How to Start a Small Business: Must-Have Checklist to Spark Success
Don’t be one of the 20% of small-business start-ups that don’t survive their first year—use this start-up checklist to plan, finance, and run your business successfully.1
|
April 3, 2018
If you’re reading this page, you’ve probably got an idea of what you want your business to be. Maybe you want to market your freelance writing skills. Or perhaps you want to sell handmade, needle-felted corgi dolls.
Whatever your great idea, you can improve your chances of success if you take the time to map out the creation of your business step-by-step. To help you with your plan, we created the checklist you need to fire up your start-up engines and fuel your entrepreneurial efforts into the future.
1. Plan: Choose a name, location, and blueprint for success
Starting a business begins with answering three questions: Who are you? Where will you work? And how will you make money? That means choosing a name, deciding on a location, and creating a business plan.
Decide on a name
Who are you, anyway? What do you want your business to be known for? Choosing a name for your business is one of the most important aspects of becoming an entrepreneur, but it doesn’t have to be daunting.
First, don’t get too hung up on picking the perfect name in the beginning. The name you choose now may not be the name you end up with at the end of your business launch.
Next, report or register your business name in a few different places. Primarily, you’ll register with the government and online to set up a website. We’ll get into the details of registering and protecting your business name in the next section.
So for now, here are some tips on choosing a good name for your new business:
- Make it unique: Be creative. Choose a name that nobody else in your industry is using. You don’t want customers to be confused—or other businesses to sue you.
- Make it relevant: Your name should represent what your business does, how it makes customers feel, or how it’s unique—a combination of all three is a plus.
- Make it positive: Don’t choose something that will leave people with a bad taste in their mouth. And avoid picking a name that’s too cutesy or too inside baseball.
- Make it short: People will be googling your business, so it should be short enough to remember. You can drop the extra “Inc.” or “LLC,” except on certain required legal documents.
- Make it easy to spell: Again, if someone can’t remember how to spell your business, wish them luck finding you. One spelling aberration—à la Tumblr—is enough for uniqueness.
Choose a location
In today’s tech- and cloud-enabled economy, many new business owners have more of a luxury for choosing where they do business than in past decades.
You may choose to open a storefront in a leased or purchased building, work from your home, or even travel to a coworking space where you share an office with different businesses.
Who are you, anyway? What do you want your business to be known for?
Your choice of location affects several factors, from the costs you pay to the services and hardware you need. If you plan to sell physical products to people in your community, you probably need a brick-and-mortar store or smaller retail base like a mall kiosk.
But if your customers live in a wider geographical area, you could operate without a physical storefront, provided you have space to create your products or services.
Working from home is an appealing option for many small-business owners. The comforts of a home office can be enticing. You control your space and your surroundings, and you can avoid a dreadful commute. But a home-based business carries some potential risks and drawbacks, such as extra distractions or a lack of human interaction.
Here are some details to consider when choosing your business location:
- Appearance and reputation of the area
- Employee needs
- Climate and seasonality (for example, a snowy climate may not be the best location for a surfing instructor business)
- Competitor location and behavior
- Start-up costs and long-term expenses
- Customer and community demographics
- Geography, travel, and distribution needs
- Physical demands, such as parking, hardware, and manufacturing
- State and local taxes, regulations, and licensing rules
Write a business plan
Most experts recommend that new entrepreneurs create a business plan—but what is a business plan, exactly? And do you really need one?
Although writing a business plan isn’t a surefire path to success, studies show that people who create business plans tend to also become successful entrepreneurs, so it can’t hurt.2
Our advice? Whether you write a formal business plan, construct a mental plan, or discuss a plan with a partner, make an effort to create a business plan.
Here’s an outline with descriptions of a business plan’s key parts:
- Executive summary: Write a short overview of your business plan. Although it comes first in the document, it’s best to write the executive summary last. By the time you’re finished with the other sections, you should have a good idea of how to summarize the plan’s contents.
- Business description: Describe what you’re going to sell, how you’ll do it, and why. Give details about your business’s location and owners and about how your products or services will meet customers’ needs and market demands.
- Market analysis: Explain who your competitors are and what your target market is. Lay out your case for success—how your business will leverage its strengths and overcome its weaknesses.
- Products or services: Give relevant details about what you’ll sell customers, such as design, development, production, and distribution.
- People and business organization: Lay out your business structure and management organization. Describe the people involved and how they’ll work together.
