Why is it important to follow a procedure for starting a business?
According to the U.S. Bureau of Labor Statistics (BLS), few businesses make it to the 10-year mark—just 34.7% of the companies that started in 2013 were still operating in 2023.
Much of what determines a company’s longevity has to do with the planning process, and following a procedure for starting a business can help. Planning can start well before you open your doors.
How to start your own small business in 10 steps
Whether you’re a “solopreneur” or opening a full-scale production facility, a detailed process can help increase your chances of success.
1. Evaluate your business goals
Ask yourself questions about your small business idea:
- Why: Think about the purpose of your business and what needs it fills in the market.
- What: What product or service will you offer?
- Who: Who is your target customer base or audience? Be specific in describing demographic characteristics, such as age, gender, income level and location.
- How: Describe your plan for developing your product or service and delivering it to customers or clients.
Starting a business from scratch isn’t your only option. You can also opt to open a franchise of an established company. You get access to a developed business idea and model, which typically makes it easier to start a business in less time.
2. Start writing your business plan
When starting a small business, it’s never too early to write a business plan. This document serves as a guide for your new company. It’s a road map that helps take you from a simple idea to a successful company.
Effective business plans should include sections for:
- Business description
- Market and competitor analysis
- Product or service description
- Design and development
- Operations and management
- Financial projections
- Funding plan
- Marketing plan
Business plans are often 30-50 pages long, so they take time to complete. The writing process can help you assess the market and refine the business idea to make it more viable. If you’re not seeking funding from outside sources, your business plan can be less detailed.
Read more: 9 Steps to Writing a Business Plan (With 2 Templates)
3. Conduct market research
Market research helps you determine if there’s a need for your business idea and enough demand to sustain it. Consider these factors during the research process include:
- Customer behaviors
- Economic trends
- Product demand
- Demographic data
- Market size
- Economic indicators
- Location appeal
- Pricing
- Competitor strategies
- Competitor weaknesses
You can gather this information through existing sources or by conducting surveys, focus groups and interviews with potential customers.
Through careful market research, you can identify your target customer and determine how to develop products and services that sell. Market research can also help you decide on a name for your business, design color schemes and select other branding elements.
Analyzing competitors is also an essential part of the process. Researching their operations can help you identify areas of improvement to gain a competitive advantage in the market.
Related: Unique Selling Proposition: How to Create One for Your Business
4. Determine your business structure and logistics
At this stage, you need to make crucial decisions that define your business:
- Business name: Choose a unique business name—a business name generator could help. Make sure the domain and social media handles are available. Then, verify that no company has the same name, and run a trademark search for your brand and tagline. Business name conflicts can cause problems down the line, so it can be helpful to work with an attorney.
- Website domains: Buy the exact-match domain for your brand name and any variations customers might use. You can redirect the extra domains to your main website.
- Business structure: Decide what structure is best for your business, such as a sole proprietorship, partnership, limited liability company (LLC) or corporation. This step can impact taxes, personal liability and your ability to get funding. Consider consulting with an attorney or accountant when making your decision.
- Business location: Decide where your business headquarters will be located. Can you run it entirely online? Will it be a retail outlet, a commercial office suite or a home office? As you choose, consider foot traffic, parking, ordinances, utilities, crime, convenience and nearby competitors.
Once you’ve figured out those key components to starting a business, you might complete these practical tasks:
- Register your business.
- Apply for an employer identification number (EIN).
- Get federal and state tax IDs.
- Apply for a business license and permits, if applicable.
- Open a business bank account.
- Apply for appropriate trademarks, copyrights or patents.
- Purchase insurance policies.
5. Get funding for your small business
Finding funding is one of the most important steps to starting a business. First, determine how much money you need—the financial data in your business plan can be a useful guide. Using a spreadsheet or budget software, record every likely expense, including costs for overhead, production and marketing.
One way to figure out how much money you need is by performing a break-even analysis. The formula for the break-even point is:
Fixed costs ÷ (Item price – Variable costs)
This analysis can help you determine profitability, how to price products and services and how much you have to sell to make a profit.
Once you have a budget, you have several options for funding your business, such as:
- Self-funding from personal savings
- Borrowing from friends and family
- Small business loan or grant
- Online crowdfunding campaign
- Angel investors (individuals who provide capital in exchange for convertible debt or ownership equity)
- Venture capitalists (typically for larger-scale projects)
- Accelerators (for short bursts of funding)
- Incubators (sustained mentorship network)
Related: How to Get Business Funding: A Guide for Employers
6. Design prototypes and get feedback
Work with freelance designers and engineers to create product prototypes. Test your designs by setting up focus groups or creating scenarios in which randomly chosen individuals can put your product to the test. Afterward, ask them to complete surveys about their experience. Certain regulated products must also meet government testing requirements.
You may not need physical prototypes if you’re selling a service. For this business type, you can develop and test workflows and procedures. For example, if you’re starting an auto-detailing business, you might offer free services to refine your processes and tools. Consider asking for feedback afterward to help you improve the customer experience.
7. Put together your leadership team
Put together a team of people who help your operation run smoothly. Depending on the business size and type, this might include partners, employees, freelancers, contractors and consultants. Work together to select an accounting system and develop a plan for manufacturing, choosing vendors and recruiting workers and independent contractors.
This is a great time to establish protocols for communication and responding to employee complaints. Define company values and policies and put them in writing. This planning can shape your company culture.
Related: Company Policies: 15 Policies to Consider for Your Business
8. Develop your product
Once you’ve finalized the design and testing phase, you can organize production. That could mean setting up a manufacturing process to create a physical product, working with external manufacturers and suppliers or installing computers for the purpose of developing software. You may need to hire specialists, managers and employees to ensure the operation runs smoothly.
As soon as production is finalized, develop quality control and safety policies. Consider creating standard operating procedures to help new employees understand what’s expected.
9. Get the word out
In the early stages of business, it’s crucial to get in front of your audience through marketing, advertising and public relations. Take time to develop a marketing strategy. Identify the social media platforms where potential customers are most active and start posting regularly. It’s generally beneficial to determine what types of messaging resonate with your audience. Before your grand opening, write a press release and send it to local or social media outlets to build interest and awareness.
Here are a few ways to get the word out about your new business:
- Print advertising
- Advertising on Google
- Radio advertising
- Advertising on Groupon
- Finding free ways to advertise online
- Yelp advertising
- Billboards
- Indeed Company Pages
Read more: Business Marketing and Sales
10. Plan for business growth
As you get your business running, it’s helpful to plan for future growth. Learn to delegate roles and responsibilities, or consider hiring your first employee. Look ahead when you make decisions so you’re prepared if the company takes off. Planning for growth might include:
- Studying market trends
- Testing new ideas
- Acquiring another business
- Growing into new markets
- Expanding product lines and services
Opening a business: How to start 15 different types of businesses
The following guides on how to start a business are broken down by business type:
- Bar
- Catering business
- Cleaning business
- Clothing line
- Coffee shop
- Construction company
- Direct sales company
- Food truck business
- Internet marketing company
- Landscaping business
- Pool cleaning service
- Restaurant
- Social media management company
- T-shirt company
- Vending machine business
FAQs about the procedure for starting a business
The answers to the following frequently asked questions can provide more information about opening a business.
How much does it cost to start a business?
Startup costs vary considerably by company. Shopify found that entrepreneurs spend about $40,000 during the first year. You can start a simple online business for the cost of a domain and hosting.
How long does it take to start a business?
Opening a new small business may take a few weeks to a year or more.
