Starting a business can be rewarding and lead to a fulfilling life—blah, blah, blah. How many times have you read these generic prompts to start a business and rolled your eyes? Let’s get real. You’re either contemplating starting a business because you need money or you want more money.

That’s where this guide comes in handy. You will be able to realistically evaluate whether or not starting a small business is right for you. Plus, you will get additional information about the pesky legal details most guides leave out. Ultimately, any business you start should be rewarding, but you must be able to evaluate all of the risks before you make a big decision like this. So, let’s get started.

If you’re interested in a particular topic, please feel free to jump ahead:

Step 1: Discover your business idea.

This by far is the most time-consuming step. Trying to come up with an idea that hasn’t been done before is nearly impossible. Usually, there’s nothing new under the sun and most ideas have been recycled. The key would be to come up with an idea that improves an existing product or service.

If you’re thinking “I want to start a business but have no ideas,” get inspired quickly with 50 online business ideas.

Step 2: Perform market research around your business idea.

There’s nothing worse than spending hours, months, or even years of your life on a product and/or service and it flops. Hard. Very, very hard. To avoid this type of setback, it’s always best to conduct market research before you begin building anything.

First, you should validate your business idea. One of the best ways to do this is to perform keyword research. If you develop this amazing product or service, but no one is searching for this solution, then your product will be a complete dud. Remember, it’s all about supply and demand. If the demand for your product isn’t there, there will be an abundant supply of your product sitting on the shelf collecting dust—literally and figuratively.

Step 3: Consider your business funding options.

This step is important, because it can halt your business in its tracks. Therefore, you should consider all of your startup costs before you invest a penny into your small business. Here are some common ways to fund a business:

• Business owners invest their own money, including funds from savings and available credit
• Receive a “love loan” (a term I just made up) from relatives, friends, and associates of the business owners
• Crowdfunding is the process of convincing strangers on the internet that you have an amazing idea and these strangers fund your project.
• Venture capital financing is a form of private equity that investors provide to start-ups and small businesses with long-term growth potential.
• Bank loans from a credit union may be the best option if you can get favorable terms, e.g., low-interest rates.
• If you want free money to start a business, you can apply for a grant. You can also apply for government grants, which are available to those small businesses that provide public services and stimulate the economy. If you believe your next big business idea or project falls into this category, please check out usa.gov/grants and grants.gov.
• Lease financing is useful if you need equipment for your business. To save money on startup costs, small businesses can lease equipment instead of buying it.

Step 4: Brainstorm your business name.

Your business name should accurately reflect what types of products or services you will offer. There is an art to naming a business, so much so, that websites were created to get you over this mental block if you’re stuck. Here are some free business name generators:

• namelix.com
• businessnamegenerator.com
• looka.com/business-name-generator
• https://namify.tech/business-name-generator

Step 5: Navigate around any trademark or copyright laws.

This step is the most underrated. But it’s very important that you make sure your small business follows all intellectual property laws. It’s better to legally protect your business at the beginning. If not, your business may be ending in a grand opening, a grand closing scenario that leaves you in debt, mounting legal fees or lawsuits, and damage to your small business reputation.

For example, you must make sure your business name does not use an existing trademark. This can be the most frustrating part. You think of a brilliant name. You research the name and it’s taken or similar to another name. You think of another name and it’s also a no-go. This cycle continues until you get it right. It may take a few tries or even a few days, but it’s important you completely research your business name. You don’t want to be on the receiving end of a cease-and-desist letter.

Another legal hurdle is navigating copyright laws. For example, if your business involves promotional videos, will it involve music? If it’s your music, should you copyright it first? If it’s someone else’s music, do you have to pay royalties to use the music? These are all important questions that you should evaluate before you develop a product or idea that will use copyrighted information.

Step 6: Write a business plan.

Not every business needs a business plan. But a good business plan will help any small business owner start, structure, manage, and grow their business.

For example, if you are seeking funding for your start-up business, a business plan can be extremely helpful in securing financing. A business plan can also provide a roadmap for management on how to run the start-up business or it can be used with presentations to financial institutions for traditional bank financing. Also, if an investor asks for additional information about your company’s projected performance and financial prospects, you can provide a detailed business plan that addresses their concerns and/or questions.