- Sales and marketing strategy: Describe your sales process and how you will market, promote, and advertise your product or services. Define how you will measure the costs and successes of these strategies.
- Financial plan: Establish a plan to fund your business and keep it running. Include the costs to start and your financial projections for as far into the future as you can, preferably at least three years.
- Appendix (optional): Attach useful illustrations, charts, or notes that would help a reader understand your plan better.
That may sound like a lot, but don’t think that your business plan needs to be dozens of pages. Keep it short, concise, and readable for your audience.
For an easy-to-follow approach to writing a business plan, we like the basic framework laid out by the U.S. Small Business Administration.
2. Register: Get structured, get legal, and get protected
The next steps are to register your small-business start-up with the government, officially define your structure, and protect your business by reserving the name online.
It’s important to note that the rules for making your business legal differ by state—and sometimes even by local community. Visit your state government’s website to learn the details.
Yet there are several steps that almost any new entrepreneur will need to take, and we list them below.
Decide on a legal structure
Every entrepreneur must decide how to structure their business for several reasons. What you choose affects your liability and taxes, as well as which laws and regulations you’re subject to.
There are four primary business legal structures. But which one is right for you? That depends on how many employees you have, how comfortable you are with taking on personal liability for business operations, and how you want to pay taxes on money earned by the business.
| Structure | Employees |
| LLC | At least one |
| Partnership | Two or more |
| Sole proprietorship | One |
| C corporation | At least one |
| S corporation | Between 1 and 100 (must be US citizens) |
There are a few less common types of business structures too.
- B corporation: Also called benefit corporations, B corps are taxed like C corps, but they operate differently under “rigorous standards of social and environmental performance, accountability, and transparency.”3
- Close corporation: These are very small corporations not subject to many of the laws and regulations of C corps and S corps.
- Cooperative: Employees and customers, rather than shareholders, have control of cooperative corporations.
- Nonprofit corporation: Nonprofits are granted a tax-exempt status for being dedicated to social welfare and not distributing profits to shareholders.
Get an identification number
You’ll likely need a federal Employer Identification Number (EIN) to do business no matter where you’re located. The IRS says to get an EIN if any of the following apply:
- You have employees.
- You operate as a corporation or partnership.
- You file tax returns for employment; excise; or alcohol, tobacco, and firearms.
- You withhold non-wage taxes on income you pay to a “non-resident alien” (IRS definition).
- You have a Keogh plan, which is a retirement plan for some small businesses and self-employed people.
- Your business has relationships with certain organizations like estates, farmers’ cooperatives, nonprofit organizations, plan administrators, real estate and mortgage organizations, or trusts.
To get an EIN, complete and submit an application with the IRS. You’re eligible for an EIN as long as the person who applies has a valid Social Security number (SSN) or other Taxpayer Identification Number (TIN).
Reserve your business name
With your fancy new EIN, you can register your company name with your state and local governments. Again, the rules governing the whens and hows for name registration vary.
Some states require you to choose a completely unique “entity” name and to pick one that reflects the type of business you’ll be doing. Registering your business name with the state protects you from other business owners trying to use the same entity name in your state.
You may also need to register your name as a Doing Business As (DBA) in your state. This ties your business name to you as the owner and may be required if you’re structured as a sole proprietor or corporation. You may be able to choose different DBA and entity names.
Registering a trademark with the United States Patent and Trademark Office provides federal protection for your business against those who may try to steal or threaten your brand identity. You can use different trademark names than what you use to register for DBA.
Finally, you should register your web domain name. This protects your address from copycats and helps customers find you. Your domain name can be anything you’d like, but—as with your business name—it should be short and easy to remember.
Prepare to pay taxes
If you sell certain products or services, you may have to pay sales tax to your state and local governments.
The taxes you pay may also depend on your business structure. To cover yourself, register with your state tax department using a valid TIN and prepare to collect sales and other taxes when required.
In addition, if you bought your business, you may have to pay additional taxes—and you may also be eligible for tax credits. Check with your state tax department to learn more about taxes that apply to buying a business.
Get business licenses and permits
Depending on the kind of business you do, you may need special licenses or permits to operate legally. Get to know your state and local business licensing and permit rules and the fees required to obtain them.
Here are some examples of federal business licenses you may be subject to:
- Agriculture
- Alcohol
- Firearms
- Radio and TV
- Transportation
One final note: keep good records. From registrations to licenses and every cost and fee you pay, record and store the information securely. You may need to access them later, and you’ll thank yourself for planning ahead.
