When it comes to building wealth, you can go the traditional route: Get a job, invest 10% of your earnings, and retire at 65 with a decent nest egg.
Some people, however, want to be more creative in the hopes of generating more wealth. Maybe they decide to buy a rental property and become landlords or run an Airbnb.
One of the most common ways to build lasting wealth? Start a business.
But starting a business is not for the faint of heart – despite what social media might say, it is harder than it looks. Research from the Bureau of Labor Statistics found that almost 20% of small businesses fail in their first year. About half will fail after five years, and a staggering 65% will fail within 10 years.
So if you’re still interested in starting your own business, read below to see what steps to take to ensure your business is set up for success.
Table of Contents
- Define Your Idea
- Research Competitors
- Create a Business Plan
- Find a Community
- Choose Your Business Structure
- Get Legal
- Open a Business Bank Account
- Fund Your Business
- Using Your Own Money
- Taking Out a Business Loan
- Relying on Invoice Financing or Factoring
- Open a Business Credit Card
- Equipment Financing
- Start a Crowdfunding Campaign
- Manage Business Finances
- Apply for Business Insurance
- Come Up with a Name
- Find Your Customers
- Final Thoughts
Define Your Idea
Your idea is the foundation for your business. Without a solid idea in place, the rest of your business will crumble. Coming up with your idea can be the longest part of the process, especially if you don’t already have something in mind. Here are some ways to come up with a strong idea that can stand the test of time:
Determine What Your Idea Is
Before you can start filing your business registration or getting the necessary licenses and permits, you need to figure out what your business idea is. You should try to be as concrete as possible. This will also help you determine who you’re targeting, how you’ll market it and how to price your products or services.
Your business does not necessarily have to be groundbreaking to be successful. There are plenty of businesses that are very similar. However, you do have to offer a service or product that people are willing to pay for. You may need to conduct market research to figure out what product or service to offer and who the ideal client is.
If you don’t already have an idea, take some time to brainstorm. You don’t have to settle on just one idea. If you have a few, you can test them out before determining which one is the most likely to work in the real world.
Once you have an idea, consider talking it over with other people and getting their feedback. If their response isn’t as positive as you would have hoped, don’t despair. Use their comments to help you refine and shape your idea.
Sometimes though you have to ignore other people, especially if they’re not offering constructive criticism and are simply being negative.
Here are 11 side hustles you can start for less than $100 if you need some inspiration.
Fill a Need
Many people launch successful businesses by recognizing a need in the market and then working to fill it. For example, the creator of Spanx, Sara Blakely, used to cut her pantyhose to create custom shapewear that gave her body a perfectly smooth look. After some time cutting pantyhose, she realized that she could create her own product to solve her shapewear needs. Thus, Spanx was born.
If you’re trying to start a business, try to fill in the blanks in the sentence: “I help ___ with ___.” For example, if you want to start a mobile dog grooming business, you could say, “I help busy dog owners with grooming services like washing, nail trimming, and grooming.”
Buy a Franchise
If you want to be a business owner but don’t have a specific idea of your own, you could buy a franchise location.
A franchise requires you to put down a chunk of money to own a location of a well-known and established brand. Having a franchise means you do not need to have a business idea because you already know what the business is. If you’re dead set on becoming a business owner but can’t come up with an original idea, then owning a franchise might be a good alternative.
Buying a franchise though isn’t cheap. Want to own your own McDonald’s location? You’ll need about $750,000 in liquid assets. Data from the International Franchise Association says that the typical franchise down payment is $250,000.
If you don’t have that kind of money, there are plenty of less expensive franchises. For example, 360 Clean is a commercial cleaning franchise you can buy for only $15,000. You can also take out a loan for the franchise fee.
A benefit of a franchise is that it comes with operations already figured out. All you have to do is work the already established system.
Become a Freelancer
If you have a specific skill, perhaps from your day job, you can start doing that on your own.
For example, you can become a freelance marketer or advertising copywriter. Doing this yourself can help you discover if you actually like being your own boss or if you want to go back to being a regular employee.
As you get more and more business, you can start hiring someone else on an hourly or part-time basis. Starting off as a freelancer instead of immediately diving in with a full-service agency and several employees can minimize risks.
Here’s our ultimate guide to freelancing to help you get started.
