Did you know that one of the easiest paths to financial freedom is learning how to start a business?
In fact, self-employed families have nearly four times the net worth of those who work for someone else. That’s why we look for ways to make it easier for you to become a small business owner.
We talked to two of the most successful small business owners we could find, Mike Andes and Paul Akers, to help you learn how to start a business. Hours of interviews were conducted to get this information about starting a successful business. We’re going to share it all with you!
Mike Andes turned a childhood lawn care business into one of Entrepreneur’s top 500 franchises. Augusta Lawn Care Services has more than 40 franchisees across the U.S. In addition, Mike has gone on to get an MBA, write multiple books, and teach others how to create a successful business.
Paul Akers turned an idea for easy screw covers for cabinets into a successful business that launches 30 new products a year. Fast Cap has been introducing new products to increase the efficiency of cabinetry for nearly 25 years and has developed a reputation as an expert in lean manufacturing.
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Click on any of the links below to find out what you want to know about how to start a small business.
- How to Start a Business in 4 Steps
- Turn Your Ideas Into a Successful Business[/su_note]
How to Start a Business in 4 Steps
The Small Business Administration (SBA) breaks down the process of starting a business into 11 steps, which include:
- Conduct market research
- Write your business plan
- Fund your business
- Pick a business location
- Choose a business structure
- Choose the business name
- Register your business
- Get federal and state tax IDs
- Apply for licenses and permits
- Open a business bank account
- Open your business
These steps are more easily broken into four distinct phases you’ll progress through as you discover how to start a small business. The business startup cycle consists of:
- Plan your business
- Launch your business
- Manage your business
- Grow your business
We’ll cover all of these steps to show you how to start a business.
Step #1. Plan Your business
Research business ideas
When thinking about how to start a business, it’s important to remember that every business is a solution to a problem. If you have the problem, someone else probably does, too.
If you are doing something and think, There’s a better way—follow that! Research it. Find a way to make it better. There’s a business idea.
Mike told us:
[su_quote]Look for ways to improve in your everyday life. There are problems to be solved every day. If it saves you time, it will save others time. The more time people save, the more they’ll pay for something.[/su_quote]
Here are some questions that people have that may give you some ideas on how to start a business.
How can I start a business with no money?
Starting a company doesn’t have to cost a lot of money—or any for that matter. We asked Mike this question, and here’s what he told us:
[su_quote]In the landscaping industry, you can’t start a lawn mowing business without money ’cause you need a lawnmower, but you can sell your time and start a weed-pulling business.[/su_quote]
So if you don’t have a lot of money, look at what you have available and ask yourself, How do I start a business with what I have?
What is the easiest business to start?
The easiest business to start will typically be a cleaning business, pet sitting business, rideshare business, or freelancing business.
- A house cleaning business is super easy. You should have all the supplies you need to open a cleaning business at your house. Find out how Cristobal Mondragon turned less than $2K into a $125K-a-month cleaning business.
- Starting a pet-sitting business is also super easy. Just check out our definitive guide on starting a pet business.
- Rideshare apps like Uber and Lyft hire people as independent contractors. All you need is a car, a good driving record, and a business license. There are people who make up to $1,000 a day. These apps provide low-pressure, low-cost ways to learn how to start a small business.
- Freelancing on sites like Upwork and Fiverr are also good ways to start if you have skills in writing, research, programming, or other in-demand fields.
- Review our list of business idea resources below.
Business idea resources
We’ve interviewed many business owners and done even more research about small businesses and what it takes to succeed. Check out some of our small business ideas blogs:
- Small Business Ideas List: Our longest list of small business ideas. Great for inspiration, but we don’t go as in-depth about each one.
- Online Businesses: Start a business online and make a great living.
- Professional Services: Find a service business idea you like.
- Low Startup Costs: You don’t have to spend a lot of money to start these businesses.
- Business Ideas For Teens: Check out 61 teenage businesses.
- Million Dollar Startups: Check out startups that make millions.
- Women-Owned Businesses: Want to know what businesses women succeed in? Check these out!
- Most Profitable Businesses: We break down the most profitable businesses to start in this blog.
Read on for the next step in starting your small business.
Market research and competitive analysis
Next, you’ll conduct market research before starting a business. Market research is simply identifying the amount of demand for the products or services the business will offer.
Mike spends quite a bit of time discussing the benefits and how to conduct thorough market research. He demonstrates how easy it is to conduct research by surveying his employees. Watch how simple it can be.
https://youtu.be/xJ71lGDtSt4
He discusses aspects such as demographics, target market, focus groups, online surveys, and target markets. Let’s look at each of these terms to better understand how to start a business.
