Basic Guide to Starting a Business
You’ve probably heard the legend of garage-coding Steve Jobs and Wozniak, as well as the industry-disrupting rise of Mark Zuckerburg while he was still in college. While those stories seem like successes that happened in a flash, they don’t quite paint an accurate picture of the long game that goes into starting a thriving business.
For that, you’ll have to understand the time you must invest in planning and strategizing your new enterprise, as well as the time it takes to get through bureaucratic requirements.
To learn how to start a business, read on.
Starting a Business: The Basics
Do you have a business idea that you’d like to bring to life? Starting a small business requires a time investment that is part personal and part bureaucratic. In other words, some of the time it takes to get your business up and running involves doing, while some of it involves waiting. You’ll have to account for both in your business entity timeline.
The primary actions you’ll need to consider as a small business owner include:
- Creating your business plan
- Launching operational first steps
- Raising funds
- Recruiting a talented team
- Opening a business bank account and setting up a robust accounting system
#1 Create Your Business Plan
Before even thinking about taking Zuckerburg’s crown, you’ll need to fine tune your vision, structure your operations, and detail your methodology all within your business plan. A great place to start? Setting parameters of what you’d like to accomplish as a small business owner by performing your own market research.
Conduct Market Research
Market research determines where your business should land at the crossroads between consumer demand and economic trends. You may have a one-in-a-billion business idea, but if it only attracts one-in-a-billion people, then you’ll have a hard time scaling your operations. To that end, you need to know who your target market is, how large your market potential is, and what piece of the market is claimed by your competitors. Outlining these points will help you set up a successful business by identifying areas of opportunity.
To determine who your market is, you can conduct your own research with surveys, questionnaires, and in-depth interviews, or you can tap into extant resources when doing your business planning. When it comes to how large your market potential is and your competitors’ positions, consider collecting data from the following sources:
- U.S. Census Bureau
- Consumer Price Index
- Income Statistics
- Gross Domestic Product
- Statistics of U.S. Businesses
Choose Your Business Structure
As a first-time business owner you’ll need to decide how you’d like to structure your business. The five primary business entities include:
- Sole proprietorship
- C corp
- S corp
Different models are better suited for different kinds of business—some structures are low-cost and easy to start (see sole proprietorships) while others offer the potential for unlimited growth (see C corps). One structure may have enticing tax breaks (see S corps), while another offers limited liability to separate legal and financial burdens from the owner’s personal assets (see LLCs).
If you’re unsure which model will best serve your business in the long run, read more about the pros and cons of each corporate structure.
Once you’ve chosen your business structure, it’s time to make your enterprise official.
Name Your Business
Choosing the right name for your new business can be both an exciting and nerve-wracking endeavor. This will be how you connect with customers and relay exactly what it is you’re offering.
Consider the following before choosing which name you’d like to register your business under:
- Conduct a thorough search to be sure there are no other businesses with your name
- Search the United States Patent and Trademark office to see if you can trademark your name
- Get feedback on the name from friends and family
- Avoid hard-to-spell and overly complex names
Register Your Business Name
When registering your business name, you’ll need to do so through a Fictitious Business Name (FBN) or a Doing Business As (DBA). There are four steps involved, including:
- Check for availability
- File the name
- Pay filing fees
- Publish the name
Additional steps may be required depending on the state in which you’re registering your business. For example:
- If you are registering in California, Georgia, Illinois, Minnesota, Nebraska, or Pennsylvania, you’ll need to follow specific newspaper publishing requirements.
- If you’re registering an LLC in Nebraska, Arizona, or New York, you’ll also have to adhere to specific newspaper publication guidelines for each of these three states.
Obtain Tax IDs
As a business owner, you’ll need to acquire an Employer Identification Number (EIN). If you apply online you can get your EIN immediately (mail-in time is approximately four weeks).
To qualify for an EIN you must:
- Operate your business within the U.S. or a U.S. territory
- Be the owner
- Have a legal Taxpayer Identification Number (TIN)
- Fill out an IRS Form SS-4
File For Licenses and Permits
Depending on what your business entails and where it’s physically located, you’ll need to apply for permits and licenses at the local, state, or federal level.
Check your city or county website as well as your state website to see what kind of paperwork you’ll need to complete, if any. The specifics for permits at these levels vary greatly.
Common industries that require federal permits include everything from agriculture to nuclear energy. Check the U.S. Small Business Administration for a full list.
#2 Operational First Steps
Remember how there are two primary aspects to the question of: How long does it take to start a business. There’s the bureaucratic side, which if you’re following the guide chronology, you just took care of a significant portion. Then there’s the personal side, the creative side of physically launching your business.