Research Competitors
Once you decide on your business idea, you need to determine your competition. This depends on your business. For example, if you are trying to start a craft brewery, your competitors are other craft breweries in the area, not major beer companies like Miller.
But if you’re trying to start a jewelry business, then your competitors may be national and global brands, as well as local businesses.
One of the best ways to research the competition is to conduct a SWOT analysis. A SWOT analysis stands for:
- Strengths
- Weaknesses
- Opportunities
- Threats
By doing a SWOT analysis, you can find potential problems that could derail your business before it even begins. You may be able to hire an outside party to do the SWOT analysis for you. When you’re a business owner, it can be tough to distance yourself enough to be objective about your business.
Create a Business Plan
When you’re starting a business, it’s important to know how much it will truly cost to run a successful business. A business plan can outline your projected expenses and income so you can determine future cash flow projections.
A business plan may look different depending on the business and how detailed you want to be. In general, you should include how you plan to earn money and how much you will have to spend to keep the business running. If you need to take out a loan, then your plan should also factor in how long it will take to pay off your loan.
It can take a while to come up with a solid business plan and you may need to revise the plan if the industry changes.
It should also have goals for certain intervals, like a one-year and five-year goal, etc. Remember, these should be educated guesses rooted in reality.
Find a Community
Starting a business can be a lonely endeavor. One of the best ways to increase your odds of success is to find a community of like-minded people. You can do this on social media or even in person.
Joining your local Chamber of Commerce can be an easy way to find other business owners that you can learn from or collaborate with. They often offer a free trial period where you can sit in on meetings without paying to become a full-fledged member. You may also receive discounts on other services if you’re a Chamber member.
Don’t shy away from business owners who happen to be your competition. For example, if you are a bookkeeper, feel free to make friends with other bookkeepers. No one can serve every customer, and your best referrals will likely come from those you consider the competition. They can also give you great tips for being more successful.
Get a Mentor
Having a mentor, especially one in a similar field, can help you get started if you’ve never had a business before or are delving into a new industry.
Finding a mentor can be challenging, especially depending on the type of business you’re in. You can start by reaching out to successful people you know, sharing what your business is, and asking them if they know anyone who can help.
If you go with this strategy, make sure that you start by contacting people who know you well. Remember, no one will refer you to someone unless they can vouch for you.
Take some time to think about who you can ask to be a mentor. You can also look through your high school or college alumni list and find people in a similar industry. If you do reach out to them, ask if you can buy them coffee or lunch in exchange for answering some of your questions.
Before showing up, make sure to have a specific list of questions prepared. Don’t bring questions that you can answer via a Google search. If you don’t come off as polished and professional, you’ll kill your chances of finding a mentor.
LinkedIn can also be a powerful way to find a mentor. If you find someone that you have a mutual connection with, you can ask that person to refer you.
Choose Your Business Structure
The best legal structure depends on what kind of business you have. For example, if you want to start a personal training business, then you may want to operate as an LLC to ensure that a client who gets injured during a workout can’t come after you personally.
You are not bound to the specific type of business structure you selected when you first opened. However, changing structures can cost money, as you may have to pay an extra filing fee. Many business owners start out as a Sole Proprietors and eventually move to an LLC or S-corp.
If you’re having trouble deciding what kind of structure fits you best, you can speak to a CPA who can help you run the numbers. You can also speak to a business attorney who can suggest which structure will offer you the most protection.
Sole Proprietorship
A sole proprietorship is the easiest way to start a business. It means that you’re essentially working by yourself.
Working as a sole proprietor is simple because you don’t need to file paperwork with the state or federal government. However, the downside is that you don’t have the same legal protections as an LLC. As a sole proprietor, your personal assets are on the line if someone decides to sue your business — even if you’re not working out of your home.
Being a sole proprietor also provides the least amount of tax savings as a business owner.
Partnership
If you’re starting a business with someone else, you could set up a partnership. A partnership is basically a sole proprietorship, but with more than one person.
It is similar to a sole proprietorship in terms of how it reports income on your taxes.
LLC
A Limited Liability Corporation (LLC) is a business structure that protects business owners from having their personal assets touched if they’re involved in a lawsuit. If you own an LLC, the profits can be passed onto your personal income.
Filing as an LLC involves an extra fee. Also, as of 2025, LLC businesses must file a Beneficial Ownership Information (BOI) form. This form is fairly straightforward and only takes a few minutes to complete. However, if you don’t complete it, you could wind up paying a hefty fine.
