How to Start a Business the (Less) Risky Way
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.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block} Starting a business is a big decision that shouldn’t be taken lightly. Without the proper knowledge and preparation, it can be easy to become overwhelmed and lose a lot of money in the process. I’m AJ, and I’m here to ensure that doesn’t happen . I’ve spent the last decade growing a digital agency, so I know a thing or two about starting a successful business. In fact, after a successful multi-million dollar exit with my agency, I started a company called Small Business Bonfire . Our mission is to help fellow entrepreneurs and small business owners get their ideas off the ground without taking on too much risk . We believe that anyone can start their own business with the right know-how. That’s why we’ve put together this guide. Let’s get into the details! Key Takeaways Make sure you know your target market and competition. Do your research to find the right legal structure for your business. Take advantage of free resources, like online courses and mentor programs. Take your time to make sure you have the right team in place before you launch. Budget accordingly, and plan for unexpected expenses. Have an exit strategy in mind for when it’s time to move on from your business.
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.elementor-heading-title{padding:0;margin:0;line-height:1}.elementor-widget-heading .elementor-heading-title[class*=elementor-size-]>a{color:inherit;font-size:inherit;line-height:inherit}.elementor-widget-heading .elementor-heading-title.elementor-size-small{font-size:15px}.elementor-widget-heading .elementor-heading-title.elementor-size-medium{font-size:19px}.elementor-widget-heading .elementor-heading-title.elementor-size-large{font-size:29px}.elementor-widget-heading .elementor-heading-title.elementor-size-xl{font-size:39px}.elementor-widget-heading .elementor-heading-title.elementor-size-xxl{font-size:59px} Determine Your Business Concept
Before starting a business, you’ll need to come up with a basic business model. This is the first step, and it can be one of the most difficult. The right concept can mean the difference between success and failure . Think about Apple computers and their impact on the tech industry. It all stemmed from the idea of a personal computer that was easy to use for anyone. In this case, the concept was revolutionary , leading to Apple becoming one of the most successful companies in history. Now, you’re (probably) not going to come up with an idea that’s as revolutionary or successful as Apple (although, never say never). But you can still build something great . It’s important to consider the following: What is your business idea? What type of business should you start? Popular business startup ideas What is Your Business Idea? When first establishing a concept for your business, it’s important to determine what the idea overall idea is. This essentially means what you are trying to achieve with your business . For example, if you want to open a bakery, your idea is to provide freshly baked goods and cakes for people in the area. What Type of Business Should You Start? Once you have an idea of what you hope to achieve, it’s time to decide on the type of business you want to start. This decision comes down to two main factors: structure and cost . For example, if you are looking to open a retail store, you may be best suited to become an LLC or other corporate entity due to its lower cost and flexible structure . If your client base is spread out geographically, you may consider setting up an online business or a franchise . What Are Some Popular Business Startup Ideas? It’s important to explore popular business startup ideas. Some of the top contenders include the following: eCommerce stores Franchise ownership Consulting services eCommerce, in particular, has become increasingly popular due to the rise of online shopping. Ultimately, the key is to choose a startup idea that aligns with your passions and strengths . Don’t be afraid to think outside the box and create something entirely unique . Remember, starting a successful business is a journey, and it’s important to enjoy the ride.
Pro Tip: Be sure to consult with a financial and/or legal advisor for guidance on starting your business.
That way, you'll have the peace of mind knowing that all aspects of your business are being taken care of in the right way.
