How to Start a Business: The Ultimate Guide (2021)

  • by Brandon Boushy
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Paul Akers explains how to start a business

We talked to two of the most successful small business owners we could find — Mike Andes and Paul Akers — and got tips from both of them about how to start a business step by step.

We combined the knowledge gleaned from hours of interviews with them to create a definitive guide on how to start a business.

Mike Andes turned a childhood lawn care business into one of Entrepreneur’s top 500 franchises.

Augusta Lawn Care Services has more than 40 franchises across the U.S. Mike has gone on to get an MBA, write multiple books, and teach others how to create a successful business.

Paul Akers turned an idea for some easy screw covers for cabinets into a successful business that launches 30 new products a year.

Fast Cap has been introducing new products to increase the efficiency of cabinetry for nearly 25 years, and Paul has developed a reputation as an expert in Lean Manufacturing.

Between the two of them, they know everything you could possibly want to know about starting a small business and scaling it.

The steps to starting a business

Paul and Mike spent hours talking to us about business. From their discussions, we came up with a 13-step process to start your own business. Aspects of opening a business we’ll discuss include:

  1. Know Yourself
  2. Identify a Problem
  3. Proof of Concept
  4. Beta Testing
  5. Build Quality Quicker
  6. Market Research
  7. Business Plan
  8. Total Addressable Market
  9. Funding
  10. Name the Business
  11. Structure the Business
  12. Preparing for Opening Day
  13. Operations

Let’s get started!

Step 1: Know Yourself

A white notepad with paperclips on a desk

Both of them agree that the first step to starting a business is knowing yourself, but they take a different approach to how to communicate it.

Mike suggests looking at three things:

You want to find the intersection of what you’re good at, what you can make money doing, and what you are passionate about.

If you don’t necessarily know what meets all these categories, there are a couple of tools available to help you. Here are some of my favorite:

  • Free Aptitude and Interest Tests: These recommend suggestions of what you are good at and can get paid for. Try a couple of the tests offered online.
  • Bureau of Labor Statistics: The BLS is a great place to get an idea of where wage growth and earnings are. Right now, manufacturing is where a ton of the growth is occurring

Paul agrees that you should love what you’re doing but that the primary focus should be asking yourself “What am I good at?” He goes even further and says:

You really have to be an expert in your field, or you almost don’t have a chance these days.

Paul’s advice makes sense given he is heavily focused on manufacturing. The difference between their advice seems to be the difference between service and creating goods.

If you are opening a business in a new field, make sure it’s one where providing great service is enough.

Once you have experience opening your first business, opening businesses in other fields becomes easier because you have learned from the mistakes of your first business.

Step 2: Identify the Business Idea

When thinking about how to start a business, it’s important to remember that every business is a solution to a problem. If you have the problem, someone else probably does too. If you are doing something and think:

there’s a better way.

Follow that! Research it. Find a way to make it better. There’s a business idea.

Mike told us:

Look for ways to improve in your everyday life. There are problems to be solved every day. If it saves you time, it will save others time. The more time people save, the more they’ll pay for something.

Here are some questions that people have that may give you some ideas on how to start a business.

How can I start a business with no money?

Starting a company doesn’t have to cost a lot of money — or any for that matter. We asked Mike this question, and here’s what he told us:

In the landscaping industry, you can’t start a lawn mowing business without money cause you need a lawnmower, but you can sell your time and start a weed-pulling business.

So if you don’t have a lot of money, look at what you have available and ask yourself ” how do I start a business with what I have?”

What is the easiest business to start?

A man holding a pen and drawing on a notepad

The easiest business to start will typically be a cleaning business, pet sitting business, rideshare business, or a freelancing business.

Starting your own business cleaning house is super easy. You should have all the materials you need to open a business at your house and a social media account.

I have friends that started a business that way. Check out our blog about how Austin Miller turned $200 into a $62k/mo cleaning business to get a ton of tips on cleaning businesses.

Starting a pet sitting business is also super easy. If you live in an apartment, just post a sign at the mailboxes with how to contact you.

In houses, you’ll probably have to go talk to your neighbors to get a start, but it’s not that much more work. For a more structured way to start a pet sitting business, read our definitive guide on starting a pet business.

Rideshare apps like Uber and Lyft hire people as independent contractors. All you need is a car, a good driving record, and a business license.