What are demographics?
Demographics are characteristics of the people who buy a product or service. You’ll want to consider:
- Location
- Age
- Gender
- Other interests
- Marital status
- Do they have kids?
- Job title
- Income
Later, We’ll provide a link to a breakdown of all the ways you can improve your targeting on Facebook. It will be a great guide for how well you should specify your demographics. But first, find out how to identify your potential customers.
How do I find out who my potential customers are?
If you have a new business idea, it might not be obvious who your potential customers are. You might need to use marketing tools, like surveys and focus groups, to establish what demographics are drawn to your small business idea.
Once upon a time, this research was really costly because you had to conduct focus groups, do in-person surveys, or do phone surveys. Each option is fairly costly.
Drive Research estimates that focus groups cost $4,000-$12,000 for two focus groups—and you normally need multiple groups for good data. That’s almost $500 per person based on their information.
The publication Entrepreneur gives a good breakdown of survey costs. Most methods will cost at least a couple of grand given the time it takes to create surveys and contact people, plus compensating participants for their time.
Meanwhile, Facebook Ad Center can normally get the results you want for less than $1 per action. Even if you pay each respondent $5 for their time, that’s still 2,000 responses for the same price as a focus group that might have just 25 people.
Pro Tip: PowerAdSpy has a great blog on how to use Facebook ads for market research campaigns.
Identifying your target market
A successful business needs to know who its ideal client is. Since you’ve just come up with your business idea, you’ll need to figure out who buys the product or services you are selling.
Facebook has got this down to a science, but their ads can be complex to use if you don’t know what you’re doing.
Pro Tip: WordStream has a great infographic on all of Facebook’s targeting options. If you want to get your target market as precise as possible, spend some time learning about each of the options.
Mike told us:
[su_quote]If you are offering lawn care services, people who own a home are going to be your potential customers. Renters won’t.[/su_quote]
We dig even deeper in our market research blog. Bookmark it and keep reading for tips on how to write a business plan.
Write a business plan
Mike explains in detail how to write a solid business plan you’ll actually use. Download our free business plan template and work through it while watching the video below.
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You’ll want to include the following and go into as much detail as possible:
- Business Plan Cover Page
- Table of Contents
- Executive Summary
- Company Description
- Description of Products and Services
- Marketing Plan
- SWOT Analysis
- Competitor Data
- Competitive Analysis
- Marketing Expenses Strategy
- Pricing Strategy
- Distribution Channel Assessment
- Operational Plan
- Management and Organizational Strategy
- Financial Statements and/or Financial Projections
- Funding
Check out our blog about writing a solid business plan to go through all the steps.
The biggest thing to remember about writing a business plan is it should be easy to understand, well-documented, and as short as possible.
Mike told us:
[su_quote]Venture capitalists and big banks will want every piece of information possible, but most people can’t write a business plan that meets their expectations. A new business will most likely have to use alternative methods of funding, so make sure the business plan works for guiding your decision-making.[/su_quote]
Calculate your startup costs
Your startup costs are the amount of money you’ll need to get the business up and running. In an ideal world, you’d have enough to cover the upfront costs and the ongoing expenses until you make enough to cover your entire cost of doing business and your cost of living, but we don’t live in an ideal world.
Just do the best you can.
How much does it cost to start a business?
We wanted to know how much it costs to start a business, so we did a ton of research. We established that most people can start a business for under $50K, but you could need up to $2 million, depending on your circ*mstances. Find out more about real business startup costs.
Establish business credit
You’ll want to start building business credit ASAP. Most small business loans will require either a 650+ personal credit score or an 80 business credit score from D&B. The following credit providers are normally very friendly to small business owners.
Next, you’ll want to secure funding for your small business.
Fund your business
You should already have an idea of your business costs, but where will you get the funding for starting a business?
Most small business owners get the funds for starting a business from the following sources:
- Bootstrapping
- Borrowing money from family or friends
- Small business loans from local banks and credit unions
- Credit cards
As noted in previous sections, Mike said the following types of funding have high hurdles:
- Venture capitalists
- Big banks
- Small Business Administration loans
- Small business grants
- Partnerships
- Crowdfunding
Let’s explore funding options to find ones that make sense for your new business idea.
Bootstrapping
Both Mike and Paul Akers think bootstrapping is the best way to start a new business. All you have to do is spend less and make sacrifices for what you really want.
