So you’re thinking about starting a small business – congratulations! Small businesses have been called “the backbone of our economy and the cornerstones of our communities”1. There are over 32 million in the United States and they have accounted for 62% of new job creation since 1995 (although in 2020, unprecedented volatility resulted in over 8 million small business job losses)2.
If you are considering starting your own small business, whether it’s a dog-sitting business, candle-making, or accounting, here’s a list of all the questions you’re sure to have, and the answers you’ve been looking for…with GIFs to, ya know, make it seem all daunting and a little more funsies.
1. What qualifies a business as a “small” business?
Let’s start with the basics – what is a small business? According to the U.S. Small Business Administration, a small business is an independent business with 500 or fewer employees; however, there is some variance in small businesses in government programs and contracting. Here’s a simple two-step tool that will give you a definitive answer based on your industry.
2. How do I get started?
There’s a reason “getting started is the hard step” is a well-known cliche – because it’s true! While this could be an article of its own, here are some helpful tips to get you started. If you haven’t already, refine your idea and name your brand – after all, you can’t have a company without a name and a direction.
It’s also helpful to figure out who your target audience is – who do you want using your product? Having this clarity will help with advertising later on, which is extra important when shifting with the “new normal” of marketing practices. Lastly, completing a simple template to figure out a basic business plan will help keep you focused on the overall direction and navigate any potential issues that may arise so you can avoid them in the future.
3. How much money do I need?
As much as you can get. Just kidding! Kind of. Naturally, this question is particular to your unique situation, but there are fundamentals you need to know. According to the U.S. Small Business Administration, most microbusinesses cost around $3,000 to start, while most home-based franchises cost $2,000 to $5,0003. This accounts for various start-up costs like your web hosting and other website costs, basic supplies, basic technology, insurance, license or permit fees, advertising or promotions, and business plan costs.
4. What are my options for financing?
So you have your business and an idea of how much you need to make it happen – but what if you need a little help? Never fear – you have options. There are four main ways to get financing.
Investors are the most obvious way for receiving large funding contributions, but there is an expectation that they have a hand in your business. If that’s not for you, keep reading for more options.
Business loans are available commercially but can be hard to get. However, you can also apply for a small business loan through the U.S. Small Business Association (SBA).
Business grants are like loans that you don’t have to pay back. These are especially helpful for minority-owned and women-owned companies and are helpful to look into to see if you qualify.
Lastly, crowdfunding is a relatively new phenomenon thanks to sites like Kickstarter, GoFundMe, and Indiegogo. With this method, a “crowd” will donate a small amount of money towards the creation of your business, rather than one or two big investors. This is also a great way to confirm that you have a relevant and interested audience for your product.
5. What setbacks should I watch out for?
The most common setback can be summarized by one word: naivety. Assuming you have no competition, trying to get rich quick, thinking you can do it all, hiring employees too soon. If anything, be your own skeptic. As Lucas Carlson, ex-CIO at CenturyLink says, “If you are not brutally honest with yourself, you can’t make informed decisions that will truly improve your company… You need a healthy dose of skepticism (not the same as self-doubt or lack of self-belief) to make real forward progress.” It can also be helpful to get more advice from industry professionals who have already made the biggest mistakes when starting a small business.
So…should I really do this?
Yes, and no? It depends. Unsure about whether your reasoning is solid? Take the time to read through this series of blog posts entitled Questionable Reasons to Become an Entrepreneur and see if yours is in there! If not, maybe you’re cut out to start a small business of your own.
If you’re still interested and ready to make your dream come true, it’s helpful to find a mentor who has been there before. SCORE is a non-profit organization committed to “helping small businesses get off the ground, grow and achieve their goals through education and mentorship.” Start there. Having a real person to bounce ideas off of, answer questions, and look out for potential mistakes will increase your rate of success. For most other questions, the U.S. Small Business Administration is a fantastic resource, especially for the more legal side of starting a small business.
Lastly, remember that no matter what happens…