How to start a business

Starting a business during a rocky economy? Follow these 17 steps

A woman listing down steps of how to start a business

In 2019 in the United States, the possibilities for small businesses seemed endless. At that time, there were over 30 million small businesses, employing close to 60 million people. The Shop Local movement dovetailed with the Experience Economy, giving small businesses a real edge over their big-box competitors, and 500,000 new businesses were popping up every single month.

Maybe you saw this sea change as an opportunity to dive in and make your own small business dream a reality. Maybe you even started to make serious moves: choosing a name, finding a space, building your website, designing your logo…

…But then, the bottom dropped out. 

When COVID-19 started to spread in the early weeks of 2020, no one knew what a toll it would take, on human life or the economy. With the inability to keep a storefront open, businesses of all sizes across the country have suffered. But a lot of small businesses were, and continue to be, the most vulnerable due to their precarious finances. On average, according to a recent study, small business owners have “$10,000 in monthly expenses and less than one month of cash on hand.” Another study predicts that as many as 7.5 million small businesses could close in America as a result of the pandemic.

The upside of a downturn

None of this sounds too encouraging when it comes to starting a small business, does it? Okay, here’s some good news: 

1. History is so much bigger than this moment.

Have you ever seen a painting by Georges Seurat? He was a famous French pointillist, meaning he created scenes using millions of tiny spots of paint. Up close, his paintings look like little more than colorful dots without much meaning. But as you back up, the world of the painting takes shape: a face, a person, a family, a whole scene of people lounging by a river. 

A whole scene of people lounging by a river

No matter how all-consuming it feels at this moment, COVID-19 is but one dot in the painting of American history. We’re too close to it right now to see the whole picture. But if we step back a few paces, we can see that this isn’t the first economic downturn— before this, there were The Great Depression and The Great Recession, to name just two—or even the first pandemic to rock our daily lives.

Thanks to these other points in time, we have proof: we will rebound and rebuild as we always have, and the need for small businesses won’t disappear. In fact, there are some small businesses who have become more necessary than ever today.

2. Small businesses can survive and thrive—even in a pandemic.

The very nature of small businesses in certain industries makes them fit to take a national crisis in stride: they’re local, they’re agile, and they have a lot less overhead to worry about. 

One major example of small businesses thriving during today’s pandemic: our local farms. When people panic-bought every scrap of meat and eggs they could find in big-box grocery stores, shoppers had to look elsewhere for supplies. Many people realized there were small farms right in their backyards that could meet their family’s needs, which has paid off in spades for these businesses and their customers. 

People with freshly-picked vegetables on their fruits and vegetables business.

At some family farms in New England, for instance, revenue has skyrocketed 400-500%, and they’ve collaborated with other local providers to diversify their product offerings and better serve these new customers.  Because of their size and the immediate location of their customers, they’ve been able to pivot much more quickly than giant grocery chains. You’ve probably seen the same in your locally owned restaurants, who have come up with creative schedules and safer setups to keep serving their communities who are stuck at home. 

In short: if you find the right niche your small business can bloom, even in dark times.

3. Lots of today’s most successful companies started during an economic crisis. 

Here are just a few of them: 

  • General Electric
  • General Motors
  • Disney 
  • Trader Joe’s
  • WhatsApp
  • Uber

Whether it was the Great Depression, the Spanish Flu, or the Recession of 2008, so many businesses have managed to find their foothold during times of strife and become super successful. This doesn’t mean it will be easy, but it’s possible if you have a great plan and the guts and creativity to blaze your path.

4. Never count out a small business. 

Remember when all the experts said Amazon would kill independent bookstores for good? In 2009, it sure looked that way, after over a decade of smaller bookstores being undercut on price and convenience of delivery. But since then, the number of independent bookstores in America has rebounded and grown by 49%. 

Local bookshops were able to claw their way back by offering something Amazon couldn’t, and something humans crave: community. Small businesses inherently have this edge on even behemoths like Amazon, so don’t assume you can’t compete.

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How to start a small business in 17 steps

1. Dig into your business idea

It’s time to get real about the idea you’ve been sitting on. Does it have legs? Here are 4 big things to think about when deciding if you should pursue your small business idea:

What’s your niche? 

Is there a market for the products or services you want to sell? If so, who’s the audience in that niche, and how will you find and sell to them? 

Do you have the market cornered?

Would you be one of the first businesses in this niche, or are there some longtime players you’ll be up against? 

How healthy is the market? 

2020 probably isn’t the time to go into VCR sales. It’s a good idea to do some market research to make sure your potential business is one that’s trending upward in popularity and demand.