Mike told us:
[su_quote]Self-financing is the easiest way to start a business as you don’t have the additional cost of debt and other people’s expectations pushing you to move faster.[/su_quote]
Paul told us:
[su_quote]There are four ways to spend money:
- The most efficient way is for you to spend your money: You earn it and spend it.
- You earn your money and spend it on someone else.
- You earn the money, you give it to someone else, and they spend it.
- You earn it, you give it to the government, and the money gets wasted.[/su_quote]
Hear more from Paul below:
https://www.youtube.com/watch?v=wog3FLh0tHk
Borrow money from family or friends
Some people are able to get money to start a business from friends and family.
If you are, that’s awesome!
Just make sure that you have an agreement in writing because nothing can strain a relationship like a lender expecting to get it back and the borrower thinking the startup capital is a gift.
Also, don’t use your parents’ house (or anyone else’s!) for a secured small business loan when starting a business.
Small business loans from local banks and credit unions
Neither Mike nor Paul particularly loves getting loans when considering how to start a business. Paul told us:
[su_quote]When you’re spending other people’s money, you don’t know what it took to earn it. That means you spend it more recklessly.[/su_quote]
That said, if you have a bank account with a local bank or credit union, they are more likely to lend to small business owners in their local community than larger banks.
Just research “credit unions near me” to find local banks and credit unions.
Be aware that they may expect you to have the business formation already completed. They also may want you to have a business bank account to prevent you from mixing your personal assets and your business assets.
When just starting a business, they may expect you to take on some personal liability, even if you are a limited liability company (LLC), before you have built business credit.
If that is the case, make sure it’s not an amount that would cause you immense problems should you decide to close the business in the future.
Alternatively, you can try applying with our loan partners to get a business loan.
How to get a loan to start a business
Follow the links above and make sure to have the following ready:
- Business formation documents
- Tax documents (Personal and Business if both are available)
- Your business plan
- How the business plans to use the funds
- An idea of your personal current debt-to-income ratio or your small business’s Net Working Capital (These impact your ability to get a loan.)
Credit cards
Many people use credit cards to start small businesses, but you need to make sure that the return on investment will be worth it.
Paul told us:
[su_quote]If your interest is 15%, you have to make a return of greater than 15% to justify it. Otherwise, you’re losing money.[/su_quote]
Despite Paul’s concern, consider applying for a business credit card so that you can start building your business credit.
Pro Tip: Having a business bank account and business credit card at the same bank as your personal accounts can help to strengthen the relationship as your business grows.
You could also get a credit card from a company you are interested in doing business with. If you are looking for cards that are likely to approve you, use Credit Karma, which also suggests loans for your small business.
For the best rates and perks, check out Nerd Wallet’s credit card recommendations.
Next, let’s look at some of the other options for getting funding when starting a business.
Get funding from a venture capitalist
Funding from a venture capitalist is typically something that only the most unique of small businesses are offered in their business formation process.
Working with a venture capitalist is similar to getting a business partner, but on a much larger scale. They look for businesses that will change the world and will turn thousands into billions of dollars.
Neither Mike nor Paul encourage this option when considering how to start your own business.
Both prefer full control because it allows them to make decisions based on their goals. As soon as you sell equity, other people have expectations that might be different than yours.
Mike told us:
[su_quote]If you sell equity, make sure you own at least 51% of the shares. Any less, and you don’t control the company.[/su_quote]
Here’s the input Paul gave us:
[su_quote]I own 100% of my company because I don’t want anyone else telling me how to run it.[/su_quote]
Watch our interview with Keith before approaching a venture capitalist.
[su_youtube url="https://www.youtube.com/watch?v=T-0qmNTaU90"]
Be careful, though, because too many startups fail to understand the terms that this capital comes with.
Make sure to review your contract with a contract lawyer you trust. If you don’t know one, ask your friends or other business owners for a reference.
Big banks
Banks like Bank of America, Wells Fargo, and CitiBank are some of the larger banks that you can get loans or lines of credit from.
They offer a variety of business products to help business owners, but many of them require $50K a year in revenue and a minimum of two years in business. That’s not exactly helpful for those wondering how to start a business from scratch.
Let’s look at other options.
Small Business Administration loans
Small Business Administration loans are a great way to start a business if you can get one. They offer three main products:
- 7(a) loans - Up to $5M with up to 85% guaranteed by SBA, capped interest rate, and capped fees. Best for real estate.
- 504 loans - Up to $5M for fixed assets that will increase job growth.
- Microloans - Under $50K to help with smaller business needs.
You can learn more about each on the SBA website. The 7(a) is the most commonly distributed loan.