3. Finance: Build the funds you need to get up and running
You’ve got to have money to get your business off the launchpad. Fortunately, there are several ways to fund your start-up even if you don’t have mountains of cash lying around—it just takes hard work to get it.
Open a business bank account
First, you need a place to put the money your business earns. Although it’s not always required to open a separate bank account for business income, we recommend doing so for several reasons. These are just a few:
- Credit and capital: Your business is likely to have access to much greater amounts of credit than you can get on your own, which can help your capital-raising efforts.
- Liability protection: Business accounts help you protect your personal assets from certain liability risks.
- Professional services: Many banks offer special services for business accounts that you can’t get with your personal checking account.
- Taxes: You—and the IRS—can more easily track your profits and expenses if you separate your business and personal accounts.
Pay attention to any special rates or services that banks offer to businesses. Be wary of any additional fees associated with business accounts too.
To apply for a business account, you usually need your EIN, business creation and ownership docs, and any licenses or permits required by the government.
Raise the money
Capital is the money you need to roll out your entrepreneurial goal. But how do you get your hands on it? If your brilliant business idea needs tons of cash to start up, you may need to ask investors to pitch in for your fledgling organization. But that’s not your only option.
- Fund it yourself: If you have access to enough liquid assets—cash, savings, investments—you may want to consider the self-funding option. It’s a risky endeavor, however, so consider this course of action carefully.
- Ask family and friends: Do you have a proverbial “rich uncle” you could ask for help? Just be sure this friend or family member agrees to the risk.
- Get a loan: Your local bank or credit union may loan your business the capital to get running. But note that you usually need to put down some cash to secure a business loan.
- Contact capital investors: Angel investors are hard to convince, but they can offer big boosts of cash along the way. Venture capital firms have the biggest reserves but can be the most difficult to secure. Either way, you’ll be trading capital for a stake in your company’s success.
- Try crowdsourcing: From Kickstarter to GoFundMe, many entrepreneurs have found success by taking their idea to the masses and soliciting small donations to get their start-up off the ground. Find out your state’s top Kickstarter campaign.
- Go to the government: Look into local financing, grants, tax credits, and other incentives for business owners. SBA-guaranteed loans, which are backed by the federal government, may be easier to get approved for, and they offer extended payback periods.
4. Run: Get software, services, and hardware to fuel your business
Once you have the foundation and funds to start up your new businesses, it’s time to look into the products and services to keep it running. But how should you sort through the thousands of available options? And which choices do you need to make immediately when it comes to services?
That’s where we come in—below are the business services and software that Business.org recommends for new businesses.
Business internet services
For running point-of-sale systems, operating an e-commerce site, or setting up a website, you’re going to need internet. And even if you plan to work from a home office, you’ll likely need a business internet plan.
If you’ve done any research on the topic, you may have noticed that business internet tends to be more expensive than residential services. What gives? Well, ISPs usually pack more bandwidth, more services, and more security into their business plans, which raises the price.
Still, you should be able to find a business internet plan that fits both your start-up needs and budget.
Check out some of our business internet guides, reviews, and comparisons below:
- 5 Best Internet Service Providers for Small Business of 2018
- How to Choose an Internet Service Provider for Your Business
- DSL vs. Cable vs. Fiber vs. Satellite Internet—Compare Internet Types
Business phone services
Maybe you can get away with using your cellphone for some business calls, but chances are you’ll need special business phone services too.
For offices that need multiple lines, you can get traditional phone, digital voice, or Voice over Internet Protocol (VoIP) services—or a combination. Whatever works for your business, we’ve got the resources to help you get started:
- How to Choose a Phone System Vendor for Your Business
- How to Set Up a Phone System for Your Small Business
- VoIP vs. Traditional Landline: Is It Time Your Business Made the Switch?
Business web and technology services
When you create a website, you have to pay someone to host it on the internet. And unless you’re a whiz web developer, you’ll probably have to pay someone to build your site too.
If you’re not sure what to do next, these resources can help you juice up your online business presence:
Business insurance
No business is without risk, and some organizations require more protection than others—that’s what business insurance is for. But do you need it?
The answer depends on your structure; whether you have employees; and certain local, state, and federal laws. Business insurance protects your personal assets if your business structure leaves them at risk. Some types also protect your employees, your property, and your ideas.