There are people who make up to $1,000/day and start learning how to start a small business without a lot of setup costs.

Freelancing on sites like upwork.com and Fiverr are also good ways to start if you have skills in writing, research, programming, or other in-demand fields.

Let’s keep moving through the steps to start a small business.

Step 2.5: Product Development

If you are building physical goods or are a web developer, you will need to do some product development and testing before you can really analyze the market.

This section will focus on the product development business model with information from Paul Akers.

Paul discusses 3 aspects that are a combination of identifying the idea and market research. They include:

  1. Proof of Concept
  2. Self Test, Beta Testing-Potentially Market Research
  3. Build Quality Quicker-Potentially Market Research

Let’s look at each.

Proof of Concept

Proof of concept is the stage in idea generation where you turn your small business ideas into an actual product.

Both physical and software products consider this “building a prototype.” Software products may also call them “wireframes.”

A prototype for a physical product is normally semi-functional, while a prototype with software is mostly going to show the process that the user would go through visually.

It does not have all the back-end coding that makes it work like a normal web application.

Paul says:

Proof of concept is the first test to see if your idea works. You need to know that what you have created works better than what you were using before. If you find yourself still going for the old solution, it didn’t solve the problem.

Watch the video below for a more in-depth discussion of the way Paul goes about establishing whether a product makes sense.

Beta Testing

Beta Testing is when you find potential early customers within your target audience and ask them to test your product. Paul told us in the video above they’ll normally have three responses:

Eh not really.’ ‘Cool Idea!’ or ‘I want that right now!’ If they say ‘I want that right now’, you’ve got something. ‘Cool’ idea could mean that they don’t want to offend you or that they really like it, but when they try to buy it off you, you know you have something.

Build Quality Quicker

When a small business owner has a great idea, they may want to patent it and try to protect their idea. If so, you can do that with the UPSTO.

Paul discourages that. Your small business could pay $1k-$16k to get a patent according to Upcounsel.com.

Paul says:

That money spent on applying for and protecting the intellectual property can easily fund the startup costs to research your target market and get your product into their hands.

He’s right. That’s at least a year of expenses for running an online store with print-on-demand items. Be smart about what you spend your money on. Understanding project management and financial planning can really help.

The Balance has a list of some great free project management courses for owners of small businesses. Quickbook also offers a list of essential free courses for small businesses. Study up if your business involves planning.

Step 3: Market Research

The next step to starting a business is to conduct market research. Market research is simply identifying the amount of demand for the products or services the business offers.

Mike spends quite a bit of time discussing the benefits and how to conduct thorough market research. He demonstrates how easy it is to conduct research by surveying his employees. Watch his take on conducting research below.

He discusses aspects such as demographics, target market, focus groups, online surveys, and target markets. Let’s look at each of these terms to better understand how to start a business.

What are demographics?

Demographics are statistical characteristics of a population or a subset of the population.  Some considerations you’ll want to consider are:

  • Location
  • Age
  • Gender
  • Other Interests
  • Marital Status
  • Do they have kids?
  • Job title
  • Income

In the identifying the target market section, we provide a link to a thorough breakdown of all the ways you can improve your targeting on Facebook.

How do I find out who my potential customers are?

If you have a new business idea where it isn’t intuitively obvious who the potential customers are, you may need to use marketing tools, like surveys and focus groups, to establish what demographics are drawn to your small business idea.

Once upon a time, this research was really costly because you had to conduct focus groups, do in-person surveys, or do phone surveys. Each option is fairly costly.

Drive Research estimates that focus groups cost $4,000-12,000 for two focus groups because you normally need multiple groups. That’s almost $500 per person based on their information.

The publication Entrepreneur gives a good breakdown of survey costs, but most methods will take at least a couple of grand and will be at least partially based on the time spent creating the surveys, contacting people, and compensating the participants for their time.

Meanwhile, Facebook Ad Center can normally get the results you want for less than $1 per action. Even if you pay each respondent $5 for their time, that’s still 2,000 responses for the same price as a focus group that might have 25 people.

PowerAdSpy has a great blog on how to use Facebook ads for market research campaigns.

Identifying your target market

A successful business needs to know who its ideal client is. Since you’ve just barely come up with the business idea, you’ll need to figure out who buys the product or services you are selling.

Facebook has got this down to a science, but their ads can be complex to use if you don’t know what you’re doing.

