Nine Tips for Starting a Successful Business
Starting and running a business takes a blend of skills. Successful entrepreneurs are creative and determined. They share a strong sense of ethical responsibility, a love of learning, and an interest in the relevant law and policy — and, of course, people.
Starting a business with thoughtful preparation pays off in money and time. Here are nine tips for successfully getting your venture up and running.
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1. Write a Well-Researched Business Plan
Your business plan shows the structure and potential of your new business. You'll use it to track your progress and to assure investors or lenders that funding your business will be worthwhile.
You can create a traditional or streamlined business plan depending on who will review it and for what purpose. Do you need an idea of how to get started writing a business plan? You can start writing your business plan now with a template from the Small Business Administration (SBA).
Your business plan should lay out your company's value, operational structure, key clients, and finances. Here are nine common components of a sound business plan:
- Executive summary: Present your mission statement, an overview of your business, and — if you plan to request funding — the addressable market and growth potential of your business.
- Company description: Provide more detail about how the company will work to achieve its mission. Discuss potential collaborators, suppliers, and strategic partners. Include facts and resumes of any key founders or employees.
- Market analysis: Explain what other businesses do and don't do. Explain what your business offers that fills a niche or a need in the current market.
- Organization and management: Describe the management structure and the legal structure of your business. State your chosen form of business, such as a sole proprietorship, a partnership, a C corporation, or an S corporation.
- Service or product line: Describe what your business produces. Explain any relevant research or intellectual property filings.
- Marketing strategy: Describe your outreach, advertising, and sale methods in detail.
- Funding request (if applicable): Lay out the projected needs, uses, and amounts of funding required over the coming five-year period. Explain why your business needs debt or equity, and your preferred terms. Name potential collateral you own in addition to the value of your business.
- Financial projections: Supply any existing balance sheets, cash flow history, and budget documents covering up to five years, and forward-looking financial information for the coming five-year period. Then break it down to show detailed spending and revenue projects for the first months, quarters, and full year. Describe and illustrate your projections, and how they meet your funding requests.
- Appendix: Provide supporting documents and resources that back all the facts laid out in the plan, as well as licensing and permitting documentation.
Tip: About a third of new businesses do not survive that two-year mark, according to the JP Morgan Chase & Co. Institute. If your business plan underpromises and your business over-delivers, lenders and investors will not be disappointed.
2. Be Vigilant About Licensing and Permitting for Your Startup
An unlicensed business, or a business engaged in activity without a required permit, can:
- Incur fines — and the longer the violation, the heftier the fines
- Be sued or reported to local property authorities by a disgruntled customer — or someone else
- Be shut down, at least until the business owner can resolve the lapse in permitting
In serious cases, a lapse in legal permissions can lead to a business owner's arrest.
Here are a few common permissions you might need to run your business:
- Local business license and signage permits
- State sales tax permit for in-person or e-commerce sales
- Local zoning or conditional-use permits
- Professional or occupational licensing
- Motor vehicle licensing
- Food-handling certification
You could also need a federal permit if your business involves interstate commerce, occurs on federal lands, or is otherwise federally regulated.
Tip: If you have complex compliance needs, you do not have to oversee them all yourself. You can outsource licensing and renewals to companies that provide this service.
3. If You're Starting a Home Business, Know the Rules
Do you plan to start a home-based small business? Setting up shop at home can streamline time and startup costs. There is no need to commute or to lease or buy commercial property.
Nevertheless, research the requirements for any licenses and permits that apply to your business. Check with your city or county to see if working out of your home involves a home occupation permit. If your unit is part of a condo property or neighborhood association, find out possible limits on business use of the home in the covenants, conditions, and restrictions.
Be sure your home business idea makes sense. You need the appropriate space (including parking space) to meet associates as well as potential customers and employees. Know that you can stick to a schedule at home, and not have to fend off constant distractions.
If you use part of your home regularly and exclusively for business, you can take a tax deduction for some of your home business expenses as well as your vehicle use. Speak with your tax professional about maximizing this tax benefit.
While a home office can accommodate many types of business, an entrepreneur with an online business is particularly well-suited for a home-based startup. And most towns and cities allow home-based businesses. Yet the owner of a home-based business should minimize potential noise and traffic. These are the issues most commonly targeted by local regulations.
Tip: Flouting zoning restrictions puts a small business at risk of fines and penalties. If delivery drivers frequent your home, consider using a commercial receiver instead. If your startup outgrows its home-office business model, consider leasing space in a commercially zoned location instead.
4. Choosing a Business Name and Marketing Materials? Talk With a Marketing Pro
When choosing your business name, you'll want something unique and memorable. Don't choose a name that a similar business has already taken in your state.
Work with professionals if you need to create a name for your new business. Speak with a web design and marketing pro. They help entrepreneurs visualize logo designs, website concepts, social media banners, and profile images. All of these should mesh with the business idea and its name.