The following charts are organized to make it easier to find the bank that best suits your needs. All statistics are modified from the 100 most active SBA 7(a) lenders for the fiscal year 2021 up to June 30, 2021.
The chart below ranks the top 10 lenders by the number of loans originated.
If you are interested in them by total approval amount, the list changes some. Five of them are the same and five are new entries.
I’ve also created tables showing the five highest and five lowest average approval values. It should be noted that the banks with the lowest average approvals also happen to be the ones that originate the most total loans.
I have personally done business with four of the 10 banks that originate the most loans. Of them, I personally preferred the service from Huntington National Bank.
Small business grants
There are grants available to some industries, regions, or groups of people. Most people won’t qualify, but check the SBA for grants.
Partnerships
Partnerships are similar to a sole proprietor but for more than two people. They are most common in law firms. If one partner provides the work and the other the funding, it can be a nice arrangement for each.
Crowdfunding
Crowdfunding is raising money from a lot of smaller investments to start a company. The owner of Pooch Selfie talked to us about crowdfunding and going on Shark Tank. Check out his interview below.
[su_youtube url="https://www.youtube.com/watch?v=j7UzP5dVOqA"]
Find out about 17 ways to fund a business or keep reading to learn about buying an existing business.
Buy an existing business or franchise
There are numerous reasons why you might want to buy an existing business or franchise. We’ll cover the:
- Differences between buying an existing business or franchise
- Benefits of buying an existing business
- Downfalls of buying a franchise or business
- Tips for buying a business
What’s the difference between buying a business and a franchise?
Buying a business means you have full control of the business, how it operates, and what you do with the assets. Meanwhile, buying a franchise grants you the rights to operate using the company name, systems, and procedures.
A franchise has more disclosures and requirements governing the business structure than an existing business, so you will normally be able to get more information than when buying a small business unless the business owner has kept detailed records.
Benefits of buying an existing business
Buying an existing business or franchise can be a great way to get into business for yourself without having to start from scratch. There are many advantages to buying an existing business, including:
- A proven track record: You can see how the business has performed in the past, which can give you a good idea of its potential for success.
- Established customer base: The business will already have a customer base, which can save you the time and expense of building one from scratch.
- Operating systems and procedures in place: The business will already have systems and procedures in place, which can save you the time and effort of developing them yourself.
- Experienced staff: The business will already have employees who are familiar with the business and its operations.
Downfalls of buying a franchise or business
There are also some potential disadvantages of buying an existing business, including:
- The price may be high: The seller may be asking a high price for the business, which could be a barrier to entry.
- The business may have hidden problems: There may be problems with the business that you are not aware of, such as financial problems or legal issues.
- You may not be able to change the business as you see fit: The business may have certain restrictions in place, such as non-compete clauses or franchise agreements, which may limit your ability to make changes to the business.
Overall, buying an existing business or franchise can be a great way to get into business for yourself. However, it is important to do your research carefully and to ask questions before making a purchase.
Tips for buying a business
Here are some tips for buying an existing business or franchise:
- Do your research: Before you start looking at businesses to buy, it is important to do your research and understand the industry you want to be in. This will help you narrow down your search and identify businesses that are a good fit for you.
- Get professional help: It is important to get professional help when buying a business. A business broker can help you find the right business for you and negotiate the terms of the sale. An attorney can help you review the purchase agreement and make sure that you are protected.
- Be prepared to pay a premium: Buying an existing business is usually more expensive than starting your own business from scratch. This is because you are buying the assets of the business, including its goodwill, customer base, and employees.
- Be prepared to put in the work: Buying a business does not mean that you can sit back and relax. You will still need to work hard to run the business and make it successful.
If you are considering buying an existing business or franchise, be sure to do your research and get professional help. With careful planning and execution, buying a business can be a great way to achieve your financial goals.
Learn more about buying franchises. Next, let’s look at how to turn your business idea into a real small business.
Step #2. Launch your own business
You’re done planning and now you need to form the business. Launching a business requires
- Picking a business location
- Choosing a business structure
- Choosing the business name
- Registering your business
- Getting federal and state tax IDs
- Applying for business licenses
- Opening a business bank account
- Getting business insurance
Let’s look at how to choose a business location.
Pick a business location
Your business location impacts how well your business does. The choices you make about opening a brick-and-mortar business or launching an online store impact your legal requirements, revenue, and taxes.
For an office, it’s good to have at least 300 square feet that you can work in, and it should be quiet. Whether it’s at home or somewhere else doesn’t matter. If you need help finding a business location, contact your local realtor.