- AJ Silber
Conduct Market Research
After you’ve got your concept nailed down, it’s time to do some market research. For the purposes of making it easier, we break it down into 4 parts: Primary research Secondary research SWOT analysis Find a business mentor Primary Research This step is like going on a first date; you want to get to know your potential customers as much as possible before diving into a business relationship. Primary research is when you gather data directly from your target market through various methods such as: Surveys Interviews Focus groups This helps you get an idea of their needs, preferences, expectations, and pain points. So, make sure to do your research , ask the right questions , and get to know your customers like they’re your best friend. At Small Business Bonfire, we are constantly conducting this type of research to help us deliver better content to the Bonfire Nation (our community of small business owners). Secondary Research Let’s talk about the second step in conducting market research: secondary research. This step involves gathering information that already exists about your industry and target market . So where can you find this secondary research? Well, the internet is your best friend here. You can use search engines like Google and Bing to dive deep into your industry and target market. We even provide a lot of this type of content on our website in order to help small business owners succeed . You can also look up government statistics and reports, industry associations, and trade publications. These sources provide valuable data on the following: Industry trends Consumer behavior Competitive analysis Social media is another valuable tool for conducting secondary research. You can monitor your competitors’ social media platforms to see what they’re up to and what their customers are saying. You can also use social media listening tools to track mentions of your industry and target market. And if you’re feeling really ambitious, you can even conduct surveys or focus groups using platforms like SurveyMonkey or Zoom. The point is, there’s a wealth of information out there just waiting for you to discover it. So don’t be afraid to dig deep and really get to know your industry and target market. SWOT Analysis SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Essentially, it’s a way to evaluate your business idea and determine the following: What could hold it back What competition might exist What could potentially make it successful What external factors could help or hinder you It’s like a self-awareness exercise for your business idea. By conducting a thorough SWOT analysis, you can gain valuable insights and identify potential problems before they become major issues down the road. Find a Business Mentor When it comes to starting a business, there’s no such thing as knowing too much. That’s why the final step in conducting market research is to find a business mentor. Sure, you could go at it alone, but why not learn from someone who’s seen it all? A mentor can provide priceless guidance and share invaluable insights gained from years of experience. Plus, they can help you avoid common pitfalls, connect you with relevant resources, and potentially even introduce you to key players in your industry . Whether it’s through a formal mentorship program or simply reaching out to someone you admire, a trusted mentor can be the difference between a fly-by-night startup and a thriving business. So, don’t be afraid to ask for help – after all, a wise person (Confucius) once said, “If you’re the smartest person in the room, you’re in the wrong room.”
Write a One Page Business Plan
After you’ve done your research, it’s a good idea to write a one-page business plan. This document will help you crystalize your ideas , clarify your goals , and ensure you’re on the right track . Your plan should cover the following: Company overview Mission statement Start with an exit strategy Don’t worry about scale (yet) Start planning for taxes Understand your funding needs Company Overview Start by writing a brief summary of your business. This should include the mission statement , goals , and core values of your company . Mission Statement Next, write a concise explanation of why you’re starting this business. Your mission statement should be clear and direct , and it should capture the essence of what you want to achieve with your business. Start With an Exit Strategy When starting a new business, it’s essential to have an exit strategy in place . This will help you plan ahead and anticipate potential problems down the road – whether it’s selling the company or scaling back operations . Don’t Worry About Scale (Yet) When starting a business, it’s easy to get carried away with ambitious plans for growth. Before you get there, it’s important to focus on the basics and make sure your business is successful in its current form. Then you can start thinking about scaling up or expanding into new markets . Start Planning for Taxes Taxes are a fact of business life, so it’s essential to plan ahead and understand your obligations. Reach out to a qualified accountant or tax specialist for help with the following: Filing taxes Setting up payroll Other financial considerations Understand Your Funding Needs Finally, consider the startup costs associated with your small business. Make sure you have a handle on your financing needs, and don’t be afraid to explore potential investors or grants that could help fund your venture.
Create a Minimum Viable Product/Service
The next step for aspiring business owners should be to create an MVP.
What is an MVP?
A Minimum Viable Product (MVP) is a version of your product or service that you can put out into the world for customer feedback.
It doesn’t need to be perfect – in fact, it shouldn’t be! The goal is to get something out as quickly and cheaply as possible so that you can start collecting data from real customers and tweaking your product/service accordingly .