A comprehensive business plan should:

• describe the industry and market the business will operate in
• describe specific problems and opportunities that the business will address
• describe the products and services that the business will offer
• describe how these products and services will solve a problem or provide a solution
• describe the operational aspects of the business (e.g., sales and marketing, research and development, human resources, etc.)
• describe the projected financial performance of the business (e.g., tax and interest rates, inflation, marketing and sales costs, and related expenses)

Step 7: Determine your legal business structure.

No, I’m not “kitten” around. Yeah, I know that was corny. But seriously, choosing the right type of business structure is very important. If you choose the wrong type of business structure, you can put your personal assets at risk. For example, some popular business structures are limited liability company (LLC), corporation, sole proprietorship, and partnership.

Don’t take this step lightly. Please put some thought into how to structure your business, which will affect every aspect of your business operation including:

• How the business will be taxed
• How the business will be managed and operated
• How much ownership each business owner has
• How will the business be transferred from individuals or another company
• How much (or how little) financial resources can be obtained for starting, sustaining, and growing your business
• How much liability (or legal protection) your business will have if you and/or your business is sued

Step 8: Register your business.

Generally, you must register your business in the state where you live. For example, you would need to register an LLC and use an operating agreement to manage your business.

However, you won’t need to register your business if it’s a sole proprietorship or a general partnership unless you use a DBA.

On average, a business registration fee averages about $200. Once you have your business name, you can register your business online or via mail.

The turnaround time for your business to become a registered company will vary from state to state. However, if you’re in a hurry to make money, you can see if your state offers an expedited filing

Step 9: Get an employer identification number (EIN).

Generally, businesses in the United States need an Employer Identification Number (EIN). An EIN is used to identify a business, and you may apply online. Do not pay to get an EIN, because it is a free service offered by the Internal Revenue Service (IRS). If you apply for an EIN online, it’s a quick and easy process, and you will instantly receive your EIN.

You will need an EIN if your small business falls into any of these categories:

• You have employees
• Your business operates as a corporation or partnership
• Your business will file any of these tax returns: Employment, Excise, Alcohol, Tobacco, and Firearms
• Your business will withhold taxes on income (other than wages) that are paid to a non-resident alien
• You have a Keogh plan (a type of retirement plan for self-employed individuals and small businesses)
• You’re involved in any of these types of organizations: 1) Trusts (except certain grantor-owned revocable trusts), IRAs, Exempt Organization Business Income Tax Returns; 2) Estates; 3) Real estate mortgage investment conduits; 4) Non-profit organizations; 5) Farmers’ cooperatives; and 5) Plan administrators

Step 10: Open a business bank account

You will need your EIN (and possibly your Articles of Incorporation) to open a bank account. Generally, it’s a good idea to have a business bank account. Since you’re just starting, you don’t have many expenses and can wait it out. But once the money starts rolling in, you should have a separate business bank account.

The main reason is that you don’t want to combine your personal funds and your business funds. Once tax time rolls around, it will be a major headache combing over your receipts and bank statements trying to figure out what’s a proper tax deduction. Therefore, save yourself the headache and keep your personal income separate from your business income.

But don’t just open up any old bank account. Research the best options for your business. Don’t be shy. Ask the really important questions before the checks clear.

Some important questions to ask when opening up a bank account are the following:

• What business banking services do you offer?
• Is there a minimum balance requirement?
• What bank fees will apply to my account?
• Is there a maximum transaction limit? Will I be charged more if I do a certain number of transactions?
• What are the online banking options?
• How long will it take for deposits to become available?

Step 11: Get a business license.

A business license is a piece of paper that allows you to legally operate your business within your state. Generally, you will need a business license in the county or city where your business is located. However, you should check the laws of your state, county, and or city to verify if you will need a business license.

Step 12: Get a business permit.

It’s important to check whether special licenses or permits are required for the products or services being offered. For example, you will need a federal permit if your business activities are regulated by a federal agency, e.g., alcoholic beverages, radio and television broadcasting, and transportation and logistics, etc.

You may also need a state permit if your activities are regulated by the state, such as restaurants, construction, and retail, etc. Check the laws of your state, county, and city to see if your business will require a state or federal permit.

Keep in mind that a business permit is different from a seller’s permit. Depending on your state’s laws, you may need a seller’s permit to sell tangible products—retail or wholesale—to the public.

Step 13: Purchase an insurance policy.

Buying insurance is optional. So, it may not be a top priority on your list, which is fine in the beginning. But every successful business owner knows that any business can be vulnerable to legal claims, e.g., a puddle of water [the customer pours] on the store floor, which causes said customer’s slip and fall.  

