Starting a business is exciting—and challenging
When you take the first step towards starting your own business, you’re joining a big club. According to the US Census Bureau, more than 400,000 people like you do the same each and every month.
We talked to some of those small business owners to get their insights, and 78% reported feeling more fulfilled at work since starting their own business. Many folks fell into one of these top three categories:
- 34% said their business was a lifelong dream.
- 22% decided to make their side job a full-time profession.
- 14% expanded a hobby into a business.
Whether you are doing this as a side hustle or as your full-time source of income (or something in between), you will likely have some challenges in your first year as a business owner. We found that 60% of new small business owners give themselves a maximum of two years to determine the success of their business, and 69% broke even within one year of starting their new business. Finances can be tight in those first years and planning is crucial. Below are some tips for crucial tasks to tackle in your first year in business.
Creating and funding your business
It is important to have a vision for your business and to have a plan to carry out that vision. Statistics show that businesses are more likely to be successful if they start with a written business plan. Set short-term, medium-term, and long-term goals for your business. Make them SMART (Specific, Measurable, Achievable, Realistic, Time-bound) to provide focus and increase the likelihood of success.
Starting a business does come with costs, but a modest amount is usually sufficient to get many types of businesses up and running. According to our research, a quarter of all new businesses start with less than $1,000; further, 44% started with less than $5,000.
Depending on what you’re doing, you may have a variety of startup costs. Our survey found that, for a physical business, the biggest operating expense is rent, whereas marketing represented the largest expense for an online business. Here’s a look at some typical startup cost categories for new businesses:
- Licensing costs: You may need to get local permits or state and federal licenses.
- Insurance: To protect your business, you may want to take out various kinds of business insurance, including general liability insurance, worker’s compensation insurance, and errors and omissions insurance.
- Equipment: This commonly includes office supplies, a dedicated vehicle, and/or commercial-grade machinery.
- Incorporation fees: There are generally fees to register a business with the secretary of state or to register a business name. You may also have recurring fees, depending on the business entity type you choose.
- Inventory: If you are in retail, you need to secure and stock inventory.
- Website: Most businesses need a website, whether to market their brick-and-mortar store or for their e-commerce business. Typical costs include fees for the domain, hosting, website design, and ongoing management—to name a few.
- Business location: If you are selling things in person, you will need to have a brick-and-mortar location.
- Trademark(s): You may want to consider registering a trademark for your business name or brand.
Our small business owner survey of 533 small business owners found that 50% said they made more money than expected, with 35% saying they made what they expected to. Just 15% said they made less than expected. Here are some things to consider:
- You may need to borrow money for your business, so it is important to have good credit. (Remember: If you’re starting a business as a sole proprietor or unincorporated partnership, your personal credit is your business credit.)
- With a lot of outgoing costs, it is important to keep track of your expenses to make sure you are making a profit—or staying on track to make a profit.
- You may also have to pay estimated quarterly taxes. Understanding how to calculate business taxes can be difficult. You can use accounting software (like Xero) to keep track of your business finances, work with an accountant to learn the best ways to save, claim deductions, and ensure that you don’t pay too many taxes.
You may need to fit in time for working on your new business along with your day job. We discovered that around 72% of new business owners already have another job, with 52% having full-time employment. Nearly two-thirds of those with full-time employment quit their “day job” within six months of starting their business. But in the meantime, you may have to juggle everything at once. Here are some tips on time management:
- Schedule key tasks: Effective scheduling will improve your time management, and guard against double-bookings. We recommend using an online daily planner. Keep the following in mind:
- Schedule in buffer time to minimize the impact when things take longer than expected.
- Healthy boundaries should be reflected in your schedule. (You can’t work 16-hour days for 12 months without burning out!) Make time to break for exercise, meditation, and other activities for well-being.
- Prioritize and focus on the most important tasks: Do the essential tasks that require your skills and delegate the rest. Establish processes to ensure consistency. Automate where possible.
Growing your business
Finding customers (or clients) for your business
Every business needs customers. Here are some tips for reaching them:
- Word of mouth: Tell everyone you know about your business. Print some business cards to share your contact details and carry them with you.
- Create a profile on Google Business, and post on local sites like Nextdoor and Craigslist.
- Local government agencies: Learn about their services and register on local business directories. Attend your local Chamber of Commerce meetings.
- Networking: Participate in relevant industry events and offer value to others in your community. Get involved in industry panel discussions and participate in community events.
- Referrals: Ask for referrals from current and former clients.
- Partner with a complementary service: Find businesses (that isn’t a competitor) with a complementary customer base—for example, a web design company and a photography business—and partner to drive business toward each other when there’s an overlap in customer needs.
- Offer discounts or incentives: Introductory offers or discounts for new customers can attract new business.
Promoting your business
All businesses involve “selling” of some sort, whether you are selling a product or a service. But not everyone is skilled at selling themselves. Here are some tips on how to market your business:
- Social media marketing: Create a business account on platforms (like Instagram or TikTok) that are popular with your customer base. Post regularly, and vary your content. This may include testimonials, promotions, and helpful or entertaining content that is related to your brand but does not have a direct sales angle.
- Paid advertising: Focus on smaller, community publications where your target customers live. Billboards, print ads, and other non-digital means of communication may be key to reaching them.
- Website: Optimize your website for mobile use and make sure that it is accessible by using alt text and appropriate color contrasting for those with visual impairments.
- Blogging: Provide value for customers with educational or entertaining content that is optimized for search engines.
- Email newsletters: Keep in touch with customers and prospects by way of an email newsletter, offering valuable content and discounts where possible.
Hiring and managing your team
As your business grows, you’ll likely need to hire and manage employees. So, how do you find (and keep) the right people? Here are some tips:
- Use LinkedIn, Craigslist, or local sites to advertise job postings: Be specific about the job title, required qualifications, and relevant details. Be transparent about the hiring process, including the salary range, and try not to drag the hiring process out too long, or you may lose strong candidates.
- Set up your payroll services: It is important to pay your employees the right amount, on time. The Internal Revenue Service (IRS) has found that one-third of employees make some sort of payroll mistake in a given year. (And in 2021, the IRS collected $7 billion in payroll penalties!) If you need accounting and payroll software, check out Xero + Gusto.
- Establish a healthy company culture: Provide meaningful, inclusive work and celebrate your team’s achievements. Where possible offer opportunities for employees to hone their skills and advance in their careers, too.
- Give feedback—and solicit feedback, too: Providing your employees with positive feedback as well as ways to improve leads to happier staff. Don’t forget to listen, too—feedback goes both ways!
Be ready and willing to pivot
You may start out with one vision for your business, but find that you’re best at one part of it, or there is more demand than expected for a particular aspect of your business. Be willing to pivot from your original vision.
A good example of this comes from Michael Alexis and Tasia Duske, owners of Museum Hack. they had originally set up what they call “renegade” tours of museums, but when the pandemic hit, their business model collapsed. “Customers canceled their tour bookings and asked for refunds,” Alexis said, “and we lost our revenue stream because museums closed down.”
He noticed that Google Trends was showing an increased number of virtual team-building event searches. So he and Duske decided to create teambuilding.com and offer virtual events for businesses. Just 24 hours later, they already had their first customer. Overall, it was a major success.
A final tip
You will wear many hats with your new business. Remember: you don’t have to know everything or do everything yourself—or have everything figured out on day one! And don’t forget about work-life balance. A good, healthy life is a key metric of success.