Once you’ve done this, use the feedback to iterate on the product or service until it meets customer needs. This will ensure that when you launch a full-scale version of your business, you have a good chance at success.
How to Create an MVP
So, how do you create an MVP? First, identify what problem your product or service solves and who your target audience is .
Then, focus on the core features that address that problem and build them out. Don’t waste time on features that don’t directly address the problem.
Keep it simple and lean. Next, test your MVP with a small group of early adopters . Allow them to use your product or service and gather feedback. This feedback is crucial and will help you refine your MVP and avoid costly mistakes.
Remember, an MVP is not a final product , so be open to making changes based on feedback.
Lastly, measure the success of your MVP based on the feedback you receive. Use this information to make informed decisions on how to move forward with your business idea. Remember, creating an MVP is about being lean , agile , and smart with your resources .
MVP Pros and Cons
Now let’s go over the pros and cons of creating an MVP .
The Pros:
It allows you to test the viability of an idea quickly and cheaply
It allows you to get feedback from customers before investing too much time and money on a full-scale product or service
You can use it to test different assumptions about how target customers interact with your product or service
The Cons:
It may not be able to capture the full scope of a problem you’re trying to solve, which could lead to problems down the road
You may miss out on market opportunities, or customer needs that didn’t get captured in the MVP
You may end up investing too much time and money on the MVP, making it difficult to pivot when needed
Ultimately, creating an MVP is all about balancing risk and reward.
Get Your First Customers
Once you have a working MVP in place, it’s time to start getting customers. Sell First Ask Questions Later One of the best pieces of advice when it comes to finding your first customers is to “sell first, ask questions later.” This essentially means that you should put forward your product or service and start seeking out buyers without getting bogged down in the details. By putting yourself and your offering out there, you’ll be able to gauge initial interest and quickly learn what works and what doesn’t , fine-tuning your approach as needed. Get 3-5 Strong Customers Once you’ve sold to a few eager customers, it’s important to make sure that you’re building strong relationships with them . Think of these early buyers as your test group, and use their feedback and input to refine and improve upon your offering. It’s generally a good idea to aim for 3-5 strong customers , as this will give you a solid foundation on which to build and grow. Continue to Refine Your Product/Service With Your Paying Test Group Congratulations! You finally have paying customers for your new business. Now, it’s time to make sure that they’re happy with your product or service and that you’re on the right track toward success. How do you do that? Well, it all comes down to continuing to refine your offering with your test group . Your test group is made up of early adopters, people who are willing to take a chance on your business and who are excited about your product or service. They’re your first customers, and their feedback is essential to making sure that you’re meeting their needs. You need to listen carefully to what they have to say and use that feedback to make improvements .
Understand Your Business Finances
This next step is critical. So many businesses start with a great business idea but don’t have the finances to back it up. This is why it’s essential to understand your business finances before you launch. Here are some steps we recommend you take: Open a business bank account Get accounting software Determine your break-even point Put together a business budget? What expenses to track in your business Open a Business Bank Account This may seem like a tedious process, but opening a business bank account is a crucial part of understanding and managing your business finances. Trust us, you don’t want to intermingle your personal and business costs – that’s a recipe for disaster. By opening a separate business bank account, you’ll be able to keep track of your income and expenses more easily, which will make tax time a whole lot less stressful. Plus, having a separate bank account can help increase your credibility with lenders , suppliers , and investors – they’ll see that you’re taking your business seriously and that you have a clear financial plan in place. Don’t make the mistake of thinking that you can just use your personal bank account for business expenses – not only is it against the terms of service for most banks, but it also puts you at risk of legal and financial complications down the line . So do yourself a favor and open a business bank account – your wallet (and your peace of mind) will thank you. Get Accounting Software Accounting software is a great way to keep track of your business finances. Having everything all in one place makes it easier (and less stressful) to understand and manage your money . There is a wide range of accounting tools on the market, ranging from high-end enterprise solutions to free open source options . Depending on the size and