Realtors will be able to help you find a place that works and, if needed, puts you near the customers your business serves.
If you expect customers to come to the location, try to get a space with high foot traffic. That increases people’s awareness of your company.
In addition, you may need space to store parts or inventory. Make sure to consider how many products you’ll be storing and how much space you’ll need.
Most products will need at least three square feet of space, but if you are using shelves, you can normally get two to four products in the same space. You’ll also want at least three feet between storage displays. Four to five feet gives both you and your customers more room to navigate.
Search for commercial interior designers to find someone to advise you before making a decision on a space.
Check out our information on finding a business location and home-based businesses for more useful considerations.
Choose a business structure
The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability.
Sole proprietorship
A sole proprietorship is the easiest way to meet small business legal requirements, but the structure doesn’t protect the owner’s personal assets from legal issues.
That means if something goes wrong, you could lose both your company and your home.
This structure should only be used if you can’t afford an LLC because most businesses have liabilities that could be costly if you operate as a sole proprietor.
To start a sole proprietorship, fill out a special tax form called a Schedule C.
Pro Tip: Sole proprietors can also join the American Independent Business Alliance.
Limited Liability Corporation (LLC)
An LLC is the most common business structure used in the United States because the company protects the owner’s personal assets. An LLC protects many business owners’ assets because it is a separate entity.
It’s similar to partnerships and corporations but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.
Each state has different requirements. Here’s a link to find your state’s requirements. People may register in specific states due to the cost of doing business.
Delaware and Nevada are common states to file an LLC because of their business-friendly laws. Here’s a blog on the top 10 states to get an LLC.
This will typically be the best business structure for most small business ideas. Learn more about registering a business.
Partnerships and corporations
Partnerships and corporations are typically for massive organizations or legal firms.
Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations.
Mike specified that the difference between an S-Corp and a C-Corp is the number of shareholders it can have, among other things.
[su_quote]If you want to have a bunch of stockholders, you’ll need to be a C-Corp.[/su_quote]
There are a ton of other business structures, too. Find the one that works for you!
Choose the business name
Mike emphasizes the importance of a name. He personally suggested using a name generator to get ideas for your business.
Pro Tip: We created our own name generator. Find your business name today!
Mike points out how you can add different words for the generator to come up with a name, like the city you live in and the type of company you’re starting, to get some good ideas.
I suggest making sure it doesn’t get shortened to curse words, slang that you wouldn’t want associated with a business, or negative statements.
For instance, Bold & Daring could be shortened to BAD, and you might not want that.
Read our blog about naming a business for more information.
Register your business
Once you’ve picked the perfect business name, it’s time to register your business name with the government to protect your brand. You may need to register with state, local, and federal governments. Learn more about registering your business.
Get federal and state tax IDs
You’ll use your employer identification number (EIN) to open a bank account and pay taxes. You get the Federal EIN (or FEIN) from the Internal Revenue Service. It’s like a social security number for your business.
Some states require an EIN from the state in addition to the Federal EIN.
Apply for licenses and permits
Legal compliance is important to keep your business running smoothly.
Each location has different licenses, permits, and tax forms required. Use the SBA License and Permits page to identify what requirements your business needs to meet.
Pro Tip: Check out our walkthrough of the business licensing process.
Open a business bank account
You’ll want a business bank account to separate your personal and business finances. A small business checking account will make legal, payroll, and taxes easier than commingling the business earnings with your personal funds.
In addition to a business bank account, you’ll want to get business insurance.
Get business insurance
Unemployment insurance
The U.S. Chamber of Commerce has a ton of information on unemployment insurance (UI) and also offers links to each state agency that handles state unemployment.
When you have employees, you’ll have to pay $420 per employee on a federal level plus any state UI.
Workers compensation
Workers compensation is basically insurance against injury or disability. Each state has different requirements. Check your state requirements.
Business and general liability insurance
Contact your current insurance agent and ask them if they can provide these. Most will be able to provide a quote or refer you to someone who can. I personally prefer Simply Business.
Basically, you want $1 to $2 million in general liability coverage unless you have reason to need more. Protecting personal assets or higher local requirements are the most common reasons to buy more.
If you own valuable machinery, work in fields that could cause personal liability (for instance, gas furnace installers can be held personally liable for explosions), or collect sensitive information, you may want other types of insurance to protect your business success, too.
Check out our walkthrough on how to get business insurance and keep reading for tips on how to run a business.