What makes your business unique? 

How can you set yourself apart from the existing competition in your market? Even if you’re an early business on the scene, there are bound to be others coming up behind you. Why should people give you their money, instead of these other businesses? How can you offer a better experience? 

2. Create the concept

It’s important to tell a story when you’re securing funding, whether it’s through investors, crowdfunding, or a loan. People like being able to see or touch what they’re buying into. Developing your concept early on can help you immerse investors in your idea, so it feels like it already exists. 

Your concept should include rough sketches of your mission, vision, and values, as well as the working name of your business. You could even contract some creative help to get a little preliminary logo and design work done to really give the full picture. 

Two important notes as you build your concept: 

  • Be sure your name and design ideas are unique and can’t be seen as an imitation of another brand… especially big names with lots of lawyers in their pockets! Check your proposed business name against the federal trademark database, because trademark infringement suits can be costly.

    This is also a good time to check what website domains are available under the names you’re weighing. If you have a great name but all the easy-to-identify domains are unavailable, you might want to move on to something else.
  • See your concept as a living, breathing document. Leave room to allow for the concept to evolve as your business plan takes shape and experts offer their advice. 

3. Do the math

As you prepare to write your business plan, the financials are a huge piece of the puzzle. Having a solid plan for where your money is coming from, how you will spend it, and how you will make more money is crucial to getting buy-in from investors and even for landing a loan. People and banks want to know their upfront funding will be handled with care. 

Here are some questions you should be able to answer as a new entrepreneur: 

  • How much funding do you need to get your business off the ground and stay out of debt? This is also known as a “break-even analysis.” 
  • How do you plan to secure this funding? Are you independently wealthy, will you rely on small business loans, or perhaps you already have some interested investors? 
  • Based on the market, what can you project to earn in the first year? Be conservative/as accurate as possible. 

P.S. A newer source of funding for startups is crowdfunding, where individuals kick in small amounts to an online campaign on sites like Kickstarter and Indiegogo. Donors usually receive some kind of perk in return for their gift; early access to your services, free products, or some other personal way to say “thanks.” Be sure to consider what your perks will be if this is your funding avenue of choice; the better the perks, the more you’re likely to raise. 

P.P.S. Is math not your strong suit? Don’t sweat it. The national Small Business Administration (SBA) has free small business counselors available across the country who can help.  

4. Find the right bank for your new business – for loans and transactions

Having all of your finances in one place keeps things simple. So while you’re shopping for a small business loan, think ahead to the kind of bank you’d like to do business with in the long run. 

You might find that the best fit isn’t a national or global chain of banks, but a smaller, local organization like a credit union or other independent bank. Because they have a vested interest in the community, they’re often much more enthusiastic about granting loans to small businesses… and can be more forgiving if you miss a payment. 

You’ll need an Employer Identification Number (EIN) to eventually open your business bank account. More on that later. 

5. What’s your structure? 

The structure you choose for your small business will affect things like your taxes, business name, and liability. Here are the main options for a small business: 

  • Sole proprietorship: This is the easiest structure to get off the ground, but beware: if you are the sole proprietor, that means your personal assets aren’t separate from your business assets, and they’ll be at risk should something happen to your business. 
  • Partnership: Going into business with someone else? This might be the right structure for you. A limited liability partnership (LLP) means each of your personal assets will be protected should bad luck befall the company. In both the sole proprietorship and partnership options, your profits are taxed through personal returns, meaning you don’t file as a business, which makes these two popular options for brand-new small businesses testing the waters.
  • Limited liability corporation (LLC): That “LLC” might sound familiar. That’s because this is a pretty popular structure for established businesses. With an LLC, your personal assets are protected, and you still don’t have to pay corporate taxes. You will, however, have to pay self-employment taxes. 
  • Nonprofit corporation: If your small business plans to do “charity, education, religious, literary, or scientific work,” you might qualify as a nonprofit. With the proper guidelines met and registration with the IRS, you could even be tax-exempt! 
  • Cooperative (Co-op): Co-ops are owned and operated by the folks who also use their services. One example is a grocery store where customers also take turns volunteering their time stocking shelves and running the cash register. Customers purchase shares and buy into the mission of supporting the co-op, and profits are split among these shareholders. 

Need help deciding where you fall? This is where things can get sticky, and it’s nice to have an expert’s eye as you make decisions. A trusty CPA is always good to have on speed dial as you start your small business. This is a great time to get in touch with one of them, or check out the Small Business Association’s free counselors

6. Choose and write your business plan

The good news: there’s no wrong way to write a business plan. 