Wordstream published an infographic with all of Facebook’s targeting options. If you want to get your target market as precise as possible, spend some time learning about each of the options.

Mike told us:

If you are offering lawn care services, people who own a home are going to be your potential customers. Renters won’t.

Keep reading for tips on how to write a business plan.

Step 4: Write a Business Plan

Mike actually took the time to explain in detail how to write a business plan you’ll actually use. Download our free business plan template and work through it while watching the video below.

You’ll want to include detailed explanations:

  • Business Plan Cover Page
  • Table of Contents
  • Executive Summary
  • Company Description
  • Description of Products and Services
  • Marketing Plan
  • SWOT Analysis
  • Competitor Data
  • Competitive Analysis
  • Marketing Expenses Strategy 
  • Pricing Strategy
  • Distribution Channel Assessment
  • Operational Plan
  • Management and Organizational Strategy
  • Financial Statements and/or Financial Projections
  • Funding

I’m not going to go into all the steps here, but check out our blog about how to write a business plan.

The biggest thing to remember about writing a business plan is it should be easy to understand, well documented, and as short as possible.

Mike told us:

Venture capitalists and big banks will want every piece of information possible, but most people can’t write a business plan that meets their expectations. A new business will most likely have to use alternative methods of funding, so make sure the business plan works for guiding your decision making.

The next step will be identifying the total addressable market.

Step 5: Total Addressable Market

Mike discusses a term called the total addressable market (TAM). This term refers to how much money a business idea would make if it achieves 100% of the revenue in the market.

Startups use this to give high, mid, and low-level estimates of revenue expected.

Mike told us:

The total addressable market really helps you decide whether it makes sense to go through all the effort required in the steps to starting a business, especially with local businesses. If you could only make $10k/year offering the service, it probably isn’t going to make sense to start a business doing that.

Using the Census Bureau’s Quick Facts Map to narrow down where the total addressable market is located in your area can help you choose a small business location that is near your target audience when starting a business.

It helps you quickly evaluate what the best areas are for your business to be located.

Before we go to the next step, you might be wondering…

How much does it cost to start a business?

This is a really common question, and the costs range dramatically based on your location, industry, and local regulations. It can be free to sell your time as a side business, or it can cost hundreds of thousands to open a franchise.

Whatever you want to do, don’t let money stop you. You can make a great living without paying a lot upfront.  You just have to be disciplined. Paul told us:

The less money you have to work with, the wiser you spend it. You can’t be trying to live in the nicest neighborhoods, drive the nicest cars, and expect to be able to bootstrap it. You’ve got to be smart.

Fundera has a great article about how much revenue a small business makes. Check out their blog to get realistic revenue expectations.

Step 6: Getting Funding

You should have already calculated the business costs associated with your idea, but you still have to get the funds necessary when starting a business. 

Most small business owners will need to get the funds for starting a business from one of the following sources:

  • Bootstrapping
  • Borrow  money from family/ friends
  • Small business loans from local banks and credit unions
  • Credit cards

As noted in previous sections, Mike attributes this to the stringent requirements of other types of funding like:

  • Venture Capitalists
  • Big Banks
  • Small business administration loans
  • Small business grants
  • Partnerships
  • Crowdfunding

Let’s look at each of these to understand whether they make sense for your new business idea.

Bootstrapping

Bootstrapping is simply tightening the belt and opening a business with your own funds. Both Mike and Paul Akers agree that if you can start a new business this way, it’s the best way.

Mike told us:

Self-financing is the easiest way to start a business as you don’t have the additional cost of debt and other people’s expectations pushing you to move faster.

Paul told us:

There are 4 ways to spend your money efficiently:

  • The most efficient way to spend your money — you earn it and spend it.
  • You earn your money and spend it on someone else.
  • You earn the money, you give it to someone else, and they spend it.
  • You earn it, you give it to the government, and the money gets wasted.

Hear more from Paul below:

Borrow money from family/ friends

Some people are able to get money to start a business from friends and family.

If you are, that’s awesome!

Just make sure that you have an agreement in writing because nothing can strain a relationship like a lender expecting to get it back and the borrower thinking the startup capital is a gift.

Also, don’t use your parents’ house for a secured small business loan when starting a business.

Small business loans from local banks and credit unions.

Neither Mike nor Paul particularly loves getting loans when considering how to start a business. Paul told us:

When you’re spending other people’s money, you don’t know what it took to earn it. That means you spend it more recklessly.