S-Corp
An S-corp is a business structure that passes through its profits to shareholders. If you have an S-corp, you may be able to take advantage of some tax savings.
An S-corp can still have an LLC structure so the owner isn’t liable for the business in case of a lawsuit.
✨ Related: How to Pay Yourself as a Business Owner
Corporation
A corporation is one of the more complex types of businesses you can open. There are separate corporation filing fees.
Corporations can have shareholders who each own a different percentage of the business. This structure is for very large companies that will be selling shares.
Get Legal
One of the first things you’ll have to do when starting a business is ensure that you’re following all applicable laws. If you’re not legally registered, then you will almost certainly have trouble getting funding, because lenders don’t want to give money to an unauthorized operation.
Get a License
When you start a business, you often need to get an official license that lets you do business in your state. The type of license will vary depending on the type of business you have. For example, if you want to start a bar, you’ll need a liquor license. If you want to turn your basement into a private pilates studio, you may need a specific business license.
If you’re not sure what kind of business license you need, you should contact your state government or local Small Business Administration. They can help you figure out what you need to be legal.
In some cases, you may also need to register your business federally. This comes with its own set of paperwork that can take time to complete correctly. Alternatively, you can also pay a service to do the work for you.
EIN
No matter what kind of business structure you have, you should get an Employer Identification Number (EIN). Think of this as a Social Security Number for your business. This unique number can be used when filing your taxes, applying for funding, and more.
You can get an EIN for free from the IRS. Make sure to use it on your official business documents. It only takes a few minutes to complete the form and get your EIN.
Using an EIN can also protect you from identity theft. If you use your SSN on business documents and this paperwork is stolen, then you will have to monitor your credit and ensure that hackers don’t use your SSN to engage in fraud.
Open a Business Bank Account
As a small business owner, it’s important to keep your business finances separate from your personal finances. Therefore, you will need to open a separate business bank account. This will make it so much easier when you start looking for business funding because you’ll be able to provide business bank statements that show how much money is coming in – and how much is going out.
This will also simplify your tax filing process because you’ll know what your business expenses are and what expenses are personal.
Many banks and credit unions offer business bank accounts, including both checking and savings accounts. You can choose from a national bank, a smaller regional bank, or a credit union.
When comparing banks, try to pick one with the fewest fees possible. If you’re tech-savvy, you should also try to find a bank that offers a mobile app with decent reviews. This can ensure that you’ll be able to deposit checks via the mobile app, check your balance on the go and more.
Sometimes regional and local banks and credit unions may offer good interest rates and low or no fees for business accounts. These smaller banks may also be more likely to lend money to new businesses.
You can use a business savings account to save money for a rainy day, buy new equipment, and more. Look for a business savings account boasting a decent interest rate.
Here’s our list of the top business bank accounts.
Fund Your Business
Every business — no matter the idea — needs money. And funding a business is one of the most common roadblocks.
There are two basic ways to fund your startup costs: get it from someone else or use your own money.
If you go with the latter option, that might include:
- Withdrawing money from your 401(k), IRA or other investment account
- Withdrawing money from your checking or savings account
- Taking out a home equity loan or line of credit
Depending on the business, you may also be able to bootstrap it. This means starting small and investing the profits back into the business until it grows enough to start taking an income.
Using Your Own Money
There are obvious downsides to using your own money. If your business goes under, you’ll have nothing left to recoup.
Also, there may be fees and fines associated with using your own money. For example, if you withdraw money from a tax-advantaged retirement account, then you may have to pay an extra fee. Withdrawing money from your traditional IRA or 401(k) will result in a 10% early withdrawal fee. You’ll also have to pay income tax on the amount.
A home equity loan can be easier to get because it uses your home’s existing equity as collateral. Here’s how that works. Let’s say you have a $100,000 mortgage balance on a home worth $500,000. In this case, you have $400,000 in equity. You can usually take out around 80% of a home’s equity, either as a loan or a line of credit. This would equal $320,000.
This amount could be significantly higher than what you could receive with a traditional business loan, especially as a brand-new business.
The downside of a home equity loan is that your home is then collateral for the loan. If your business tanks and you can’t afford to make the new payments, your home could be foreclosed upon. This would also ruin your credit and cost you thousands in extra fees and penalties.
