While it may seem like large companies dominate headlines, it’s small business owners who represent the American dream. Small businesses are the backbone of the U.S. economy and represent opportunity and independence.
Small businesses — generally businesses with less than 1,500 employees — create two-thirds of new jobs in the U.S. According to the U.S. Small Business Administration (SBA), small businesses create 44% of all economic activity in the U.S.
Maybe you’re thinking of joining their ranks as a first-time business owner. We know these first steps into entrepreneurship can be both exhilarating and confusing, so we created a simple startup checklist for aspiring small business owners. Using this small business checklist, you can determine what essential items to tackle before starting a business.
This post is a snapshot of a larger chapter in NEXT’s Small Business Guide. In the complete guide, the full small business checklist contains more tips, details and resources. There are also survey results and advice from experienced business owners and service providers. It’s completely free, so download it today.
1. Do your research
Before you launch your business, you’ll want to figure out if your business is viable. That is, does it have the potential to become successful? After all, you wouldn’t want to pour your heart and efforts into a business that has very little chance of turning a profit.
One of the first steps in getting your business off the ground is to do some research into the market you’re entering. You’ll want to find out information about:
- Who your potential customers are and what problem of theirs you’re going to solve
- The preferences of these potential customers. How will they find you, and how do they want to communicate with you? What do they like and dislike?
- Who your competitors are and their strengths and weaknesses
- What it’s like to start a business in your area. What is the process and regulations you’ll face?
- The market in your area. Is there a demand for your business, or is the market saturated with similar products and services?
TIP: Hit the books. Before starting your research, consider taking a small business class online or in person through your local community college or the Small Business Administration (SBA). These classes are designed to help first-time entrepreneurs navigate an unfamiliar path.
2. Create a business plan
A business plan will guide you on how to operate your small business. It also helps you create strategies for increasing your sales and number of customers. Your business plan can be either simple or complex in structure, but essentially it’s a document that outlines your financial objectives and how you will achieve them.
Since a business plan explains how you will reach your goals, you can share it with potential investors to help you secure financing for your business. It can also help you attract partners who can help grow your business.
TIP: Seek out existing resources. Creating a business plan may sound intimidating, but there are plenty of resources to guide you. The SBA offers a free course with videos to show you how and what you may want to include in it. There are also numerous templates available online that can get you started.
3. Set up a financial plan
After creating a business plan, you need to figure out how you’re going to handle your finances so you can pay bills and get paid. Where you do your banking doesn’t matter, but you may want to look into business bank accounts with digital services and apps, branches close to your physical location and low or minimal account fees and costs.
You’ll also want to start establishing business credit. Just like a personal credit score that you’ve built over time, if you’re a first-time entrepreneur, you’ll have to build a business credit score.
Your business credit score determines future loan interest rates, your repayment terms and how much money you’ll receive.
While each lender has different qualifications; typically, you’ll need to provide your past revenue, expenses, bills and payroll when you apply for a loan.
TIP: Ask for a net 30 days account. First-time business owners can build their credit score through their vendors and suppliers by asking for net terms such as 30 days. This is important to have adequate cash flow and a longer time period to pay vendors and suppliers.
4. Choose your insurance coverage
Whether you are self-employed or have five employees working for you, you need to make sure you have adequate business insurance. The right coverage protects you from unexpected costs related to running your business. From accidents to property damage to lawsuits, the right coverage means you won’t be responsible for shelling out tens of thousands of dollars from damage resulting from a burst pipe or slips and falls.
Depending on the kind of business you’re operating, you’ll need different kinds of coverage. The four most common for new small businesses are:
- General liability. This covers many of the accidents at work, including property damage, physical injury and medical or legal fees. General liability coverage is the most basic type of insurance that most businesses need.
- Professional liability. This insurance can cover accusations of professional mistakes, as opposed to unavoidable accidents. It’s important if you deal with expensive property (such as houses or cars), but professional liability insurance can also cover you if you have technical difficulties and can’t complete a job.
