Although we've grown beyond serving just the Puget Sound, there's still nothing we love more than seeing our neighbors succeed at their craft and make their business ownership dreams a reality. Not only does WaFd offer business accounts, but we also offer helpful tools and services to give you peace of mind so you can focus on running and growing your business. Give us a call at 800-324-9375, stop by your neighborhood branch, or contact your local business banker to get started today!