The not-so-good news: that means the guidelines for writing one from scratch are kind of thin. 

As it stands, there are two general structures that people use when writing a business plan:

  • The traditional business plan: This version is more in-depth and takes more work upfront fleshing out the financials, market analysis, risks, and other factors. The plus is that once it’s done, it’s done, and you’ll have a really solid document that any lender or investor will feel comfortable with. 
  • The lean startup business plan: This version will get you out the door first, since it’s a lot less detailed and more about the big picture idea of your business, like your vision and key activities. The downside is that eventually, you’ll have to dig in and get granular, which might feel like double the work, unless you have some investors who already believe in your business and aren’t asking for in-depth projections. 

Want help writing your business plan? Check out Business Plans for Beginners: A Step-by-Step Guide.

7. Secure your funding

It’s time to get your pitch together! Use that shiny new business plan to build a slick slide deck, design your crowdfunding site, or complete that bank loan paperwork. 

If you’re looking to individual investors or donors, make your ask specific, no matter the size. And shoot for the stars; you never know how excited someone is about your idea, and you don’t want to sell yourself short. They can always counter. 

If you’re courting investors, what’s in it for them? A share of the company, a piece of the profits? Make sure you have these benefits clearly outlined in your ask. And as we mentioned earlier, for crowdfunding, develop and clearly share the gifts or perks you can deliver on as a thank you for their support. 

8. Find a home for your business

Will you have a real-life shop on Main Street, an online storefront, or both? Where and how you decide to do business affects your taxes, insurance liabilities, the permits you’ll need, and more, not to mention your potential overhead and customer base. 

Opening an online store can be a more affordable option that’s accessible to a wider audience thanks to e-commerce. Plus, given the current state of the world, it’s a good idea to have an online storefront available even if you have a physical location. 

If you do decide to put up a brick-and-mortar shop, there might be state and federal tax breaks available to encourage your doing business in certain towns or neighborhoods. You can learn more about these region-specific opportunities at your local Small Business Association office or your state government website.

9. Secure and protect your new business name

Once you have your funding and your space, it’s time to lock down your business name and make sure no one else can swipe it out from under you. In some cases, registering your name could provide some increased security and protection for your business. There are three main ways you can register your business name: 

  • “Doing Business As” (DBA) protection. Registering a DBA name allows you to separate your business from your personal identity. This can be separate from your actual entity name, and many states require you register a DBA name. An important note: your registered DBA name is not protected from others using the same name. 
  • An entity name for state-level protection. With an entity name, no other business in your state is allowed to have the same name as your business. While this isn’t always required (it varies from state to state), we highly recommend it. 
  • A trademark for nationwide protection. If you plan to do business on a larger scale, going for the trademark might be the right move for you. It would mean no one in the rest of the United States, in your industry, could use the same name as your business. 

10. Register your business with the proper agencies

Depending on the nature of your business, securing the name might be the most you have to do when it comes to registering your business. 

If you decide to go with an LLC, nonprofit, or co-op structure, you should check with your state government to see how these entities are registered. Start with the Secretary of State’s office, who should have the information you need.

As far as federal registration goes: unless you’re looking for tax-exempt status from the IRS or a trademark to protect your name, this step might not be necessary at all.

11. Snag the right domain and social handles

Once you know your chosen business name is free and clear with your state or federal government, it’s time to lock down your website domain and social media accounts. 

Try to secure a domain name that is as intuitive as possible, so people find you easily when they go looking. But beware of “domain squatters” who hold domains hostage for large sums of money. 

As for your social handle: make it consistent across all the platforms you plan to use. Ensure the one you want is available on the big three before you pull the trigger: Facebook, Instagram, and Twitter. 

12. Get your tax ID numbers

Once your business is registered, it’s time to apply for your Employer Identification Number (EIN). This is your federal tax ID, and among other things, you’ll need it to open a business bank account and apply for any licenses or permits you might need. 

You can apply for your federal tax ID here when you’re ready to start, for free.

State tax ID numbers are a stickier topic, since every state runs their taxation differently. Reach out to your Secretary of State’s office, and they should be able to help you navigate the state-level process. 

13. Secure any licenses or permits

The type of permits and licenses you’ll need to conduct business depend on a lot of factors, including but not limited to:

  • The town or city and state where you’re conducting business
  • What products or services you plan to provide 
  • Whether you rent or own your physical space
  • Any modifications you plan to make to your physical location: adding parking, building an addition, updating plumbing, etc. 