If you have a bank account with a local bank or credit union, they are more likely to lend to small business owners in their local community than larger banks.

Just research “credit unions near me” to find local banks and credit unions.

In this scenario, they may expect you to have the business formation already completed. They also may want you to have a business bank account to prevent you from mixing your personal assets and your business assets.

When just starting a business, they may expect you to take on some personal liability even if you are a limited liability company (LLC) before you have built business credit.

If that is the case, make sure it’s not an amount that would cause you immense problems should you decide to close the business in the future.

Alternatively, you can try applying with our loan partners to get a business loan.

How to get a loan to start a business

Follow the links above and make sure to have the following ready:

  • Business formation documents
  • Tax documents (Personal and Business if both are available)
  • Your Business Plan
  • How the business plans to use the funds
  • An idea of your personal current debt-to-income ratio or your small businesses’ Net Working Capital. These impact your ability to get a loan.

Credit cards

Credit cards can be a way to start small businesses, but you need to make sure that the return on investment is worth it.

Paul told us:

If your interest is 15%, you have to make a return of greater than 15% to justify it. Otherwise, you’re losing money.

If you go this route, I suggest you apply for a business credit card so that you can start earning credit under your business name.

Getting a business bank account and business credit card at the same bank as your personal accounts can help to strengthen the relationship as your business grows.

You could also get a credit card from a company you are interested in doing business with. If you are looking for cards that are likely to approve you, use Credit Karma, which can also suggest loans for your small business.

For the best rates and perks, check out Nerd Wallet‘s credit card recommendations.

Now that we’ve covered some of the most common ways to get funding for a business, let’s look at some of the other options for getting funding when starting a business.

Get funding from a venture capitalist

Getting funding from a venture capitalist is typically something that only the most unique of small businesses is offered early in their business formation process.

A venture capitalist is similar to getting a business partner. They are typically looking for businesses that will change the world and can turn thousands into millions or billions.

Neither of the business owners liked this option when considering how to start your own business.

Both prefer to avoid having multiple owners. When you raise capital by selling ownership of the company, it becomes harder to run the company based on your goals.

Mike told us:

If you sell equity, make sure you own at least 51% of the shares. Any less and you don’t control the company.

Here’s the input Paul gave us:

I own 100% of my company. I don’t want anyone else telling me how to run it.

If you want to approach a venture capitalist, watch our interview with Keith, the founder of Pollen Solutions.

Be careful though because too many startups fail to understand the terms that this capital comes with.

Make sure to review your contract with a contract lawyer you trust. If you don’t know one, ask your friends or other business owners for a reference.

Big Banks

Banks like Bank of America, Wells Fargo, and CitiBank are some of the larger banks that you can get loans or lines of credit from.

They offer a variety of business products to help business owners, but many of them require $50k/year revenue and 2 years in business. That’s not exactly helpful for those wondering how to start a business from scratch.

Let’s look at other options.

Small business administration loans

Small Business Administration Loans are a great way to start a business if you can get one. They offer three main products:

  • 7(a) loans– Up to $5m loan with up to 85% guaranteed by SBA, capped interest rate, capped fees. Best for real estate
  • 504 loans– Up to $5m for fixed assets that will increase job growth.
  • Microloans– Under $50k to help with smaller business needs.

You can learn more about each on the SBA website. The 7(a) is the most commonly distributed loan. 

The following charts are organized to make it easier to find the bank that best suits your needs. All statistics are modified from 100 most active SBA 7(a) lenders for the fiscal year 2021 up to June 30, 2021.

The chart below ranked the top 10 lenders by the number of loans originated.

If you are interested in them by total approval amount, the list changes some. Five of them are the same and five are new entries.

I’ve also created tables for you of the five highest and five lowest average approval values. It should be noted that the banks with the lowest average approvals also happen to be the ones that originate the most total loans.

I have personally done business with 4 of the 10 banks that originate the most loans. Of them, I personally preferred the service from Huntington National Bank.

Small business grants

There are grants available to some industries, regions, or groups of people. Most people won’t qualify, but check the SBA for grants.

Partnerships

Partnerships are similar to a sole proprietor but for more than two people. They are most common in law firms.

Crowdfunding

Crowdfunding is raising money from a lot of smaller investments to start a company. The owner of Pooch Selfie talked to us about crowdfunding and going on Shark Tank. Check out his interview below.

