Home Digital Marketing How to Start a Small Business from Scratch: A Step-by-Step Guide

How to Start a Small Business from Scratch: A Step-by-Step Guide

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How to Start a Small Business from Scratch

There is something very exciting, borderline electrifying about starting your own business. You get a sense of freedom, a feeling that your destiny is completely in your hands. There is much more potential in what you can achieve, not just financially.

But of course, there is also great risk.

Leaping into the unknown is scary, but our article is there to help you get started. The premise and the steps found within this article are applicable, no matter what industry you’re in.

IT consultants, contractors, digital marketing companies or mattress retailers – the core principles remain. Below you can find a step-by-step guide on how you can start your own business from scratch.

What Will Your Brand Be?

The first step is probably the most fun, but that doesn’t mean it’s not vital. Here you need to put your daydreams on paper.

First of all – let’s think of a name. Your company’s name will follow you for years (if you’re successful). Changing it later on means rebranding, potentially losing loyal clients, as well as requiring a ton of paperwork.

Choose something that fits with your brand, your industry, as well as your own personal vision and passion.

You should have a clear idea of what your business will focus on. You probably already have an idea (otherwise you wouldn’t be reading this article). However, what your brand looks like, how will you present yourself?

Are you going online, brick-and-mortar, or both if you’re a retailer? Do you only provide services to your local area, or are you willing (and able) to travel?

For example, let’s say you want to get into retail, selling office supplies. You still need to see what the competition is doing, and what you can do better. How will you stand out? What makes you special?

All of these need to align with your passion and your skillset. To some, asking the above questions before doing market research and thinking about finances might sound counterintuitive. However, choosing your field and area solely based on money simply does not work.

Sure, you want to make as much money as possible, that’s a reality of life. But if you’re not passionate about your work, if you’re not good at it, you will inevitably fail.

You can’t force yourself to care about things you are not invested in.

Who is Your Target Demographic?

Getting into something more concrete, you need to look at your target customers. Have a very clear idea of who they are. Is your target demographic older people, or younger? Are you targeting high-level professionals or the average Joe?

Will you present yourself as a hip and young business, a mom-and-pop shop, or something really luxurious and high-end?

Essentially – who are you selling to and what will you be selling?

Market Research and Goals

Now let’s get into the nitty-gritty. You have an idea of who your target audience is, you know what your brand will look like, let’s see how you will influence your actual business practices.

Conduct market research. Ask around, read surveys and market analysis articles. How much is your target audience willing to spend? What does the demand for certain products and services look like?

Furthermore, through market research, you should get an understanding of what your competition looks like. What kind of services and products can you offer in order to really stand out? What are your limitations? Are there any gaps in the market you should focus on?

What is your end goal? Do you want to retire early? What kind of lifestyle would you like to provide for yourself and your family? How much are you willing to work?

What Will Your Finances Look Like?

This question is two-fold. What will your general finances look like when you start (and run) your business, and what will your personal finances look like until you break out?

First of all – how much can you invest in your company? Can you afford to minimize your expenses in order to fund your business? What is life going to look like before you start breaking even? Do you expect to break even in six months, a year, two?

What Will Your Finances Look Like

Figure out approximate costs of running your business as well. How much money will you be spending on marketing, maintenance, office bills, equipment, storage, products, tools? What about raw bureaucratic costs, paperwork, incorporation?

What about profits? How much money do you think your company can make in the first couple of months? What kind of income can you expect? What will your margins look like now, in six months, and then in a year?

You need to ask around, do proper research, and get a rough idea of these expenses. Then, hire an accountant with at least some experience working with people in your field. You need a very specific, clear idea of what your monthly expenses, and profits, will be.


Figure out how much money you need to begin; be incredibly strict. So, initial costs, bills, running the place until you think you start making money, paperwork, accounting, starting a website… Then, add 15% to that number.

Of course, the best way to start a business is through your own money. Depending on your field, the initial investment can vary significantly. Consider your options; you can:

  • Get a business loan
  • Find investors
  • Get a grant.

All of the above can vary, depending on where you are located, what your state’s laws and options are.

Every one of these has its advantages and disadvantages. Are you eligible for government grants, and can you meet the stipulations they require? How heavy are the interest rates on the loans a bank is willing to give? What do your investors expect and are you willing to give up a piece of your freedom?

Essentially, there is no such thing as free money. All of these will test your negotiating skills.

Are you able to convince the bank to give you the loan you need? Can you negotiate with your investors and keep their influence to a minimum, maybe even having them silent? It’s all on you.

Business Structure, Incorporation, and Bureaucracy

Business Structure, Incorporation, and Bureaucracy

It’s time to start your company properly. First, think of the structure your company will have. You can:

  • Start a corporation
  • Begin a partnership
  • Start an LLC
  • Be the sole proprietor

Each one of these has its own legal definitions that are far outside the scope of this article. However, we’ll give you some quick tips.

With a corporation, it’s all about liability. You want to separate your personal liability from your company’s liability. This means that your business is its own entity, separate from you.

In essence, the corporation can be sued, enter contracts, pay taxes, and even own property.

LLCs are pretty common for smaller businesses. Limited liability companies have a kind of mixed structure, where you basically get the tax benefits of partnerships while having some legal protections that surround a corporation.

LLCs are much more flexible, and easier to manage than corporations, though.

The sole proprietorship is the simplest to manage, but all of the obligations and debts fall onto you. It has the most freedom, you answer to no one, not your partners nor your shareholders. However, there is almost no legal buffer between you and your business.

Finally, a partnership is very similar to a sole proprietorship. However, instead of all obligations falling onto you, they are shared with your partner.

Outsourcing and Delegation

We understand that there is a part of you that wants to do everything by yourself. It’s kind of in the nature of entrepreneurs, this urge to have everything done your way, by your own hand. Well, that is a one-way ticket to burnout.

First of all, get an accountant. They don’t have to be full-time, but a good accountant can save you a lot of headaches, trouble, and money. Next – get some people on your team.

Keep in mind that delegating tasks, even outside of your team, is very beneficial.

First of all, it saves you energy and time, your two most valuable resources. Secondly, nobody is an expert at everything. No matter how experienced or skilled you and your team are, there are some gaps in knowledge that need to be covered.

We suggest you analyze your weaknesses and outsource to people who are actual experts in the areas where you are lacking.

Probably the best way you can find a good company or professional to help you out is by word of mouth. Try to find local companies, and ask other people in your (prospective) field for recommendations.

So, to illustrate our point, let’s say you need a website, and you don’t have anybody on your small team who can do it for you. And you’re in New York. Instead of taking on this work yourself, think about hiring an NYC website design company. See if you can get any recommendations from your colleagues too.

Now, you might be thinking – doing everything by yourself saves money. This might be true in the short term, but for the long term, it’s better if you invest your energy and time into things only you can do.

Keep an eye on logistics, hiring new people and refining your original ideas.

And there you have it, folks, a quick and simple guide on how to start your own small business. Remember to always have a plan, and to stick to it.

Stick to the steps above, focus on your goal, and you’ll have a clear way to success.

Author bio

Travis Dillard is a business consultant and an organizational psychologist based in Arlington, Texas. Passionate about marketing, social networks, and business in general. In his spare time, he writes a lot about new business strategies and digital marketing for DigitalStrategyOne.

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