For many, entrepreneurship has become the American dream, with adults and children alike taking steps to start a business. Some people tire of traditional employment, while others spot an opportunity and decide to pursue it, sometimes as a side hustle.
Fortunately, starting a business is a lot easier, and less time-consuming than running one. though there are some steps you'll want to take to make sure you're operating legally. Other steps—perhaps the most important ones—involve making sure you're offering something the market wants.
1. Research Your Market
Before you invest in materials, space, marketing, and all the other details of launching your business, study other companies in the field you want to pursue. Kelsey Klenklen, owner of Lilac Market Headbands, says, "Before taking the plunge on my business, I spent a lot of time observing other businesses and learning from their mistakes and successes."
One key takeaway for Klenklen was the amount of risk involved in setting up a brick-and-mortar operation, which was driven home for her once the pandemic hit. Instead, she went all-in on e-commerce.
2. Solve a Problem
The best business ideas solve a problem customers already have. This could be a new grocery store in a neighborhood that's never had one or a childcare service for children who have been sent home from school sick.
Kelli Lane, chief marketing officer at Genexa, a clean medicine company based in Beverly Hills, says she disagrees with the frequently voiced adage that entrepreneurs should "launch quickly and pivot accordingly." She thinks a better approach is "diving deep into your industry, testing, researching, and ultimately coming up with a product or service that offers a solution to a customer's problem."
3. Choose a Legal Structure for Your Business
Before you get too involved in designing a website and announcing your new venture, take some time to think about which type of legal entity makes the most sense for your specific business. The three most common are sole proprietorship or doing business as (DBA); limited liability company (LLC), which provides a firewall between your personal and business affairs; and an S corporation, which also provides liability protection.
Priscilla Arthus, founder, and CEO of Houston-based The GMS Lifestyle, chose to set up an LLC—partly to put herself in the right mindset. "When you don't set up your business the right way, you end up treating it like a hobby," she says.
4. Open a Business Bank Account
Once you have your legal paperwork ready, you can set up a bank account in your company's name, points out Pooneh Ramezani, DDS. The co-founder and CEO of Dr. Brite sees setting up your official business bank account as one of the top five steps to start a business.
5. Create a Plan
Often referred to as a road map for your company, a business plan is a critical document for getting your venture off the ground successfully.
Houston-based Neha Naik, who helps moms start their own businesses, says, "Contrary to popular belief, you don't need a complicated, elaborate business plan. It can and should be simple and actionable. Get 10 priority points down and act on them. Figure out what needs to happen today, this week, this month, and get it out of your head, be it on a piece of paper or in a project management tool." Not only will it help you with your decision-making, but it will reduce feelings of overwhelm, she says.
6. Become Familiar With Local, State, and Federal Laws
"This is a first step that I missed with my first business and it cost me a good deal of time and money to fix," says John Manison, owner of Los Angeles-based Apex Tutors.
"There are a plethora of federal, state, and local laws and policies that have to be followed, from what taxes you have to pay, to what e-file accounts must be set up," he says. The IRS website can be useful for this, as well as your local Small Business Development Center.