Taking Out a Business Loan
Lending options for businesses are generally more limited than they are for personal expenses. For example, you can’t take out a personal loan for business expenses.
If you qualify for a business loan, you will still need to guarantee the loan personally. That means that if the business defaults on the loan, the lender will come after your personal assets. It can take years or even decades before a lender won’t require a personal guarantee.
Business loans can be obtained directly from banks, credit unions, or online lenders. Rates vary depending on the loan amount, type of business loan, and whether it is a fixed or variable interest rate.
A business loan can have a term ranging from one year to 20 years, with longer terms often having higher interest rates. You can also apply for a business line of credit, which lets you draw upon a line of credit over a specific period of time. Once the draw period ends, you will have to pay back any outstanding balance.
Loan amounts can start as low as $1,000 and end at $1 million. The amount you qualify for depends on your credit score, time in business, number of employees and more.
Relying on Invoice Financing or Factoring
If you send invoices to customers and they take too long to pay, you could wind up making late payments to your own vendors. That’s where invoice financing or factoring comes in.
This funding strategy involves essentially selling an invoice to a third-party company, who will give you around 80% of its total value. When the client finally pays the invoice, the third-party company will receive the funds.
While this method means you’ll earn less money than you would if you waited for payment, it also ensures that you can still pay your own bills.
Open a Business Credit Card
Like regular consumer credit cards, business credit cards are fairly easy to open, even if your business is barely operational. Business credit cards typically come with a high credit limit, the average is around $50,000.
When you have a business card, you can pay your vendors, buy equipment and purchase supplies. I like the Chase Ink Business Cash® Credit Card.
Business cards are often personally guaranteed, so your credit will be impacted if you don’t make the payments.
Equipment Financing
The toughest part of business financing is when your business doesn’t have physical items to use as collateral. But if you have equipment, you may be able to qualify for equipment financing in lieu of a traditional business loan.
Interest rates for equipment financing are usually less than they would be for a regular business loan. The repayment term is usually between three and 10 years, and rates are often fixed for the duration. You may be able to get equipment financing through the dealer where you bought the equipment.
Start a Crowdfunding Campaign
In the last few years, starting a business with a crowdfunding campaign has become a viable option. Here’s how it works: You decide how much you want to raise, write why you need the funds, and launch the campaign. If you reach your goal, you keep the funds without having to pay them back. Sounds easy, right?
Unfortunately, crowdfunding campaigns aren’t a given. The success rate for a crowdfunding campaign – business or personal – is around 20%. And if you don’t raise 100% of the stated goal, then you will have to return all the money raised.
Relying on a crowdfunding campaign can use up lots of your social capital. If people try to raise money for you and the campaign fails, they may be hesitant to financially support you in the future.
Manage Business Finances
Being a small business owner comes with a whole new challenge: taking care of your business finances. Here’s what to know about taking care of the financial side of owning a business:
Track Income and Expenses
When starting a business, it can be easy to lose track of your spending. But not knowing how much money is coming in or going out can make it harder to determine whether you’re actually making a profit.
That’s why it’s imperative to use accounting software, like Quickbooks, to manage your business finances. Again, business taxes are also more complicated than personal taxes so it’s wise to set things up correctly from the beginning.
At some point, you may need to hire an outside party to handle your bookkeeping and/or taxes. If you already have a system in place, it will be much easier — and less expensive — for them to sort through your finances.
If you have a business that charges state taxes, you will have to set aside those funds until it’s time to pay the state. Make sure to keep this in a separate account so you don’t accidentally spend the money.
Apply for Business Insurance
When you are a business, you are often exposed to legal risks, such as being sued. Even if you think that your business is safe from legal issues, you may need to buy business insurance to protect you.
For example, if you’re trying to start a private practice as a physical therapist, then you will likely need malpractice insurance to cover you in case someone is injured under your care. Even just renting an office could mean you need liability insurance. You may also want to consider a bond to protect you against claims of theft or fraud.
When choosing a business insurance policy, make sure to compare different providers. Different companies may have different pricing methods that can vary significantly.
You should also be completely honest and describe how your business operates so the insurance company knows how to quantify your potential risk factors. You can also keep shopping around even if there is an existing policy in place.
If you have employees who work for you, you may need to verify that you have the right type of insurance to protect them in case something happens. For example, you’ll need a workers’ compensation policy if you have employees.