scope of your business, you may want to consider investing in a more sophisticated accounting tool. No matter what software you decide to use, the important thing is that it allows you to track income and expenses, create invoices, understand cash flow, and generate reports. This will help keep your finances organized and make sure you don’t miss any important deductions or credits . Determine Your Break-Even Point Your break-even point is the point at which your business is making enough money to cover its costs and expenses without going into debt. To figure out your break-even point, you’ll need to understand all of your fixed and variable expenses . We’ll get into these terms more in-depth below, but suffice it to say that you need to make sure you’re making enough money to cover all of your costs. Some of these include the following: Inventory management Equipment Payroll Taxes Put Together a Business Budget Putting together a business budget might not sound like the most exciting part of starting a business, but it is absolutely crucial to understanding your finances and avoiding any unpleasant surprises down the line. A good business budget should take into account all of your expected expenses – from rent and utilities to employee salaries and business marketing costs. It should also factor in a healthy margin for unexpected expenses or emergencies. To put it simply: if you’re not budgeting, you’re flying blind . What Expenses To Track In Your Business Let’s go over the different expenses that your new business could have after your initial startup costs. We’ve broken it down into two important categories: Fixed expenses Variable expenses Fixed Expenses These are the expenses that stay the same each month. Examples of fixed expenses include: Rent for office space Utilities Employee salaries Small business loan payments Business insurance premiums It’s typically easier to budget for fixed expenses since they are consistent each month. Variable Expenses Variable expenses can change from month to month and can include things like: Marketing costs Travel expenses Merchant fees/sales tax Supplies and inventory As you might imagine, these types of expenses require a bit more planning since you don’t always know how much they’re going to cost. It’s important to track these expenses closely so that you can budget accordingly and avoid any unexpected surprises .
Choose a Business Name
Once you have your finances in order, it’s time to choose a business name. This is the name that will appear on all of your official paperwork and marketing materials. How to Choose a Business Name At Small Business Bonfire, we picked our name by brainstorming keywords that represent what we’re all about: community , growth , and support . We landed on “Bonfire” because it represents a gathering of people around a common goal. Also, the word “small business” in our name is a clear indication of our target audience. When you’re choosing a business name, it’s essential to consider factors such as relevance , uniqueness , and future growth . You want a name that will give your brand identity credibility and will be memorable and easy to pronounce . It may take some time to come up with the perfect business name, but it’s worth the effort in the long run. After all, this will be the name that represents you for years to come! Business Name Best Practices Here are some best practices when it comes to settling on a name: Don’t be too similar to competitors Choose a name people can spell Be memorable Be brandable Try and find the URL Let’s go over each of these to give you a better idea of what makes for a great business name. Don’t be Too Similar to Competitors One thing you should always keep in mind is not to be too similar to your competitors. The last thing you want is to confuse your customers or risk being accused of trademark infringement . Besides, being too similar to your competitors doesn’t help you stand out from the crowd, which is crucial in a competitive business landscape. That’s why it’s important to do your research and check if your proposed name is already taken or if there are similar ones out there. You’d be surprised how many businesses make this mistake and end up changing their name down the road, costing them time and money . Choose a Name People Can Spell One of the best practices when it comes to choosing a name for your business is to pick one that people can spell . This might seem obvious, but many entrepreneurs overlook the importance of having a name that is easy to spell. When your potential clients search for your business online, they may have trouble finding you if they don’t know how to spell your name correctly. This can lead to missed opportunities and lost business , which is the last thing you want when you’re just starting out. Of course, choosing a name that people can spell doesn’t mean you have to settle for something boring or generic. You can still be creative and unique with your name as long as you keep it simple. Be Memorable Speaking of being creative, you want to make sure your business name is memorable and stands out . A memorable name is essential for making a lasting impression on your target audience . A name that is easy to remember and pronounce is more likely to stick in people’s minds and come to them when they are looking for a product or service in your niche. Some successful businesses with memorable