The Beginner’s Guide to Starting a Small Business

What’s your vision?

Who’s your ideal customer?

How can you bring this vision to life and serve your customers?

These are just three questions of many that you should ask yourself when putting together your business plan. You can keep these questions pretty high level in the beginning and ask your team, if you have one, to help you sort out the details. From there, you’ll want to consider the following when developing your plan:

• Goals: What do you need to accomplish to achieve your vision?

• Methods: What are the steps you need to follow to get you there?

• Measurements: How will you determine when each objective has been met?

• Obstacles: What could throw you off course along the way?

A business plan is your roadmap; it helps guide you as you start and grow your company. It’s also an important marketing tool that can help persuade people to invest in you and your business. You can download a template of a business plan so you have something to guide you.

The SBA outlines two major types of business plan categories: traditional and lean startup. The former tends to be comprehensive, detailed, and dozens of pages long. The latter is usually more direct and focuses on key points, and may only be a page long. 

Regardless of which plan you develop, you want to get clear on several items. In her article for Fundera, Meredith Wood writes that you need to address these 10 questions:

1. What does your small business do?

2. Who is your small business for?

3. Who are your competitors?

4. What is your unique value proposition?

5. How will your customers find you?

6. What resources will you need?

7. How will your small business make money?

8. How long will it take you to make a profit?

9. What values will you never compromise?

10. What’s your endgame?

These questions can be answered by doing an internal audit. Think about what you want from your business and where you see it going. Once you have an idea and a plan in place, it’s time to think about what business structure you need to establish.

Once you’ve decided to start a small business, you need to pick a business structure. The type of structure you choose can affect four major areas, according to the SBA:

• How much you pay in taxes

• Whether or not you can raise money

• Which paperwork you need to file

• Your personal liability

You don’t need to have the future of your business completely mapped out years before making a decision; the business structure you choose now may change in the future. With that said, you do want to be mindful of your choice, and you should consult with legal and financial professionals if you need to make a change down the line to avoid any unintended consequences.

There are several types of business structures. Here are the most common five, as stated by the IRS, at a glance:

1. Sole proprietorship

2. Partnership

3. Corporation

4. S corporation

5. Limited liability company (LLC)

The SBA provides a brief description of each one.

A sole proprietorship is the most common type of business structure and is pretty easy to form. This is a solid choice for most new business owners who are just getting their feet wet or intentionally keeping things small. However, a sole proprietorship is not considered a separate business entity, which means you are personally held responsible for any business debts and obligations.

A partnership consists of two or more people. There are two popular types: limited partnerships (LP) and limited liability partnerships (LLP). This could be a good option for groups with multiple owners, though there are tax and liability considerations you should review to see if a partnership is a fit for your situation.

A corporation, also known as a C corporation, is a business structure separate from its owners — meaning, it offers you protection from personal liability. This type of partnership can be complex and typically costs more to form, but it may be a good choice if you’re looking to raise money and/or sell it down the road.

An S corporation, also known as an S corp, is a structure that can help business owners avoid the double taxation that’s present in C corps. It may be a decent choice for a would-be C corp that meets the particular qualifications of an S corp. However, some states don’t recognize S corps and others tax S corps on profits above a certain limit.

A limited liability company (LLC) has benefits of corporation and partnership designations, and it can protect you from personal liability in most cases. As such, choosing this business structure could be the right move for a medium- or high-risk business. Unlike other business structures, an LLC may need to be dissolved if there’s a shakeup of members.

You can refer to the IRS and SBA websites for more information and learn the pros and cons of each business designation. You should also consult with tax, business, and financial professionals about your options.

Having capital on hand can help you grow your business in new and exciting ways. If you’re looking to raise money from investors, keep in mind that they usually look for or at the following:

• Your team, your product, and your product’s large-market potential

• Your data, from the number of customers you have to your monthly recurring revenue (MRR) to your gross margins — so keep those records organized early and often

• How much money you want to raise and why

Fundraising is a lot like dating: Every investor won’t be a match for you and your company, and you have to put in the work to find the right fit. Make sure you research potential investors and have clear goals for any partnerships.

If you’re not ready to seek out capital, you can always bootstrap your company, secure a small business loan, or seek out additional opportunities to net money for your operation.

The short answer is: It depends.

First off, if your full-time job doesn’t allow employees to work concurrently on side businesses, that may help you reach your decision. You’ll want to confirm you can have a small business by consulting your employee handbook or talking to someone in your human resources department. 

If you’re in the clear, it may make sense to stay put and work on your business after your regular working hours. This way, you can eliminate the pressure of going all in on your business without a regular paycheck coming in.

You may also want to test the waters with your side hustle and gauge your success before completely striking out on your own. Having six to 12 months’ worth of living expenses in an emergency savings account won’t hurt, either.

Good luck! Your future customers are waiting for you.