Be sure to check in with your local and state licensing authorities so you have your ducks in a row. Permits are one time in life when it’s better to ask for permission than forgiveness. 

Pro-tip: Add any permit and license expiration dates to your calendar, so you never fall out of good standing. 

14. Don’t forget the insurance! 

Insurance is the kind of thing that you always wish you had more of, as soon as something goes wrong. Be sure to do your research and choose a commercial insurance agency that has you covered, instead of one that cuts corners just to save you a few dollars a year. A local, licensed agency is likely to be more attuned to your needs in the specific market and be more hands-on in helping you should a problem arise. 

Here’s a handy chart from the Small Business Administration that explains the different types of commercial insurance you might need: 

A chart from the Small Business Administration that explains the different types of commercial insurance you might need

Pro-tip: Insurance shouldn’t be “set it and forget it.” Set time in your calendar to sit down with your agent every year at renewal time to see where you might be able to adjust your coverage, or decide if you’d like to switch agencies altogether. 

15. Invest in the right tools upfront

There’s nothing worse than blowing your own grand-opening momentum with subpar customer service. Before you launch, make sure you have the right processes and technology in place to delight your customers.

Here are a few critical tools for smooth sailing that you’ll need as you shove off: 

  • A solid customer relationship management system (CRM). Salesforce is probably the most well-known CRM, but there are more affordable options popping up on the market, like Zendesk Sell, Freshsales, and Zoho CRM. 
  • A professional communication system. How do you plan to handle calls and messages from your customers? It’ll be helpful as you grow to have a system that can grow with you, so keep scalability in mind as you shop for the right telephony and messaging solution.
  • OR: a customer contact center.  A system that covers your phone calls might be enough at first, but if you want to take customer service to the next level, there are contact centers that can handle a whole lot more with ease. A great cloud-based customer engagement tool will put all of your communications in one place, so your team can answer emails, phone calls, and even social media messages in one place.

    The most efficient customer engagement solutions will let you access the entire customer journey in one screen. For example, the RingCentral Engage Digital platform connects your CRM, your ACD, and your inbound messages for a holistic look into your customers’ experience and your team’s performance: 
  • An intuitive accounting system (or awesome accountant). Whether you want to manage your finances in-house or outsource to someone who lives and breathes numbers, you need a system to stay on top of your books.

    Just like CRMs, there are a growing number of accounting tools available for people of all mathematical abilities. The most well-known tool might be Quickbooks, but there are also some newer, more agile and cloud-based services out there like Bench, Patriot Accounting, and Netsuite, to name a few.

16. Build your online presence

Don’t sleep on this one; while it seems like one of the fluffier steps on this list, more and more customers are relying on self-service via websites and contacting businesses through their social accounts when they need help.

If you don’t have the cash upfront to build a website from scratch, try an affordable service like Wix or Squarespace that offers templates for both static sites and online storefronts that you can update and sell through. Also, make sure your contact information is visible on every single webpage, and that your FAQ’s page is easy to access and full of helpful information. This might cut down on the number of phone calls and emails you receive, keeping lines free for more complex customer issues.

Put your business hours on your Facebook page, and be sure your Instagram links to your website or Facebook page, whichever place you plan to keep more up-to-date. Think about what aesthetic or theme you’d like for your Instagram page, if you decide to have one: what kinds of visuals will be most appealing to your customers? 

Share your accounts in your personal networks and start building your audience. 

17. Ready, set, launch! 

You’ve done all this work to make sure your business starts off on the right foot. Now it’s time to celebrate and take off. 

Make your opening feel like a special event, perhaps a soft launch for friends and family who have supported you, where they’re encouraged to try your products or services and leave a great review on Yelp or Google. Whatever you decided to do for your big launch, give it some memorable flare that embodies the vision of your business, so people walk away knowing who you are and what you have to offer.

Starting a business…in this economy? 

With a clear vision, a promising niche, and an agile spirit, we say go for it. Small businesses have faced challenges before, and they’ll face challenges again, but they remain one of the most important job creators the country has ever had and create lasting impact on the communities they serve. 

Our biggest advice as you start your new business: never stop innovating. Keep an eye on the market and the world as your small business takes off so you can better anticipate bumps in the road that you’ll need to account for. Listen to your customers, actively seek out their feedback, and put that feedback to work. Never stop imagining better ways to excite your customers, build relationships, and show appreciation for your team, and you’ll be on the right track. 

Now that you have the context, keep reading to find the answer to the question: “When is the best time to start my business?” 

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