Once it becomes necessary, consider buying business insurance, such as:

• General liability insurance: protects your business claims involving bodily injury, property damage to someone’s belongings, and personal injury, e.g., libel and slander.
• Commercial property insurance: protects your owned or leased business equipment.
• Professional liability insurance: protects you if you make mistakes in the services you provided.
• Worker’s compensation insurance: gives your employees benefits if they get hurt or sick on the job.
• Data breach insurance: helps your business respond to a data breach if customers’ personal information is lost or stolen.
• Commercial umbrella insurance: extends the coverage limits for some of your policies if your claim exceeds the limits; the umbrella insurance will cover the difference.
• Commercial auto insurance: protects employees driving company-owned vehicles.

Step 14: Brand your business.

Why should your customers choose your business over your competitor? These questions may keep you up at night. Once you discover your main selling point, you can create a memorable brand centered around these benefits.

The best way to stay at the top of your customer’s minds is to create a strong logo and tagline. You have several options for creating an affordable logo and tagline: 1) hire a graphic designer; 2) use a site like fiverr.com; or 3) create a logo yourself on Canva. Regardless of which method you choose, you should be mindful of your branding colors.

I’m going to let you in on a little—not so unknown—secret. There is a psychology behind how companies choose their brand colors, because colors are meant to cause certain emotions in customers.

For example, Americans associate the color green with money, because that’s the color of USD currency. Therefore, you should put some thought into how you want your customers to perceive your brand, which may appear on your website, advertising campaigns, etc.

Here is a summary of the color meanings:

• Yellow is associated with happiness, optimism, and youth; it can be used to show affordability or grab the attention of customers.
• Pink equates to femininity, innocence, and youth; it can give a brand a luxurious or modern feel.
• Green suggests prosperity, growth, stability, and mother nature.
• Brown makes your brand feel old-fashioned, rugged, or earthy.
• Red can stir up excitement, passion, and anger in your customers; it can also be used to grab your customer’s attention or alert your customers to an important item, e.g., the “buy button.”
• Orange alludes to playfulness, friendliness, and vitality; it can also indicate energy.
• Purple evokes creativity, luxury, and royalty.
• Light Blue radiates innocence, trust, openness, and tranquility.
• Dark Blue implies a sense of security, professionalism, formality, maturity, and trustworthiness.
• Gray signals neutrality; it can make your brand look classic, subdued, mature, serious, or mysterious.
• White suggests virtue, simplicity, cleanliness, or health; this color can range from affordable to high-end.
• Black creates a modern sophisticated, luxurious, edgy, and powerful look.

Step 15: Create a website.

A website is important in today’s world, because most customers expect a business to have a website. If you don’t have a website, customers will think you’re not serious about your brand. The best thing about a business website is that you can advertise your brand 24/7 and create profitable leads for your business.

You don’t have to spend a gazillion dollars on your website. And you can even create a website yourself. There are plenty of resources for creating websites—free and paid:

• WordPress
• Webflow
• Squarespace
• Showit
• Wix

If you don’t have any technical experience, you can hire a website designer to make you a custom website. However, all of the platforms listed above allow technical and non-technical customers to create websites.

You will also need to purchase website hosting if the platform you purchase doesn’t include hosting. If you create a website, no one will see it unless it’s hosted. Therefore, you must purchase website hosting for your website to be published to the world. Here is a list of website hosting providers:

• Siteground
• Bluehost
• HostGator
• GoDaddy
• Domain.com
• InMotion
• DreamHost
• Hostinger
• Namecheap
• Hostwinds

Once you’ve created your website, slap a website user agreement on it, e.g., terms and conditions, privacy policy, etc. These website agreements let users know how they can legally use your website and products.

Step 16: Conduct business marketing.

Customers or customer leads don’t fall out the sky. You have to know where to find customers. This is the one time I say it’s fine to stalk someone. You need to figure out where your customers hang out online, how to reach them, and their purchasing behavior.

So, before you spend a ton of money on ads, you should first identify your target market. What specific demographic are you targeting? A type of demographic would be an age group, millennials, income bracket, etc.

For effective marketing, you want to make sure your marketing is tailored to your demographic. If your marketing campaign speaks to everyone, then it speaks to no one. Customers should feel that your marketing speaks to them or addresses their concerns.

