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

Starting a small business is a bold endeavor with the potential for financial rewards and greater personal satisfaction. While the prospect of being your own boss is exciting, you might be unsure about the first steps on your small-business journey.

These steps should help take you from developing your business idea to hiring your first employee.

What you’ll learn:

• Some first steps to opening a small business include conducting market research, writing a business plan and determining your business’s location.
• You may also need to register your business, find insurance and obtain any necessary licenses or permits.
• Setting up your business finances—like opening a business bank account or applying for a business credit card—is another key step to starting a business.
• Capital One offers a variety of resources and financial tools to help you get business done.

As you embark on your business journey, it’s important to understand that ample research and planning are required before you’re up and running. While each situation is unique, here are some key steps involved in starting a small business.

To build a successful business, start with a well-thought-out concept and business idea. Your business should deliver either a unique offering or extra value for customers in your industry. In addition, consider why you want to open a business in the first place. Your business should offer a product or service that you—and your intended customers—believe in.

Conducting market research can help you test your business idea. This phase is an opportunity to better understand your industry, your potential customers and your competitors. Conducting market research could include:

• Holding focus groups
• Researching public data
• Conducting interviews with target audiences
• Reviewing the competitive landscape

Whether you’re opening a physical store or running an online business, location is a key decision when starting a small business. Your location of choice can impact certain aspects of business operations, such as:

• Taxes
• Regulations
• Zoning laws
• Revenue
• Government incentives

Choose a business name that reflects the personality of your brand and resonates with potential customers in your market segment. Be sure your business name is unique so customers won’t confuse your business with any others. You can also check your state’s business name database and the United States Patent and Trademark Office website to be sure your name isn’t taken or too similar to an existing name.

A well-crafted business plan is the foundation of your new venture. Your plan should include items like:

• A description of your business idea and values
• A competitive analysis
• A strategy to market and grow your business

After you write your business plan, it’s time to obtain funding for your business.

If you don’t have the necessary cash to get started, there are various types of business financing options available, including:

• Venture capital
• Crowdfunding
• Small-business loan, such as an SBA loan
• Business grant
• Business line of credit

Capital One offers a variety of business financing options to help power your business.

The legal structure you choose for your business will determine how it is run and by whom, how it is taxed and how much of your personal assets are at risk. Options for structuring your business include:

• Franchise
• LLC
• Corporation
• Sole proprietorship
• Partnership
• Cooperative

Registering your business will help secure your business name and keep others from choosing the same name for their business. Your business will also need a federal tax ID, which is sometimes referred to as an Employer Identification Number (EIN). Your EIN acts like a Social Security number (SSN) for your business.

Not all types of businesses will require licenses and permits. If your business operates in a regulated industry or performs professional services, you may need to apply for the appropriate licensure. Check local, state and federal regulations concerning operating your type of business to find out what permits are required.

Depending on your business structure, you can be held personally liable for any claims against your business. Having the right insurance coverage in place can mitigate these and other risks to help you weather any crisis that comes up.

Opening a small-business bank account is an exciting step toward being a business owner and will help keep your business finances organized. You’ll need your official business name and either your EIN or SSN. Look for an account that offers low fees, wire transfer services and secure payment options for your customers as well as convenient online and mobile banking options.

Small-business credit cards offer benefits specifically designed for business needs and help keep your personal and business finances separate. Applying for a business credit card is similar to getting a personal credit card. Some information you may need to have before applying for a business credit card includes:

• Personal identification information, such as your SSN
• Business identification information, such as your EIN or tax identification number
• The legal name, address, birth date and SSN of any beneficial owners or business controllers with a 25% or greater stake

Business taxes differ slightly from personal taxes. You may need to pay quarterly estimated taxes and payroll taxes for your business throughout the year. There are also special deductions you may want to take advantage of when it’s time to file. Consider consulting a small-business tax adviser and purchasing tax software to make business taxes a little easier to manage.

Tax software is just one type of software that may make running your business easier. Here are some various types of software and tools you may want to consider:

• Accounting and tax software: These tools can help you keep track of expenses like payroll and inventory. Look for a software package that is easy to use and can produce up-to-the-minute reports on every aspect of your business finances.
• Communication and project management software: Whether you’re managing a remote team or are a solo practitioner working on multiple client projects simultaneously, project management software may help you stay organized and on top of deadlines.
• Website software: Building a business website and launching effective marketing campaigns can contribute to the overall success of your business. Choosing an effective software system can make these tasks easier and more streamlined.
• Marketing software: Once your website is set up, marketing campaigns can help drive customers to your digital storefront. Marketing software can help you coordinate digital ads, social media and email campaigns.
• HR and hiring software: Managing the hiring process and providing HR support to employees can also be made easier with the right tools. HR software can help you post job openings, screen resumes and onboard new employees more efficiently. 

You may start out as a one-person operation, but eventually, you may need to hire additional employees. Before recruiting a new member to your team, be sure you have a steady revenue stream that can support the overall cost that comes with having an employee. Learn more about how to build a successful business team.

One of the challenges of starting a new business is attracting your first customers. It is unlikely that people will know your business exists or what services and goods you provide until you begin to advertise. With your website, logo, branding and social media accounts already in place, advertising your small business should be a coordinated effort that tells your brand story and reaches your target audience.

Starting a business requires patience, planning and dedication. But once you’ve taken the necessary steps, being a business owner can be a rewarding endeavor. As you look for growth opportunities, you might consider different ways to support your business’s goals, such as opening a business credit card. Check out Capital One’s Business credit cards to find one that can help move your business forward.