By Ellise Pierce
Illustrations by Mikey Burton
According to the United States Small Business Administration (SBA)
, there were 30.2 million small businesses—which they define as fewer than 500 employees—in 2018, employing almost 59 million people in fields as diverse as health care, construction, entertainment, and agriculture. The fastest-growing segment? Firms employing fewer than 20 people.
"It's a good time to be starting a business," says Steve Bulger, regional administrator for the SBA. "We're seeing growth areas across the board, from online businesses to brick-and-mortar retail."
Before ordering those business cards, though, Bulger says to keep the following tips in mind.
1. Do Homework
2. Write a Business Plan
- Research potential customers—Look into demographic information and consumer spending habits in your area with this tool from the United States Census Bureau.
- Find a mentor—Identify others in the same industry and ask for advice—someone who's already been down the path could help you avoid mistakes.
- Get feedback—Conduct an informal survey of friends and family, as well as potential customers and people who might be familiar with the product or service. Is it something they would spend their money on?
- Check out the competition—Is someone else or another company already doing it? If so, how is what you're offering different?
A business plan forces the entrepreneur to create a strategy and determine what will be necessary to get the business off the ground. It can include things like what makes the business unique and how the product or service may be manufactured, distributed, and marketed. Get suggestions on what to include in the plan with free online tools, like this one from the SBA
, and remember:
3. Create a Financial Plan
- Not all business plans are the same. A retail store business plan will look different from one that's selling products online, for example. However, they'll all have some of the same general categories, like a company description and a market analysis.
- Let others read the business plan. As the plan is developed and fine-tuned, bouncing questions off a mentor or others could increase your odds of success.
- The plan will change over time. Keep in mind that every business plan should be flexible in order to adapt to changing conditions.
The biggest reason small businesses fail is simple, says Bulger—they run out of money. The solution? Forecast how much capital is needed to launch the business, and keep it going for the first six, 12, or 24 months.
Creating a financial plan will require asking questions like what the cost of the goods or services will be; what kind of upfront money will be needed; if employees will be hired; and how to budget enough to pay oneself.
4. Decide How the Business Will Be Structured
What kind of business will it be—a limited liability corporation (LLC), an S corporation, a partnership, a sole proprietorship? There are pluses and minuses to each, and some make more sense than others, depending on the business. A mentor can offer advice about options, and the state's department of commerce may also have online resources.
5. Make It Official
Each state, county, and city has different requirements for opening and running a business. Check with the local government's chamber of commerce or economic development office, which may have a checklist for new, small businesses. Depending on the location and type of business, it may need to be registered with the local, state, or federal authorities; obtain licenses and permits; and get a tax identification number.
6. Get the Right Insurance
Having the proper business insurance
will depend on the business. If opening a legal or tax service out of one's home, a different policy will be needed from someone opening a hair salon or dry cleaning business. In general, look into options like business owner's insurance
, which bundles property damage and liability coverage into a single policy. Also, if personal vehicles will be used for business purposes, a commercial auto insurance
policy will be needed, as a personal auto policy doesn't cover vehicles for business use.
Starting your small business is a big deal. Help protect your dreams with business insurance
through the GEICO Insurance Agency. Get a quote now.
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