For example, if you want to develop a fitness program, then you should research who exercises the most, e.g., the age group 18 to 44. Next, you should study this age group to understand their pain points or their struggles with exercising.

Once you determine a solution, you can write a clear value proposition in this format: My business (name) helps (target demographic) overcome (top challenges) by teaching them (key strategies) so they can (feeling they have/transformation).

The next step is to determine where your target demographic hangs out. Are they on Facebook, YouTube, Instagram, Tik Tok, etc.? Go where your customers are and run marketing ads on these platforms using your value proposition. It’s best to implement A/B testing or two campaigns to see which ad your demographic responds to best.

Keep in mind marketing ads should run for at least 30 to 45 days. You can use this marketing data to strengthen or fine-tune your marketing campaign. For example, you can analyze the age, gender, and location of your demographic to see if you should tweak your marketing campaign.

Step 17: Create business contracts.

Contracts are like condoms. You should one every time unless you’re okay with getting a raw deal.

For example, if you’re offering services as an independent contractor or a consultant, you’ll need a paper trail so you can get paid. Contracts set expectations for all parties involved so that no one gets amnesia when things don’t go as planned.

So, any time you perform a new service for an existing client or a new client, be sure to always use a contract.

Step 18: Hire employees or independent contractors.

If you’re starting your business on a budget, then you may not have any money to hire any employees or independent contractors. But eventually, you will want to scale your business to maximize profit. You should not do everything yourself.

Don’t be that person. A jack of all trades is a master of none. Once you start to make consistent money, you should consider outsourcing some of your business tasks.

Build a team of competent workers to get more done and make more money. Platforms like monster.com, indeed.com, and ziprecruiter.com are starting points for hiring the best candidates.

It’s important that any worker—intern, independent contractor, or employee—sign an agreement outlining their responsibilities, salary, and other obligations. You won’t be able to prevent every legal dispute with a past or present worker. But you can lessen your liability with properly drafted and executed employment agreements. 

Starting a Business FAQs

What is the easiest business to start?

The easiest business to start is a home-based business or an online business. You can make money from anywhere in the world with only a phone, laptop, and a reliable internet connection. This type of freedom combined with the low start-up costs makes starting an online business a no-brainer.

What small businesses are successful?

The success of a business largely depends on the business owner’s preparation and perseverance.  A successful entrepreneur would most likely have these traits. Having the entrepreneurial DNA to start a business is one thing. But having the survivor skills to weather any setbacks, downturns, and obstacles will ultimately lead to your success.

Remember to research your business, refine your business, and adapt to any changes along the way. This is an ongoing process and you shouldn’t let any failures get in your way. Failure is just feedback. Therefore, you should use any failures to deliver better products and services. If you keep these things in mind, you will be successful and so will your business.

What must an entrepreneur assume when starting a business?

The biggest myth about starting a business is that you will start making money immediately. See Exhibit A.

Is it possible to make money on the first day of business? Absolutely. But if you’re just starting in an unknown industry or if you don’t have any prior customers, you will have to wait to see some profit. In my opinion, you can expect to see a profit within three to six months. If you dedicate part of your work week to marketing and the other to providing excellent service, you should be able to attain your goals.

Can you start a business without a high school diploma?

Absolutely. You don’t need a college degree or even a high school diploma to start a business. The only exception is if your business involves a specialized service, e.g., doctor, lawyer, etc. That’s the beauty of being an entrepreneur. Anyone with ambition, determination, and the ability to adapt can start a small business.

How long does it take is start a business?

It all depends on the type of business. If you’re starting an online business, it’s possible to have your business running in about 1 to 2 weeks. But the key is to have a solid business idea. Some entrepreneurs get hung up on developing a business idea, which prevents them from starting a business. Don’t be that person. Learn about profitable business ideas so that you can join the entrepreneur club.

How hard is it to start a business?

I don’t believe it’s hard to start a business. The hard part is being consistent in your marketing, meeting customers’ expectations, and generating quality leads. According to the U.S Bureau of Labor Statistics (BLS), 20% of new businesses fail within their first 2 years of being open, 45% during the first 5 years, and 65% during the first 10 years. So, only 25% of new businesses will make it to the 15-year finish line.

Whether your business makes remains open for 2 years or 15 years isn’t the data I’m interested in though. I believe the key is to building the most successful business you can in the 2-year to 15-year span and to sell it for an enormous profit. That my friend is the American way.

So, get off your couch and go start your next multi-million-dollar business!