How To Start A Small Business

As appealing as working for yourself sounds, there’s a reason why not everyone owns their own business: It’s hard. After all, the skills it takes to create the product or service that you’ll be selling are often very different from the skills you’ll need to run a successful business. You can be really good at baking amazing cupcakes, for example, but turning that into a successful bakery is a different thing entirely.

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In this guide, we’ll help you sort out the main steps to starting a business, including how to write a business plan, get funding, figure out your business insurance and legal requirements, and more.

Written by Lindsay VanSomeren – You can read this article in its entirety HERE on Bankrate’s website

Bankrate Insights

There are 33.2 million small businesses in the U.S., composing 99.9% of all U.S. businesses. (U.S. Small Business Administration)
The average small business loan is $663,000. (U.S. Federal Reserve)
77% of small-business owners use personal savings to start their business, and 41% use a business loan or line of credit. (Gallup)
Over five million small businesses were established in the year leading up to August 2022. (U.S. Census)
82% of small businesses survive one year; 50% survive to the five-year mark; just 35% survive ten years. (Bureau of Labor Statistics)
The median income for small-business owners in 2018 was $51,816 for those with incorporated businesses and $26,084 for those with unincorporated businesses. (U.S. Small Business Administration)

Find your inspiration and write a business plan

People get inspired to start a business in a couple of different ways.

Maybe you’re good at making something, like homemade tamales, or doing something, like gardening. You can turn that hobby into a business if it doesn’t already exist in your area or if you can differentiate it in some way from potential competitors. Some small business ideas are novel enough that you may be able to sell your products nationwide.

Alternatively, some people start with the goal of opening a business in mind, and they just need to find the right idea.

Either way, it’s a good idea to write up a business plan. Just like with resumes, there isn’t any one way to do it. You’ll want to include certain things like your plans for how to organize and market your business, what products or services you’ll offer, market analyses and financial projects.

Successful business owners are split in terms of whether they wrote a business plan or not, a study from Babson College for Entrepreneurship Research found. About a third didn’t begin with any business plan at all, a third had an informal plan scribbled down somewhere and another third started with a formal written business plan. People who write a formal business plan are 16 percent more likely to succeed, according to an analysis by Harvard Business Review — a good thing to keep in mind if you’re thinking about starting a company.

Assess your finances and acquire funding

Your business will live and die by your ability to get a firm handle on your finances. Namely, you’ll need to learn how to control your business costs and pricing, so you can maximize your profit. You can get started on this by doing a break-even analysis, where you’ll calculate the minimum price for your goods and services in order to break even. If you price things below that, you’ll go out of business. If you price your items above that, you’ll earn a profit.

Of course, before you manage your finances, you’ll need first to get funding. Starting a business with no money may be possible in a very limited number of cases, but most of us will require some cash outlay. Here are some of the most common ways people do it:

Personal investment: money from your own savings
Small business loans: money from a lender. Approval rates vary from 14 percent with big banks to 26 percent with alternative lenders. Small banks, credit unions and institutional lenders fall in the middle.
Small business credit card: money from a line of credit dedicated to the business. Around 71 percent of small business owners have a business credit card, according to a study by Visa & A.T. Kearney.