Step #3. Manage your business
You’re a small business owner now. You chose a business model and got your LLC and business license. Now you have a business to run. Get ready to:
- Manage your finances
- Hire and manage employees
- Pay taxes
- Stay legally compliant
- Buy assets and equipment
- Marketing and sales
- Strengthen your cybersecurity
- Prepare for emergencies
- Recover from disasters
- Close or sell your business
- Hire employees with disabilities
Manage your finances
Managing your business finances is all about knowing how much money you have coming in and going out. That means you’ll want to keep your personal finances separate from your business expenses.
Most new business owners use QuickBooks accounting software because it has all the tools you need to manage your finances as a small business owner. Plus it integrates with most other software.
Hire and manage employees
Hiring employees includes posting jobs, conducting interviews, compensation, paying taxes, following labor laws, scheduling, and payroll.
Job posting
Hiring people requires posting “Now Hiring” signs and posting on prominent job boards. Some places you can start posting job requirements are:
Interviews
Preparing a list of questions for interviews will make hiring the right people easier. Indeed offers a variety of resources to help you make better hiring decisions. Read their How to Hire Your First Employee guide.
Compensation
Employees are typically a company’s biggest expense. There are three common pay structures in business. Each fits different scenarios. Let’s take a closer look.
Salary
This is a flat weekly or monthly rate based on a person working a specific number of hours. It’s typically reserved for owners, managers, and some admin roles. You might want to assign this to yourself for budgeting purposes.
Hourly
This pay structure simply tracks the hours an employee works and pays them a set hourly rate. This pay structure is solely based on time, not performance.
Commission
Commission-based pay is typically used in sales to give employees a percentage of revenue. It is a strictly performance-based compensation model.
Hybrid models
Hybrid models combine two pay structures: for instance, hourly plus commission to compensate for time and performance. The hourly rate will typically be lower than an hourly rate without commission, but the commission should make it so good performing employees make more than they would without commission. These structures also help reduce the variability of pay from week to week.
Paying employees an hourly wage works for most positions, but depending on your business structure, a commission or hybrid payment model might make sense.
Pro Tip: Entrepreneur’s article on how to create a pay structure that promotes team and company growth offers some insights into thinking about pay structure.
Tax filing and withholding
Federal and state tax filing requirements apply to new employers. You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes.
Don’t worry! We’ve got you covered! Check out the IRS guide for employers here.
Federal employment and labor law posters
All employers must display Workplace Posters, which you can download from the Department of Labor website.
Other requirements may include:
- Employment eligibility verification (Form I-9)
- State’s new hire program requirements
- Worker’s compensation insurance
- Disability insurance—varies by state
- Occupational Safety and Health Administration (OSHA) requirements
Scheduling
Scheduling employees can become complicated depending on your company’s hours of operation. Labor laws in the U.S. define work that occurs after an employee has clocked 40 hours in a week as overtime, meaning you’ll have to pay 1.5 times their hourly wage if they work over 40 hours.
If your business is open for nine hours a day (with an hour lunch), five days a week , you can hire exactly enough people to meet the company’s needs. Once it exceeds that, you’ll need more employees and have to schedule based on their needs as well.
Pro Tip: 7Shifts has a great blog on scheduling and also offers scheduling software. Check them out.
Payroll
Paying your employees will normally occur on a weekly, every two weeks, bi-monthly, or monthly period. Most employees like being paid weekly because cash flow management is easier, but it costs less to pay less frequently.
You can pay by check or direct deposit, and you can hire payroll companies to manage payroll for you. ADP is the most well-known payroll company, but Inc. provides a list of payroll companies to check out.
If you handle it yourself, your accounting software can integrate with your bank and your timesheets to make the management of payroll easier.
Pay taxes
Personally, I don’t love this section because government spending is wasteful, but as a business owner, you are required to pay taxes. You may have to pay:
- Sales tax: Most states have sales tax you have to pay, but some have income taxes instead. Make sure to collect sales tax if necessary.
- Payroll taxes: When you hire employees or pay yourself a salary, you’ll have to pay these. To do so you’ll have to have an employer identification number (EIN).
- Income tax: Every business entity will have to pay income tax to the federal government through either a corporate tax filing or a personal tax return. Depending on your legal structure, the self-employment tax may be deducted from your earnings as an expense.
Pro Tip: Look for a great accountant who can help you find ways to make your taxable income as close to zero as possible. It’s better to reinvest in the business than send the government money.
Stay legally compliant
Every business idea and business model will have different government regulations you have to follow. Those who don’t may find themselves dealing with lawsuits, fines, and in some cases, criminal charges.