Step 7: Name the Business

Mike emphasizes the importance of a name. He personally suggested using a name generator to get ideas for your business. He told us:

I personally love the Shopify Business Name Generator.

UpFlip is actually partnered with Shopify and got permission to embed it in this blog to make it easy for you to choose a business name. Check it out below.

 If you are starting an online store, we strongly recommend you start by looking at Shopify.

Their eCommerce store offerings are impressive and super easy to use. eCommerce is a competitive landscape, but it has some of the lowest startup costs when considering how to create a business.

Mike points out you can add different words for them to come up with a name, like the city you live in and the type of company it is for you to get some good ideas.

As always, I suggest making sure it doesn’t get shortened to curse words, slang that you wouldn’t want associated with a business or negative statements.

For instance, Bold & Daring could be shortened to BAD, and you might not want that.

Step 8: Business Legal Requirements

Depending on the industry and business location, there are going to be different legal requirements for your business. This section will be focused on the legal structure in the United States.

It should be noted before beginning that I am not a lawyer, and this should not be considered legal advice.

Hiring a lawyer will make the process of complying with business regulations much easier. You can find one by searching for business lawyers.

Licenses, permits, and tax forms

Each location has different licenses, permits, or tax forms required. Use the SBA License and Permits page to identify what requirements your business needs to meet.

Keep reading for information on different legal structures.

Sole proprietorship

A sole proprietorship is the easiest way to meet the small business legal requirements, but the structure doesn’t protect the owner’s personal assets from legal issues.

That means if something goes wrong, you could lose both your company and your home.

This structure should only be used if you can’t afford an LLC because most businesses have liabilities that could be costly if you operate as a sole proprietor.

To start a sole proprietorship, fill out a special tax form called a Schedule C. Sole proprietors can also join the American Independent Business Alliance.

Limited Liability Corporation (LLC)

An LLC is the most common business structure used in the United States because the company protects the owner’s personal assets. An LLC protects many business owners’ assets because it is a separate entity.

It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements. People may register in specific states due to the cost of doing business.

Delaware and Nevada are common states to file an LLC because of their business-friendly laws. Here’s a blog on the top 10 states to get an LLC.

This will typically be the best business structure for most small business ideas.

Partnerships and corporations

Partnerships and corporations are typically for massive organizations or legal firms.

Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations.

Mike specified that the difference between an S-Corp and a C-Corp is the number of shareholders it can have among other things.

If you want to have a bunch of stockholders, you’ll need to be a C-Corp.

Apply for an EIN

Every business operating in the United States needs an employer identification number.

It’s like a social security number for your business. Apply for it on the IRS website. It’s used on tax forms when filing taxes and to tie employees’ pay to the proper employer.

Unemployment Insurance

The U.S. Chamber of Commerce has a ton of information on unemployment and also offers links to each state agency that handles state unemployment.

You’ll have to pay $420 per employee on a federal level plus any state UI.

Workman’s Compensation

Workman’s compensation is basically insurance against injury or disability. Each state has different requirements. Check your state requirements.

Business Insurance/ General Liability Insurance

A man holding a stamp with the word "insurance"

Contact your current insurance agent and ask them if they can provide these. Most will be able to provide a quote or refer you to someone who can.

Basically, you want $1m/2m general liability unless you have reason to need more. Protecting personal assets or higher local requirements are the most common reasons to buy more.

If you own valuable machinery, work in fields that could cause personal liability (for instance gas furnace installers can be held personally liable for explosions), or collect sensitive information, you may want other types of insurance to protect your business success.

Keep reading for tips on how to open a business.

Step 9: Preparing for Opening Day

Getting ready for opening day is a big deal. Whether you are an online store, work from home, or opening up a physical location with office space, you’ll need to have equipment and space to perform the work. You’ll typically need:

  • Office Space
  • A computer
  • A website
  • Space to store inventory (if selling physical products on site)
  • Phone
  • Internet
  • Social Media
  • Displays (if customers will be coming to your location)
  • Furniture
  • Payment processors

If you are reading this article and wondering “how can I start my own business?” you probably have everything but an office, website, and displays. 

I’ll provide you with some references for those.

Offices and other locations

For an office, it’s good to have at least 300 square feet that you can work in that is quiet. Whether it’s at home or somewhere else doesn’t matter. If you need help finding a business location, contact your local realtor.

