Your go-to checklist for starting a small business (+ free download!)

Maybe it all started with your EZ bake oven marketing plan, and it's been your long-time dream to start a business. Or maybe you've recently developed your top-tier welding skills, and you want to monetize your trade. The trouble with starting any small business is knowing where to start! Luckily for you, you’ve come to the right place. If you're getting the yips just thinking about what it takes to start a small business, we'll walk you through the steps involved, including actionable advice along the way. And to help you even more, we've created a handy checklist for starting a small business so you can get started on the doing instead of stuck in the thinking.

What is a small business?

There’s no one definition for a small business. It can be just you in your backyard or an enterprise with a fulfillment team in a warehouse, and everything in between. Typically when we talk about small businesses, we’re referring to those with fewer employees and lower annual revenue. Think more along the lines of a local restaurant or a boutique hair salon versus a big-box department store. The U.S. Small Business Administration (SBA) does give more specific standards for small businesses in specific industries based on annual revenue and the number of employees. Officially, if you're under 500 employees, you qualify as a small business. But it’s not just revenue and size that separates small businesses from the crowd. Small businesses generally aim to break even or make money as soon as possible. With few (or no) investment dollars, your livelihood is on the line! A small business is different than a startup, though a startup can also be a small business. While startups prioritize industry disruption and profitability down the line, a small business might have humbler motivations, like opening a single storefront or pursuing a passion project.

What to expect when starting a small business.

If you’re starting a small business, you’re about to embark on the ride of a lifetime. If there’s anything you should expect when starting a small business, it’s to expect the unexpected. No matter how organized and prepared you are, there’s almost guaranteed to be something that comes out of the blue. But it’s all part of the fun right? That's why putting a solid plan in place is so important. When you plan for speedbumps and have contingencies in place, you can set yourself up for success—and hopefully experience more ups than downs to opening day and beyond.

Steps to start a small business.

Getting a small business off the ground is no easy feat. Here are a few basic tips to get you started. Don't forget to scroll down and download our checklist for starting a small business to get you oriented!

1. Come up with a business idea.

Every business starts with an idea. And really, all you need is that one spark to kick off your small business adventure. You might already have a business idea. But if you’re still on the search, here are some tips to help you come up with the perfect business idea:

• Ask friends and family around you what they think you're great at.
• Dig into your own needs and interests.
• Take advantage of something you’re good at.

Remember: your business idea doesn’t have to be groundbreaking. You can own a very successful small business without having to go too far outside the box. Just make sure you're meeting a market need! Which brings us to...

2. Do market research.

Now that you have your business-worthy idea, it’s time to do some research. The goal of market research is to double-check that your business is actually a good idea. Some questions you’ll want to answer when doing market research include:

• Is there a market for your business? Are there people willing to pay you for your products or services?
• What is your competition? How will you stand out from the crowd?
• Based on the current and projected market conditions, can you be confident that your business will be profitable?

3. Write a business plan.

A business plan is basically the blueprint for your business. It covers all the key information you need to get your business up and running. While drafting up a business plan can feel time-consuming and a little overwhelming, we promise it’s a step that is definitely worth taking. If you need some help getting started, we’ve got just the business plan template for that!

4. Secure your funding.

Usually, you’ll need a small sum of money to get your business off the ground. The amount you need will vary depending on the type of business you’re starting. For example, opening a brick-and-mortar business will likely require a bit more than a digital-first business since you’ll need to secure a physical location. You might have saved up some funds, but if you don’t have a full bank account, don’t worry. It’s not the only way to fund your new business venture. You can reach out to family or friends and even secure loans or grants to help you navigate the money side of starting your business. The U.S. SBA has some resources available, and there might be similar programs at a state or local level as well.

5. Pick a business location.

Now that you have a budget and funding, you’ll need to decide where to open your business. Even if you aren’t necessarily going to open a physical location, you still need to have a primary place of business. Your business location doesn’t just determine where you’ll open your business. It also impacts the rules and regulations for operating your business, such as employee leave requirements and licensing. We’ll cover these aspects in more detail below.

6. Choose a business structure.

How will you register your business with the state? There are many ways to structure the ownership of your small business. The three most common are:

1. 1. Sole proprietorship. This type of business is the easiest to set up. Under this structure, you own your business, and you generally don’t have to separate your personal and business assets or expenses.
   2. Partnership. This type of ownership is similar to a sole proprietorship, except you’ll own the business in partnership with one or several individuals. You’ll typically pen an agreement that outlines the terms of the partnership to make sure all your interests are protected.
   3. Limited liability companies (LLC). More similar to a corporation, an LLC allows you to separate your business from you personally. This can impact everything from taxes to your personal liability for business debts and legal claims. Though it helps protect you as a business owner, LLCs typically require more paperwork and can be more expensive to set up.

If you’re not sure what the best structure is for your small business, a legal and tax advisor can be worth the investment to help you navigate the different options.