Buy assets and equipment
You’ll need the tools to do the job. Most businesses will need:
- Office space
- Social media platforms
- Business website
- Payment processor
- Customer relationship management software
- Industry-specific tools
- Inventory management software
We’ve written blogs for many business ideas. In each we include suggestions for the assets and tools you need for that specific small business idea. Just use the search function near the top of this blog to find blogs that discuss your business idea.
Marketing and sales
You’ll need a budget for business marketing that leverages:
- Social media accounts
- Search engine optimization (SEO)
- Paid advertising on Google and social media platforms
- Vehicles and buildings
- Print ads
- Business cards
- Loyalty programs
You’ll also need to consider things like how to accept credit card payments and how to communicate with your target audience. Each of these will change depending on whether you run an eCommerce store, a brick-and-mortar business, or a home service company.
Useful marketing tools
There are some useful marketing tools that small business owners use to market their companies:
- Canva: Simplify graphic design with Canva. Get access to thousands of templates for website and social media for as low as $4.99 per month.
- SurferSEO: Write blog content faster and rank higher on search engines with SurferSEO.
- MailChimp: Email and SMS marketing automation is one of the keys to success that many small business owners mention. Get started with Mailchimp.
Strengthen your cybersecurity
As your online business grows, you will become a target for hackers trying to gain access to information like your business credit card, customer cards, and intellectual property. You’ll want to start paying for better cyber security and insurance to protect against losses.
One of the easiest ways to do this is hosting your web assets on Google, Amazon, or Azure servers because they have a dedicated team of cybersecurity professionals working around the clock to protect against attacks.
You can also get business insurance to protect against the cost of attacks.
Prepare for emergencies
As your business grows, there are going to be times when things occur that could severely harm your business. Natural disaster, death of a valuable employee, lawsuits, and suffering a personal injury are all things that take your attention away from the business.
When these occur, you need a plan in place to handle them. This plan might include having a public relations person on retainer, buying business interruption insurance to protect against lost business income, or training a manager to take over in case of emergency.
Check out the SBA’s emergency planning content for more information.
Recover from disasters
Business recovery from disasters is all about implementing your emergency preparedness plan.
- Assess the damage. The first step is to assess the damage to your business. This includes both physical damage to your property and equipment as well as financial losses.
- Contact your insurance company. If you have business insurance, contact your insurance company as soon as possible to file a claim.
- Get help from the government. There are a number of government programs that can help businesses recover from disasters. Contact your local government to find out what assistance is available.
- Rebuild your business. Once you have assessed the damage and taken care of any insurance claims, it’s time to start rebuilding your business. This may involve repairing or replacing damaged property, hiring new employees, and marketing your business again.
- Learn from the experience. Once your business is back on track, take some time to reflect on the experience. What, if anything, could you have done to prevent the disaster? What can you do to be better prepared for the future?
In some cases, like a hurricane or wildfires, you may have some warning to help prepare the business to help itself and others. You can also work with fundraisers to help raise money to help the community. Doing so will create goodwill, which is one of a company’s most valuable assets.
Recovering from a disaster can be a long and difficult process, but it is possible. By following these tips, you can give your business the best chance of success.
Close or sell your business
Every business owner reaches a point where business exit planning needs to occur. Often it is because the business grows too slowly and they have to abandon it, but many people also reach retirement or succeed enough that a competitor makes an offer to buy their business.
Keeping detailed records, maintaining a CRM for your business website, and documenting procedures are all good steps to take to make sure you can exit the small business idea and it can carry on without you.
It’s also good to keep employees, your target audience, and investors in the loop when you are implementing an exit plan. They’ll all want reassurance that your small business idea will not leave them in a problematic scenario.
Hire employees with disabilities
When you hire employees, there are incentives for hiring certain individuals. These incentives can include tax credits (meaning the right hires could take your taxable consequences below zero).
You have to screen to get potential employees qualified before hiring them, but some of the groups that are incentivized include:
- People convicted of a felony
- Some SSA recipients
- Veterans
- Empowerment zone or rural renewal county residents
- Job rehabilitation participants
- SNAP recipients
- Long-term unemployed
- People with disabilities
Check out the Work Opportunity Tax Credit to see if it is something you want to implement. Hiring qualifying individuals can save you up to $9,600 per employee during their first year as long as they work more than 400 hours a year.
This is a great way to reduce the cost of doing business and improve your chances of success. Once you have implemented everything you need, it’s time to look at the different ways to help your business model grow.