Realtors will be able to help you find a place that works to be near the customers your business serves.

If you expect customers to come to the location, try to get a space with high foot traffic. That increases people’s awareness of your company.

In addition to space for you to perform your work, you may need space to store parts or inventory. You should consider how many products you’ll be storing and how much space each will need.

Most products will need at least 3 square feet of space, but if you are using shelves, you can normally get 2-4 products in the same space.

You’ll also want at least 3 feet between storage displays. 4-5 feet gives both you and customers more room to navigate.

Search for commercial interior designers to find someone to advise you before making a decision on a space.

What do I need to start a business? A website!

A website is critical. There are millionaires who literally started a business with just a website, social media, and a computer.

Marcus Harvey already had t-shirt printing experience, but he told us that you could literally start a T-shirt printing company on Shopify for less than $50/mo with print-on-demand companies, like Printful.

Check out our interview with Marcus about Portland Gear for tips on how to start a T-shirt company.

Our blog has a walkthrough of how to create a website. Check it out and build one yourself.

Displays and other furniture

You’ll need to buy any displays, furniture, and decorations you want to make the space beautiful. Check out Facebook Marketplace to find some great deals on used furniture. Just make sure it fits in your space.

Step 10: How to start a company: Operations

When I was thinking about how to start my own business, there were a number of things I had to consider. 

If you’re wondering, “what do you need to start a business?” realize that you’re going to spend more time on operations than on starting the business itself.

Most businesses can be started in a few months, but operations can go on for years.

Operations of a business include things like:

  • Managing Inventory and Equipment
  • Human Resources
  • Marketing
  • Accounting and Taxes

Whether you decide to handle each aspect yourself or hire someone else to manage it, you’ll need to be a little familiar with each portion of running the business.

If you’re wondering how to start a business, you need to realize that you can hire employees, agencies, or subcontractors to help you with the aspects of the business that you’re not an expert in.

Managing Inventory and Equipment

Managing inventory and equipment comes down to three aspects:

  1. Software
  2. Lean Mindset
  3. Inventory Financing

Managing inventory and equipment is crucial if you sell products. Investopedia has a great list of inventory management software by industry. It should be noted that software will need to be integrated with your accounting systems.

Depending on the software you use for each, you may be able to integrate the software with several clicks. Otherwise, you’ll have to map data points and may want to hire a developer to assist you.

Software can help, but developing a lean mindset also helps.

Lean Mindset

Having a lean mindset is focused on doing the most possible while conserving resources.

Paul discusses Lean processes extensively in our interviews with him.

I strongly recommend taking a couple of hours to hear everything he has to say about how to run a business with low inventory.

I’ve watched these videos at least 20 times because they are filled with great info.

Keep reading for information on financing inventory.

Financing Inventory

Inventory can typically be financed. Inventory financing requires a written agreement that may include:

  • Amount of loan
  • Duration of loan
  • Interest rate and terms
  • Who manages inventory

If you can get the vendor to manage inventory, it can be far easier than doing it yourself as they are experts in their field.

Law Insider offers a sample contract of how vendor managed inventory contracts might work.

Human Resources

If you are going to hire employees, you’ll need to manage your human resources. Human resources involves aspects like hiring, scheduling, and paying your employees. 

Hiring Employees

Hiring employees includes posting jobs, conducting interviews, 

Job Posting 

Hiring people requires posting “now hiring” signs and posting on prominent job boards.  Some places you can start posting job requirements are:

Interviews

Having a prepared list of questions for interviews can make hiring the right people easier.  Indeed offers a variety of resources to help you make better hiring decisions. Read their guide, How to hire your first employee.

Compensation

Employees are typically a company’s biggest expense. There are three common pay structures in business. Each fits different scenarios. Let’s take a closer look.

Salary

Flat weekly/monthly rate based on a person working a specific number of hours. This is typically reserved for owners, managers, and some admin roles. You might want to assign this to yourself for budgeting purposes.

Hourly

This pay structure just tracks the hours an employee works and pays them a set hourly rate. This pay structure is solely based on time, not performance.

Commission

A laptop, iPad and a cup of coffee on a desk

Typically used in sales to give employees a percentage of revenue. It is a strictly performance-based compensation model.