7. Choose a business name.

Finding the perfect business name can take a bit of trial and error. Not only do you need a name you and your customers love, but it needs to be available for use. Once you've checked with business registration services, it's a good idea to make sure the website domain name, social media handle, and trademarks are also available before you finalize your name. Otherwise, you might find yourself facing a pretty costly rebrand in the future.

8. Register your business.

Once you have a name and have decided on your business structure, it’s time to go through the proper registration process. The good news is that according to the SBA, most small businesses only have to register their business name with state and local governments.

9. Secure federal and state tax IDs.

As an individual, you have a social security number. Businesses have Employer Identification Numbers (EIN)—also known as your state tax ID and federal tax ID. You’ll need a federal tax ID to pay your taxes and before you can open a bank account or hire any employees. It’s free to register for an EIN and you can get your number through the IRS right after you register your business. Every state also has different uses for state tax IDs, so it’s worth checking your local state’s website to understand whether or not you need one.

10. Apply for licenses and permits.

What type of permit or license you need will depend on your business activity and often depends on the state your business is located. For example, in New York you need a lottery agent license to sell lottery tickets. Or in California, you need a license from the California Board of Barbering and Cosmetology to offer services in the beauty industry. The SBA provides a list of federally regulated industries and ones that you might want to double check with your local Secretary of State’s website.

11. Open a business bank account.

Managing money can be a bit of a headache in the best of circumstances. Add a business in there and you’re well on your way to a full-on migraine. You can make the money management side of owning a business a bit easier by separating out your business expenses and income from your personal. In fact, depending on your business structure, you might be required to have a separate business bank account. Tip: Don’t forget to connect it to your payment and payroll software.

12. Decide what payment methods to accept.

Once opening day comes around, it’s time to start selling, which means you have to have a solution to collect payment. There are many popular payment platforms that you can use to collect payment. You’ll also want to consider if you’re accepting all types of payment. Cash is often the most cost-effective payment method. However, offering credit card and debit payments will likely make it easier for customers to pay and visit your small business.

13. Set up invoicing and accounting software.

You’ll also need a solution for keeping track of that money. Generally, you should be providing customers with receipts and tracking incoming and outgoing payments. Even before your business opens, you’ll likely be spending some money. Having solid invoicing and accounting software can help keep you organized and profitable, and save you some stress when tax season rolls around.

14. Establish your record-keeping process.

Record-keeping helps you track business growth and easily access the information you need when you need to file taxes or prepare financial statements. It’s a log of every single transaction that should make it easy for you to look back on and understand your income and outgo. For the most part, there aren’t any specific rules around how you need to manage your books. The best kind of record-keeping process is the one that you’ll actually stay on top of—and one that lays out what you need to know when you need to know it.

15. Hire employees (if needed).

Not all small businesses start off as a one-person show. For example, if you’re a new small retail shop that’s open 7 days a week, it’s unlikely you’ll be able to manage all the hours yourself. So if you expect to hire employees, make sure to plan in advance. It can take several weeks from listing your job posting to hiring. You'll want to be prepared for your business's grand opening!

16. Set up payroll.

Where there are employees, there’s payroll. A full-service payroll platform can help you calculate employee wages, breaks, overtime, and even taxes based on labor laws at the click of a button. By setting up the right payroll process from the start, you’ll be able to spend less time paying your employees and more time starting your small business. Small business owner tip: Don’t forget to think about how you plan to pay yourself as well.

17. Get business insurance.

Just like you, your business also needs insurance. Business insurance protects your business from the unexpected, such as theft, fire, or any other unexpected emergency. It also protects your customers. Most business policies also cover liability in case something happens to your customers while engaging with your business. Every business will have unique business needs. Make sure to talk to an experienced insurance representative to help you find the best policy for you.

18. Create your employee policies and handbook.

We know what you’re thinking, “Do I really need an employee handbook for my small business?” The answer is—you betcha. Even if you’ve only got a couple of employees, having clear policies and an employee handbook can help keep everyone on the same page. Plus, it’ll make it easier to onboard new employees as your team grows. An employee handbook isn’t technically a legal requirement but there are federal and state laws that require you to keep employees up-to-date on their rights, as well as paid time off (PTO) and sick leave policies.

19. Purchase and license must-have tools.

As you get closer to opening day, you’ll start purchasing all the tools and equipment you need. A great way to make sure you cover all your bases is by creating an operational plan for your day-to-day. However, common examples of tools and platforms for small businesses include:

• Employee time-clocking system
• Point-of-sale (POS) system
• Accounting software
• Team communication app

20. Market your business.

Last but not least, don’t forget to market your business. While you know you have a great business, your customers might not know it just yet. Marketing is key to attracting the right customers and growing your business. You might’ve already outlined some marketing strategies in your business plan, so make sure to execute them as you get close to opening day.

Your checklist for starting a small business

There’s a lot of ground to cover before you can open a business. The good news: we’ve put together this free checklist that’ll help you cover all your bases before opening day. Download the free checklist for starting a small business here: Step-by-step checklist for starting a small business PDF

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