Step #4. Grow your business
Once you’ve done everything to become a successful business owner, you’ll reach a point where you want to meet new goals. There are a ton of ways you can expand a business to challenge yourself more. Some common ways to grow a business include:
- Get more business funding
- Expand to new locations
- Mergers and acquisitions (M&A)
- Become a federal contractor
- Export products
- Qualify For special business incentives
Let’s start by looking at how to get more funding.
Get more funding
Business financing is normally much easier once you reach three years in business and over $100K in annual revenue. More lenders are willing to offer business loans after this point.
You’ll normally need:
- Your business license
- Employer identification number
- Solid business plan
- Separate business bank account
- Plan for earning returns on the money
We got the chance to pick the brain of Joseph Camberato, who started National Business Capital and has helped businesses secure over $2 billion in financing. Check out our interview with him below.
Expand to new locations
Once your revenue peaks at a single location, you may want to convert your good small business idea into a chain or franchise. When should you choose each, though?
Start a chain
Turning your single location into a chain can work if you live in a large city and can operate many locations. Running corporate locations in other cities can be a real challenge if you don’t have people you trust in those locations. That’s why many business owners choose a different route.
Start franchising your successful business
Franchising means allowing other business owners to use your business name, intellectual property, and processes to skip many of the trials new business owners face. You’ll need processes for each of these areas of business:
- Inventory management
- Social media and marketing
- Accounting software and processes
- Uniforms and brand guidelines
- Suppliers
- Payroll and benefits
- Customer service and quality
You provide the systems to be successful for an initial fee and recurring commission while the franchisee runs the franchise and manages employees and customers. The franchisor normally gets less than 10% of revenue and the franchisee keeps the profits.
Make sure both corporate offices and franchises comply with all laws, rules, and regulations.
Pro Tip: Does franchising sound like a fit? Find out how to franchise a business.
Merge and acquire businesses
Mergers and acquisitions (M&A) are common with large corporations, but you can grow your business by buying or merging with a smaller business, too. The process is similar to starting a new business but has some unique benefits and challenges.
Benefits of M&A
Mergers have some benefits that save money and increase profit margins. Some of the unique benefits of a merger or acquisition include:
- Elimination of some of the accounting software costs
- Gaining the ownership of any intellectual property
- Reduction of duplicate business roles
- Improved route efficiencies for some types of businesses
- Both businesses gain access to new customers
- Reduction of duplicate insurance policies
Meanwhile, there are also challenges when two companies become one.
Challenges of M&A
If a merger or acquisition is not handled well, you may face some challenges over opening new locations like:
- Losing employees
- Changes in business culture
- Losing customers
- Poor integration of accounting software and other business systems
- Government intervention for large mergers
Every business should move with caution when bringing two companies together. If the costs of lost customers and talent exceed the benefits from cost savings, you may end up writing off the purchase.
Become a federal contractor
Federal contracting is big business. The federal government provides assistance to encourage small businesses to bid on contracting opportunities. Find out how to become a federal contractor from the SBA.
Export products
Another way to grow your business is exporting goods. There are a ton of resources that are helpful for online business ideas that involve expansion to selling internationally.
Pro Tip: Research exporting products by checking out SBA resources.
Qualify for special business incentives
There are small business grants and other business incentives for the following types of business owners:
- Women
- Native Americans
- Veterans
- LGBTQ
- Rural locations
- Minorities
Women-owned businesses
There are plenty of resources for women about how to start a business. There are specific loans for female entrepreneurs. Plus, women can get training and funding opportunities from the SBA.
Native American-owned businesses
Native Americans can benefit from opportunities the federal government provides including contracting, business development, and other programs. Learn more.
Veteran-owned businesses
Get information on what the SBA offers veterans to help support business ownership. You’ll find training, funding programs, and federal contracting opportunities.
LGBTQ-owned businesses
There are lots of opportunities for the LGBTQ community on the SBA website.
Rural businesses
Rural small businesses are the lifeblood of small towns. That’s why the SBA offers resources to support local economies and communities. Learn more about SBA resources for rural businesses.
Minority-owned businesses
Minority-owned businesses receive support to improve resources in underserved communities. Find out how the SBA provides support for development and growth.
Turn Your Ideas Into a Successful Business
We’ve shared tons of information about how to start a business, but there is so much more for you to do. Most business owners find it easiest to start an online business like an eCommerce store or social media management company because they have low barriers to entry.
Just remember, even though it seems like a lot, it only takes four steps:
- Create your business plan.
- Start your business.
- Develop your business systems.
- Grow your business.
What business are you going to start? Let us know in the comments below.