Hybrid Models

Hybrid models combine two pay structures: for instance hourly and commission to compensate for time and performance. The hourly rate will typically be lower than an hourly rate without commission, but the commission should make it where good performing employees make more than they would without commission. These structures also help reduce the variability of pay from week to week.

Paying employees an hourly wage works for most positions for clothing lines, but depending on your business structure, a commission or hybrid payment model might make sense. The article, “How to Create a Pay Structure That Promotes Team and Company Growth” offers some insights into thinking about pay structure.

Tax filing and withholding

Federal and state tax filing requirements apply to new employers. You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes. Don’t worry! We’ve got you covered! Check out the IRS guide for employers here.

Federal employment and labor law posters

All employers must display Workplace Posters, which you can download from the website.

Other requirements may include:

  • Employment Eligibility Verification (Form I-9)
  • State’s New Hire Program
  • Worker’s Compensation Insurance
  • Disability insurance — varies by states
  • Occupational Safety and Health Administration (OSHA)

Scheduling

Scheduling employees can become complicated depending on your company’s hours of operations. Given overtime occurs in the United States after 40 hours, you will have to pay 1.5x their wages if they exceed 40 hours.

If you are open for 9 hours a day(with an hour lunch), 5 days a week , you can hire exactly enough people to meet the company’s needs. Once it exceeds that, you’ll need more employees and have to schedule based on their needs as well.

7Shifts has a great blog on scheduling and also offers scheduling software. Check them out.

Payroll

Paying your employees will normally occur on a weekly, every two weeks, bi-monthly, or monthly period. Most employees like being paid weekly because cash flow management is easier, but it costs less to pay less frequently.

You can pay by check or direct deposit, and you can hire payroll companies to manage payroll for you. ADP is the most well known payroll company, but Inc. provides a list of payroll companies to check out.

If you handle it yourself, your accounting software can integrate with your bank and your timesheets to make the management of payroll easier.

Marketing

A laptop on a desk with the word "marketing' on the screen

For years, marketing was traditionally done through print, radio, and TV, but digital marketing is what most business owners first investigate when starting a business.

Each market is different though. You will need to figure out what works for you.

Mike pointed out that mailing print brochures to everyone in a zip code can often work well for lawn care businesses. He said:

I can normally reach every address in an entire zip code for a couple of cents, which is often less expensive than using digital marketing.

Despite each market being different, there are some commonalities that occur across all types of marketing, including:

  • Know your target market- We discussed this in Steps 3 and 5.
  • Test, Collect Data, and Recalibrate- Marketing is experimental, so try different things till you find what works
  • Hire mid-level influencers works- People who tend to be respected in the local community and have high engagement can get people interested in your products and services
  • Trade shows can work, but people may also try to steal your idea
  • Email marketing- Collect customers emails and other data for purposes of contacting them
  • Maintain social media accounts- Clients like to be able to reach you there
  • Search engine optimization- make sure you are using the keywords that people search

Paul pointed out:

I used to take my products to tradeshows a lot. It was expensive, but it worked. There were a ton of people who tried to steal my ideas though. Now that I don’t need them anymore, I don’t spend the money, but it helped launch my business.

Accounting and Taxes

Accounting and paying taxes are another crucial part of a business. Most companies will use one of two main software offerings — QuickBooks or Xero

Both have relatively similar features. In the U.S., most use Quickbooks, but Xero is commonly used in other countries and is available in the U.S.

You may need an accountant and/or developer to help you set up some of their most useful features, but the automation that can occur from them is remarkable.

I suggest asking other business owners what accounting software they use and who their accountant is. Finding a great one is critical.

At first, you’ll be able to handle your taxes on your own, but they can get complicated fast.

You’ll need to have an accountant look at your books at least annually, but as you grow, it will increase to at least 4x per year because you need to pay taxes quarterly based on the Alternative Minimum Tax.

Some locations require sales tax monthly. Capterra offers sales tax software reviews so you can choose the software that’s right for you.

Influencers: how do you start a business?

A tiny cactus with googly eyes holding a yellow paper

There are a ton of influencers in the business space. The ones you follow should be based on what industry you are in. Obviously, I would recommend following both of the people we interviewed for this article:

Starting a business can be challenging, but fulfilling work. Once you start your business, we’d love to hear about it.

Hopefully we’ll get to spotlight you on our YouTube channel and blogs. Keep us updated on your progress. We’re rooting for you!

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