For this, you’ll need to focus on three things:
- Creating a minimum viable product
- Launching your website
- Securing IP protections
Be careful about getting too caught up in every element—aim for progress, not perfection.
Create a Minimum Viable Product (MVP)
Whatever service or product your business is specializing in, you’ll want to get the minimum viable product (MVP) out to the market as quickly as possible. Yet herein lies a trap. Come to market unprepared, and your business could sink before it’s given a chance. Wait too long, and someone else could beat you to market.
So, when do you know when your MVP is ready to present?
American entrepreneur Eric Ries introduced this concept to the business world, and defines the purpose of an MVP as:
“[The MVP] is the version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least amount of effort.”
Let’s look at a real-life MVP example with company Airbnb. The Airbnb team attended a design conference in 2017 and offered low-cost accommodations during the event, posting information on a simple website.
When conference attendees said they’d pay to stay in someone’s home versus a hotel, Airbnb proved their concept. That’s all they had to accomplish.
Launch Your Website
Creating a sleek, easy-to-navigate home for your business is often the harbinger of long-term success. Why is that? Well, your website is often your first impression with new clients.
Consider the following steps when launching your new business website:
- Procure a domain name
- Peruse sites offering similar services or products
- Make notes of sites you admire
- Sketch a template of what you’d like your site to look like
- Make navigation bars prominent on the homepage
- When in doubt, leave out (another way of saying, keep your website simple, clean, and filled with only the most important pieces of information)
Secure IP Protections
As a new business owner, you’ll want to protect your intellectual property (IP). Common forms of IP protection include:
- Patents – Visit the U.S. Patent Office to secure a patent for your IP. Patents are often procured for intangibles like original designs and improvements, or for physical inventions, like a new machine.
- Copyrights – A copyright allows the creator of original material to use, copy, or duplicate their material as they so choose. You can file for a copyright at copyright.gov.
- Trademarks – A trademark is a symbol or words that represents a product, legally separating it from other products. Trademarks are often associated with a company’s brand, like Pepsi or Kleenex. You can file for a trademark through the U.S Patent and Trademark Office.
#3 Raise Funds
Without a money tree growing in your backyard, chances are, you’ll need to raise some capital to get your business off the ground. Even if you have initial funds, companies will often raise large rounds of capital when they plan to expand or scale rapidly.
According to Forbes, startups have shared that it can take anywhere from 90 days to nine months to complete fundraising efforts.
There are three main types of fundraising:
- Loan fundraising – Debt-based financing is the most common source of capital for new businesses. Owners seeking this kind of fundraising can set the rate of interest on these loans and the time frame in which they think they'll be able to pay back the funds to lenders. Common loan programs for new businesses include: SBA loans, CDFI loans, and traditional bank loans.
- Equity fundraising – This type of fundraising allows individuals to invest money in your company now and in exchange for a stake in the business as it progresses. Common forms of equity fundraising include seed funding, series A, series B, etc.
- Convertible debt – This form of financing blends the equity and loan models. Within convertible debt parameters you borrow money from investors. They can then choose to be repaid or to have their borrowed funds converted to a share in the company.
Note: As your company becomes more established and builds a credit report, you can take out a revolving line of credit through corporate cards. When doing so, look for smart corporate card programs that have built-in tools to help manage your company expenses.
#4 Hire Employees
Hiring employees to help you grow your business can be mentally and emotionally draining—after all you’ve worked tirelessly to get to a point where you can hire employees. You want to ensure that they treat your business with the same ethos you do.
With this in mind, know that the more attention you pay to these first hires, the fewer blunders you’ll encounter down the line.
Before diving into the hiring process, consider investing time in the following practices:
- Write a clear and detailed job description
- Set a hiring schedule
- Conduct a comprehensive reference check on all applicants
- Understand market rates to create competitive employment packages to attract top talent
#5 Set Up Accounting Systems
Bookkeeping is the universal bane of all business owners’ existence. The reason being that most new business owners rely on manual accounting workflows. This takes countless hours from the outset and makes growing your business (alongside scaling your expenses) an on-going nightmare.
For this reason, investing in expense management software upfront can save you time and money in the long run.
Ideally, you want one that is built into your corporate card.
Take Your First Steps With Ramp
Once you’ve decided to become the proud owner of a new business and taken those initial steps, it’s time to partner with those who help you achieve your mission. At Ramp, we can help you save time and money by investing in a real-time accounting and expense management platform built into your corporate card.
According to the Global Business Travel Association, manually entering and correcting expense reports can cost a company upwards of 38 minutes per report, and more than $100 per report. This may be fine when you have 2-3 employees, but what happens when you scale to 50 employees?