- Commercial auto. Commercial auto coverage pays for damage caused by or to your business vehicle in case of an accident or collision. It’s generally a legal requirement if you use your vehicle for business.
- Workers’ compensation. If an employee gets hurt on the job, this type of insurance will cover their medical expenses and lost salary while protecting you, the employer, from being sued for negligence. In many states, workers’ compensation is mandatory for any business with even one employee.
TIP: Shop around for insurance. Not all providers are alike, so look for insurance tailored to your specific needs. For instance, NEXT Insurance specializes in affordable coverage for small businesses, making insurance easy to understand and simple to manage. Small businesses owners can get a quote online, mix and match coverage and purchase in less than 10 minutes.
5. Consider legal and tax matters
While not a lot of fun, taking care of legal paperwork and setting up your tax structure is important for being a small business owner.
First, there’s taking care of any licenses or permits from federal and state agencies. The requirements and fees vary depending on your business, location and government rules. Check with your local SBA branch office on what specific licenses or permits you need to acquire.
You’ll also need to choose a business structure for your company, such as a sole proprietorship or limited liability company (LLC), S corporation, C corporation or other types. Choosing your structure determines how you’ll pay taxes and protects you from personal liability for any debts your company may incur.
TIP: Consult with an expert. A lawyer or CPA can be crucial in helping you form and maintain your business. A lawyer can discuss what type of corporation is best for you and how to protect and set up your business. Consult with CPAs on tax matters. They can walk you through state and local tax laws and help with financial planning.
6. Create marketing and advertising strategies
We know you’re eager to launch your business, but don’t forget to check off one more important thing off your list: marketing and advertising. If you plan a strategy before you launch, you could have customers knocking on your door as soon as you open, rather than you chasing them.
Today, for both online and offline businesses, a good deal of marketing revolves around building an online presence. Whether it’s your own website, social media channels or Yelp reviews, this is how many potential customers will find and engage with your business. This is your chance to represent yourself to the world and start building your brand.
Build an online presence with this advertising checklist:
- Google My Business. Make sure your business can be found and is searchable. Here’s how.
- Yelp. Set up your business page to engage with customers and attract new ones.
- Social channels. Determine which social platforms best connect you to your customers.
- Email marketing. Create a company email to send newsletters and provide an avenue for customers to engage with you directly.
TIP: Consistency is key. Building a following and customer base is a slow and steady process. It may be tempting to stop marketing and advertising efforts when your business is doing well or double your efforts when it’s slow, but a continuous pace will keep your momentum going. Figure out a cadence you’re willing to commit to — maybe it’s a weekly post on social media — and stick with it.
7. Celebrate and evaluate your first year of business
Starting your own business is incredibly rewarding. After all of your hard work, it’s time to take a step back to celebrate your accomplishments. Many business owners choose to do the following to commemorate their special anniversary:
- Create an event such as a giveaway or contest
- Reward loyal customers with a gift or discount
- Volunteer within the community
- Thank your partners and customers
- Treat your staff to something special
- Sponsor an event
- Launch a new product or service.
TIP: Look to the future. The one-year mark is a great time to evaluate what went well for your small business, areas where you can improve and the next steps for growth. You know so much more now than when you started, so set some new goals for what you want to achieve.
Get NEXT’s full small business checklist
This checklist is designed to make your first year of business easier to navigate. If you want full checklist details, including more tips and resources, download the NEXT Insurance Small Business Guide.
Our guide is a one-stop resource outlining steps to consider when getting a small business off the ground. It’s packed with first-hand advice from small business owners and new survey data from over 500 small business owners across industries.
NEXT Insurance is helping small business owners thrive by delivering a painless and seamless experience for getting business insurance online. You can get a quote, review options and purchase coverage in less than 10 minutes. If you need any help along the way, our team of U.S.-based, licensed advisors are standing by to help.