A consultation with a marketing and design team is time well invested. Quality branding helps your business look professional and recognizable to the public.
The creation of your website includes reserving a domain and signing up for a hosting service. Set it to auto-renew to sustain your internet presence year after year.
Tip: A professional can also look around the internet in incognito mode to ensure that your startup's proposed new name is not already taken in your area. This avoids the problem of web domain companies taking the word search and selling your chosen domain name to you when you go to purchase a website address.
5. Protect Your Brand and Register Your Small Business
The next step is to visit your state's business website run by the Secretary of State. Here, you can register your business. Registering the name of your business protects your use of the business name throughout the state.
Rules related to how to name a business and what suffix (Co., Inc., Cooperative, etc.) you can use are state-based. Typically, your state will reject your application if your proposed name is already registered. States may also reject applications for names they deem deceptive or confusing to consumers.
To avoid infringement on others' intellectual property, learn the basics of trademark and copyright. Check for the uniqueness of your proposed business name, as well as any product and service names you might develop, with the U.S. Patent and Trademark Office (USPTO) database.
Tip: Should you register your trademarks? You don't have to do this to start a business. Yet formal registration with the USTPO protects commercial names nationally. Consulting with an intellectual property attorney and formally registering your business name can pay off by enabling your business to take legal action if competitors try to use your business and product names.
6. Obtain a DBA ("Doing Business As") Name
While sole proprietors must name small businesses after themselves, they may also create a new name to represent the business. If so, they should formally register their DBA ("doing business as") name. Registering a DBA lets businesses use a fictitious business name — also known as a trade name. Having a trade name helps keep their business activities separate from their personal finances.
Entrepreneurs who have registered a corporation or limited liability company (LLC) name might also register a DBA, if, for example, they offer services under a different name.
Do you need to register your DBA? Check both state and local government websites for guidance. Each state's processes and fees are distinct (see how to file a DBA by state). Once you register, people can pay you under your trade name. You can sign legal documents for your registered DBA, and your small business can open business bank accounts with a financial institution using the DBA and a federal tax ID number (EIN).
Although you can use a DBA already being used in your state, you must still use care to avoid trademark infringement laws.
Tip: Registering a DBA name does not provide small business owners with personal liability protection. The startup owner should look into small business insurance to reduce risk.
7. Fund Your Business: Don't Miss Assistance That Might Be Available to You
Once you have a legally registered entity, you can obtain an employer identification number (EIN) from the Internal Revenue Service (IRS). Then, you'll be prepared to open a business bank account and apply for credit cards and loans under your business name. This is the start of building your business credit profile.
You (or your friends or family members) can contribute equity or lend funds to your startup as it builds a business credit history. If you need startup funding from a financial institution, be sure you have an excellent business plan.
A reputable source of funding is the Small Business Administration. The SBA 7(a) loan is its signature startup financing product. Some banks participate as 7(a) lenders.
Don't overlook the assistance that might be available to you as an entrepreneur. Some state and local governments offer loans, tax credits, and other benefits for small businesses. Check your state and local government websites. The SBA offers a tool to plug in your zip code and find your local Small Business Development Center.
Tip: First-time borrowers looking for startup funding should prepare for the possibility of rejection. Should you experience a bank's rejection, you are not alone. Many first-timers rely on personal funds, or loans from their close connections until they build up a reliable business credit history and a record of profitable operations.
8. Buying a Business? Find the Pain Points and Negotiate
What if your financial plan involves buying an existing business? Avoid making conclusory assumptions that it will be a successful business. Take out your fine-toothed comb, and:
- Review the business laws of your state. Don't overlook any applicable business opportunity disclosure laws.
- Peruse the firm's balance sheet and tax returns. How much cash flow remains after the company pays its expenses?
- Review the company's documents and information. Consider assets, outstanding bills, shareholders, customer base, and contractors. Don't overlook integrated cloud services, online security, accounting software, and even the business's email marketing strategy. All of these components put together show how much restorative effort and funds you might need to invest in the business.
- Physically inspect the premises.
- If you're buying a franchise, find out what kind of support the parent company will give you.
- Go over the staff records, looking for possible red flags including high turnover. Online reviews from employees say a lot to the buyer and to the general public about the principles of a business.
The first steps to start a business, including market research, apply when buying a business, too. The biggest difference? As a buyer, you'll take on the building, the assets, the staff, the contracts, the debts, and the reputation of the existing company. You'll assume both the business's success and the risks in the market you enter.
Will people want what the company offers? Market research can let you know.
Will they want it from this company? Check on the company at customer review sites, LinkedIn, and social media accounts. Get a sense of the company's credibility.
Tip: Rehabilitating a sagging reputation can take a good deal of time and money. Don't be afraid to negotiate on price accordingly.
9. For Peace of Mind, Get Legal Expertise
Starting a business always involves laws and regulations — and some aren't obvious. For case-specific help, consult an experienced business organizations attorney in your area.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.