How to Start a Small Business in 2020: Step-by-step Guide

Written by Melanie

September 3, 2020

start a small business

Are you ready to finally start a small business this year? That’s great!

However, the fact of the matter is, the statistics are, unfortunately, not in your favor. A lot of businesses don’t make it beyond the first year, and fewer still get to the fifth year.

The good news, though, is that there are a few things you can do right at the beginning to improve your chances of finding success.

This article will act as a concise guide on how to start a small business from home.

Here, you’ll find a step by step guide on how to get your business started, as well as a few tips that will help you get a head start.

How to start a small business: Step-by-step guide

Step 1: Be thorough in your market research

Conducting proper market research is the first step to starting any business, big or small.

Through market research, you will be able to see whether or not there is an opportunity for a business idea such as yours to turn into a successful venture.

Market research will also guide you on what niche to get into and what is already overdone within your industry of choice.

Being thorough in your market research is the best way to gather the data you need to know about your customers and your potential competition.

Step 2: Write your business plan

A good business plan will lay the foundation of your entire business. It is an outline of how you will structure and run your business, as well as how it will grow over time.

With a business plan, you will also be able to convince potential clients and investors that you are a good choice for them.

If you need help writing your business plan, I found this really great guide that will help you do exactly that.

Step 3: Plan to fund your business

Your business plan will tell you everything you need to know about how your business will be funded.

You’re either going to have to use your savings or raise the money somehow.

If you have very little money with which to start your small business from home, here is a list of the best small business ideas that require little to no startup costs.

Step 4: Pick a location

Do you want to launch a brick-and-mortar business or an online one? For a brick-and-mortar business, your physical location will have a huge impact on your overall success.

If you want to start a small business online, things like your choice of hosting provider, how your website is set up, and your website builder of choice will impact how your business performs.

Step 5: Choose your business structure

This is what will determine your registration requirements, how much your taxes cost you, and your personal liability. Therefore, it is a very important decision that you should make carefully.

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Step 6: Choose your business name

Picking that perfect name is easier said than done. Besides making sure that no one else is using it, you also want a name that perfectly captures your brand identity.

If you need more information on how to choose a winning business name, check out this post.

Step 7: Register your business

The next step is to register your business and make it legal. Not only will this protect you from prosecution, but it will also protect your brand and make the government recognize that you exist.

Step 8: Get your tax IDs

You’ll need your federal tax ID to open a business bank account and to pay taxes, among other important things that are necessary for your business to grow. Depending on where you live, you may also have to get a tax ID as well.

Step 9: Apply for permits and licences

This will help you keep your business running smoothly. Be sure to comply with all the legal requirements of your industry, location, state, and so on.

Step 10: Open your business bank account

A dedicated business bank account is important because it will help you separate your personal finances from your business.

It will also help you handle business taxes and legal issues, as well as making the running of your day-to-day activities more efficient.

If you follow all the previous steps above, you’ll have all your paperwork ready, making the process of opening your business account very easy.

Tips to increase your chances of success as you start your small business

1. Start small

One of the biggest mistakes a lot of people make as they start their small businesses is investing too much money too quickly.

It is important to be realistic about your expectations and to keep an open mind about your business’ growth rate.

While you probably have very high expectations about your business idea, a little bit of skepticism will go a long way. Don’t assume your business will be successful. Instead, test all your big ideas in a small, inexpensive way.

This will show you whether or not people really need your product and how much they are willing to pay for it.

2. Do your cost estimates early

Every business has its financial requirements. According to experts, you need to budget for at least 6 months of fixed costs at startup.

You especially need to cover all your expenses for the first month, even if you do not make any money. At the same time, understand the various types of costs that all businesses have as they start.

You should also keep in mind that your expenses will grow with your business. Running out of cash when your business is just starting to do well is the last thing you want.

Don’t make the mistake of overestimating your revenue and underestimating your costs.

3. Perform a cash-flow projection

Do a cash-flow projection for the first three to six months of your business.

Add up fixed costs, estimates expenses (including the cost of buying goods, loan repayments, and so on), and worst-case scenario revenues.

This will give you a good idea of how much money you need to make to keep the business running.

Being realistic about your cash-flow will give you a good foundation on which to build your business, especially when you actually start incurring costs that you were not expecting.

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4. Understand your financing methods

Most small businesses are self-funded from personal savings.

Other funding sources include loans from friends and family, crowdfunding, bank and other financial institution loans, government loans, and grants.

There are also small business loans and angel investors that your business might benefit from. You will likely have to use a combination of two or more of these funding sources.

How can I start my own business with no money?

Not everyone has the financial means to launch the business of their dreams. So what if you have the desire to start your own business, but no money to invest in it?

Well, here are a few things you can do to help you start your own business with no money.

1. Start with what you have

Before you start, ask yourself these questions:

  • What can you do really well? What skills do you have?
  • What past experience do you have that you can leverage into a business?
  • What subjects are you knowledgeable about?
  • What resources do you own? What things do you have access to that you can take advantage of?

Think carefully about these questions and write down your answers. This will be a list of things that you can use to establish a new business with little to no initial capital.

2. Leverage your networks

Map out your networks and connections and take stock of the kind of relationships you have with others.

How could these connections help you use what you have more effectively?

Your networks can turn into partnerships that will shape your overall business model, and this makes them very valuable assets to have.

3. Be smart in how you invest

The golden rule of investment when starting a small business with very little initial capital is to only invest what you can afford to lose.

Investing only what you can afford to lose will make you more flexible and less prone to stress as you run your business.

You have no fixed expectations of returns, which makes you more likely to make the daring decisions that will catapult your business to the heights you’ve always dreamed it could get.

4. Be willing to experiment and adapt accordingly

You want to be responsive to your environment. Becoming adaptable will give you a competitive edge over your competition.

You have no incentive for things to remain the same, so why should you? Be eager to realign your business when technology, legislation, or customer preferences change and you will stand out.

Final Thoughts

Starting a small business is no easy feat. However, with the tips outlined here, taking those first steps should be a little easier.

If you need some inspiration on the best small business ideas to start with little to no startup costs, we have a dedicated post for that. Be sure to check it out!

What business are you planning to start this year? How are you planning to make that leap? Please let us know in the comments below. And if you found this post helpful, don’t forget to share it with other people who might, too!

Good luck!

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