7 Best Workers Compensation Insurance Companies for Small Businesses
Depending on how your business operates and the number and roles of the people involved, you may need at least one of these types of business insurance plans:
- Business-owner policy (BOP): A BOP is a package of insurance plans that combine property, liability, and other types of coverage.
- Health insurance: Many new small businesses can’t afford to provide health benefits to their employees. But as you grow, you may want to sign up for a small business health insurance plan to protect your employees.
- General liability insurance: A must-have for most businesses. General liability protects you from claims resulting from employee injuries on your property.
- Professional liability insurance: This type of insurance is also called errors and omissions (E&O) insurance. In cases where you may be sued for making errors or acting negligently, it reduces your liability.
- Commercial property insurance: Cover your business property and assets, including buildings, equipment, and outdoor items, with commercial property insurance.
- Workers compensation: Required in many states if you have employees, workers compensation insurance pays for your employees’ health and other expenses if they are injured or get ill on the job.
Business software
The software you need for your business depends heavily on the type of company you’re starting. But here are some of the most common categories of business software that may help your organization operate smoothly:
- Accounting and auditing: Track finances, pay employees, invoice vendors, bill customers, and secure tax records.
- Cloud storage and backup: If your business produces and works with large amounts of data, you need a place to safely store it—and a way to restore lost data in emergencies.
- Communication: Download email, chat, and collaboration software that keeps your communication lines open and your customers and employees connected.
- Customer relationship management (CRM): Use cloud-based tools for customer data management to improve customer service and automate marketing functions.
The 5 Best Mobile Credit Card Readers for Your Small Business
- Inventory and supply chain management: Manage and track lots of physical products and how they’re produced and distributed.
- Point-of-sale (POS) systems: POS systems handle transactions and may also include inventory tracking, invoicing, and other features. Mobile point-of-sale (mPOS) systems let you accept payments from mobile devices.
- Project management and productivity: Use tools to better manage projects and the teams who work on them to increase quality and efficiency.
- Remote access and virtual private networks (VPNs): If you or your employees work in remote locations, VPNs let you securely access your private business networks and information while away from the office.
Business hardware
Not every business needs a fax machine, but there are a few items that nearly every small-business start-up should buy in the early stages.
A Guide to Finding the Right POS System for Your Business
- Computers, laptops, and mobile devices: Purchase quality devices from reputable sources that you and your employees can easily use for everyday work.
- Routers, modems, Wi-Fi boosters, and servers: Your ISP may provide a modem and router with your business internet, but depending on the type of business you run, you may need extra boosters to extend your Wi-Fi networks or the local or network services that process your data.
- Printers, copiers, and fax machines: Love them or hate them (think Office Space), many new businesses need to purchase professional-grade equipment to produce and send documents.
- POS and mPOS equipment: Brick-and-mortar offices, kiosks, and roving storefronts need equipment to handle transactions.
- Storage devices: Unless you’re backing up all your data to a secure cloud-based service, you’ll need external hard drives or mobile storage devices to store your sensitive information.
5. Sell: Earn customers through effective sales, marketing, and promotions
You’ve got the name, the funds, the systems, and the legal cred: now it’s time to get the customers. Successful businesses leverage the best tools to help them find and acquire the right customers—and provide experiences that keep them coming back.
Here are some key documents, services, and software you need to turn strangers into happily paying customers:
5 Best Lead Tracking Apps: Maximize Your Productivity and Sales
- Marketing and sales plan: You may have included sales and marketing in your business plan. If not, you should get to work on how you will position your business in the market, who your potential customers are, and how you plan to serve their needs with your products or services.
- Lead tracking software: Many businesses now get most or all of their customers through online marketing and promotional efforts. Lead tracking software combines data about your customers, product and services, and business capabilities to identify opportunities to increase revenue and build your success.
- Customer service: A business transaction doesn’t end with a sale—keep your customers happy long after they make a purchase and build pathways for customers to communicate with you.
The takeaway
Starting a business takes commitment, patience, and hard work. Following a plan—like this checklist—can make your entrepreneurial process easier and more successful.
Your business starts with an idea, which turns into a name and eventually becomes a reality. Make sure you have the right structure, financial plan, services, and protection for your business to keep customers happy and the money flowing.
How will you jumpstart your business plan and achieve your entrepreneurial goals?
Sources
1. U.S. Small Business Association, “Small Business Facts”
2. Entrepreneur, “Do You Really Need a Business Plan?”
3. B Lab, “What are B Corps?”
-
Sheldon Frank