names include: Uber Airbnb Google These names are simple , catchy , and easy to remember , making them stand out in the crowded market. A good way to ensure your business name is memorable is to keep it short and simple, avoid using numbers or special characters, and make sure it is not too similar to other businesses in your industry. It’s also important to make sure your name is relevant to your products or services, as this can help customers identify with your brand . Ultimately, a memorable name can help your business stand out from the competition, create brand recognition, and bring in more customers in the long run. Be Brandable You’ll want to make sure that your business’s name is brandable. This means that the name should be simple and unique, so it can become an easily recognizable symbol of your business. Some examples of fantastic brandable names include: Apple Amazon Nike The names are short, simple, and easily recognizable. These brands have become a symbol of quality and reliability for their customers. When choosing your the name of your new business, try to come up with something unique that will stick in people’s minds and become your company’s signature. Try and Find the URL This final step is one of the most important. You want to make sure the domain name for your business is available . You’d be surprised how many businesses have already taken the domain names of their own companies or are just using a generic URL that doesn’t accurately reflect their brand. To make sure you have a unique URL, try to find one that closely resembles your company’s name . You can also use a domain registrar to search for available URLs and find one that fits your business perfectly.
Register Your Business & Get Federal & State Tax IDs
Now, let’s get into the nitty-gritty of the guide. Once you have your name, it’s time to officially get your business license and form an LLC or other business structure. You’ll need to get a Federal Tax ID number as well as a State Tax ID number in order to do this. These numbers are important for filing taxes and opening bank accounts , so make sure to get them before you move forward. This is part of starting a new business takes some paperwork and legal know-how, so it’s best to consult with a lawyer or accountant before making any decisions. What is an LLC? An LLC (Limited Liability Company) is the most popular and widely used business structure in the United States. This type of business is great because it offers a number of advantages to entrepreneurs . An LLC provides limited personal liability protection for its owners, so they are not held personally responsible for any debts or obligations of the business. It also offers flexible taxation options and can help you save money on taxes . Finally, an LLC is relatively easy to set up and maintain, making it a great choice for small businesses. LLC Pros and Cons Before you commit to forming an LLC for your business, it’s important to understand both the advantages and disadvantages of this type of structure. The pros include: Limited liability protection Flexible taxation options Easy to set up and maintain Attractive to potential investors The cons include: Higher filing fees compared to other business structures More formalities and paperwork are required to maintain the LLC status Limited life span – the LLC can be dissolved if not managed properly What is an LLP? An LLP is a hybrid business structure that offers the limited liability of a corporation while still allowing partners to share in the management and profits of the business, similar to a partnership. LLPs are commonly used in professional services industries, such as law or accounting, where partners want to protect themselves from each other’s liabilities . One of the advantages of an LLP is that partners are not personally responsible for the debts and obligations of the business . This means that if the business is sued or goes bankrupt, partners are not required to use their personal assets to pay off any debts. Additionally, LLPs are taxed like partnerships, which means that profits and losses are “passed through” to partners and are taxed at their individual tax rates rather than being taxed at the business level like a corporation. However, it’s important to note that not all states allow LLPs, so it’s essential to check local laws and regulations before considering this business structure. LLP Pros and Cons As with any business structure, it’s important to understand the benefits and downsides of an LLP. The pros include: Limited liability protection for partners Profits and losses pass through to partners, not the business Reduced paperwork compared to other business structures Flexible ownership structure The cons include: Some states do not allow LLPs Require more formalities and paperwork to maintain the LLP status Profits are subject to self-employment taxes What is a Sole Proprietorship? If you’re looking for a business venture that offers maximum control without the headache of complicated legalities , then starting a sole proprietorship might just be the way to go. Essentially, a sole proprietorship is a business structure where one individual is the sole owner and operator of the business. This means that all profits and losses are solely his or hers to bear. Unlike other business structures, such as a corporation or LLC, there is no separate legal entity established for the business . In simpler terms, the business is viewed as an extension of the individual owner’s personal assets and liabilities. The best part? No partners to answer to and no need to involve any third parties when it comes to decision-making. And for those who find comfort in simplicity, let’s not forget that the registration process for sole proprietorships can be a breeze. In fact, many states don’t require any formal registration at all! However, as with any business venture, there are potential risks involved. With a sole proprietorship, unlimited personal liability is a major concern . This means that if the business incurs any debt or legal liabilities, the owner’s personal assets are at risk. Sole Proprietorship Pros and Cons The pros of a sole proprietorship include: Unlimited control over business decisions and assets Easy to set up and maintain Simple tax filing process The cons of a sole proprietorship include: Unlimited personal liability for any debt or legal liabilities incurred by the business Difficult to raise capital as the owner has full responsibility for all debts Not available in all states What is a Corporation? A corporation is a legal entity that’s separate from its owners, also referred to as shareholders. In other words, the assets and liabilities of the corporation are not owned by its owners and vice versa. This means that if the company incurs any sort of debt or obligation, it will be solely responsible for it, and the shareholders will not be held accountable. This is one of the main benefits of forming a corporation, as it offers limited liability protection to shareholders. Additionally, corporations have more options when it comes to raising capital, and they benefit from favorable tax treatment in some cases. However, setting up a corporation can be complicated and involves several legal steps, such as filing articles of incorporation and setting up corporate bylaws. We recommend that you consult with an attorney before starting this process . Corporation Pros and Cons The pros of forming a corporation include: Limited liability protection for shareholders More options for raising capital Potential tax benefits, depending on the situation The cons of starting a corporation include: Complicated setup process with several legal steps Additional paperwork and filing requirements to maintain the corporate status The potential for double taxation if the corporation is not set up correctly Register Your Business & Get an EIN Once you’ve established your business structure, the next step is to register your business with the state and obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The purpose of registering your business is to legally declare it as a different entity from yourself . This will help you establish legitimacy and credibility in the eyes of customers, Depending on the type of business you are starting, there could be various forms and fees involved. As we said previously, we recommend consulting with an attorney and/or accountant to make sure you are taking the right steps.
Launch a Website for Your Business
Alright, you’ve got the business idea, the plan, the structure, the name, and the paperwork. Now it’s time to let people know about your business! The best way to do this in the modern world is to launch a website for your business . This can be done by hiring a web developer, or if you’re tech-savvy, you could take on the challenge yourself with one of the many content management systems available today. I’m a firm believer in the concept of learning by doing, so if you’re up for it, go for it! Having an online presence will give your business instant visibility and make it easier for people to find and connect with your business. It will also help you establish credibility, as people are more likely to take you seriously if they can find a website associated with your business. Start With Squarespace Speaking of website platforms, there’s no better way to get started than with Squarespace. Its simple and intuitive user interface makes creating a website fast and easy , while its array of templates gives you the freedom to customize your site according to your needs. Squarespace also offers advanced tools such as: Domain registration Analytics tracking eCommerce integration All of these features make it one of the best platforms for small businesses to create an impressive online presence . So if you’re ready to jump into the world of entrepreneurship, Squarespace is a great place to start! Launch Your Site Before It’s Ready This step may seem counterintuitive, but hear me out. Launching your website before it’s completely ready can have several benefits. It will give your audience a taste of what you’ve been doing and get them excited about the launch of the full version of your site. It will also give you time to test things out and make sure everything is running smoothly before launch day. And finally, it will give you a platform for gathering feedback from your audience that can help inform and improve the final version of your website. Launching before you’re ready may sound risky, but if done correctly, it can be a great way to start building an engaged audience for your business .
Start Marketing Your Business
Now comes the fun part. It’s time to start marketing your business and let the world know what you’re up to! The options are endless, so be sure