Property Insurance
If you buy a building or land for your business, you should insure that property. Just like a homeowner’s insurance policy, this type of insurance will help you recoup your losses in case of damage like fire, storms and more.
When buying a policy, your property will need to be appraised. If you do any property improvements, you will have to upgrade your policy.
Product Liability Insurance
If you are building a product to sell, you may want to purchase product liability insurance. This can protect you in case your product is defective and accidentally hurts someone.
For example, let’s say you manufacture children’s toys. If one of your toys breaks and hits the child in the face, the parents could come after you if there are any injuries. While this may sound like a ludicrous hypothetical, it’s always better to be overprepared.
Vehicle Insurance
Whether you use a specific company vehicle or your own personal vehicle for business purposes, you will likely need to buy a vehicle insurance policy for your business. This policy is separate from your personal car insurance, which only covers you if you use the car for business purposes.
If you don’t have business insurance and get into an accident, you could end up having to cover all those costs yourself—even if the accident isn’t your fault. It’s similar to driving around without car insurance.
Come Up with a Name
One of the most important factors to consider when choosing a business name is its SEO potential. You need to choose something that is unique and not too similar to your competitors.
For example, if you wanted to start a diner, you wouldn’t want to use the word “waffle” in your name, because it might be compared to “Waffle House.”
Once you have a name in mind, type it into Google and see what comes up. It’s almost impossible to find a unique business name, but you should try to find a name that can stand out on Google. If your business is locally-minded, then double-check that there isn’t a similar business with the same name in your area. That would make it harder for people to find you online.
You also want a business name that is easy to remember and has some kind of connection with your service or product. For example, if you want to start a landscaping business, a name like “Marcy’s Landscaping” is more direct and helpful than just “Marcy’s.”
You should also check to see if you can buy the domain for your business name and claim the social media accounts.
Find Your Customers
Once your business is set up and running, you can start finding your potential customers.
Create a Website
Nowadays, having a web presence is essential for business success. Without a website, you may struggle to build a clientele or find funding.
For many types of businesses, you don’t need a web developer to build a website. You can use a service like Squarespace or Wix to build a professional-looking website that will attract customers.
If you plan on selling items directly through your website, you can connect with third-party services like Shopify that will take care of some of the back-end for you. Some businesses can also use third-party sites, like Etsy or Amazon, to sell their wares.
If you’re not sure what kind of website setup you need, look at your competitors and see what they’re doing. If you have mentors in the space, you can also ask them how they operate and what they would recommend if you’re just starting out.
Some types of websites are better for fully established businesses, while others are more appropriate for newly launched businesses.
Utilize Social Media
One of the best ways to find customers is to utilize social media. Having a strong social media presence can give your business more legitimacy, especially in the beginning before you have any word of mouth. If people see that your business has a consistent social media posting schedule, they may treat you more like a legitimate enterprise instead of a scam.
Try to post to social media platforms that your customers use regularly and don’t spread yourself too thin. For example, if you’re targeting those in their 50s, you don’t need to start a TikTok account. That would be a better fit for those trying to appeal to teens and young adults.
Start by choosing one or two platforms that you know how to use and post on them regularly. The algorithm promotes accounts that are more consistent. Once you master those networks, you can decide to add more accounts if you’re comfortable. You can also hire someone to manage your social media for you.
Don’t forget that you can also rely on your personal social media and web presence to sell your business. If you have a strong presence already, then those people may be willing to support your business.
Network in Person
Meeting potential customers in person is a great way to test your business idea. For example, if you’re creating a product, you can go to local fairs and set up a booth. This can be an easy way to see how people respond in real life. You might even get inspiration for other ideas just by being out in the real world.
You can find local business-minded meetups or attend local conferences and other events where you can meet potential investors, shareholders, and customers.
Final Thoughts
You should also realize that starting a business will require more time, emotional energy, and dedication than working a 9-to-5. Most new business owners don’t realize that starting a new business is like having a baby. It takes a lot of time for the business to become self-sufficient, and there may be steep learning curves. And just like it helps to have a babysitter or a helpful mother-in-law on call, your business will almost certainly need help from other people.
Some people think that having their own business is easier than working for someone else because they don’t have to report to anyone else. But even when you’re a business owner, you still have to answer to customers, employees and, if you’re lucky enough, investors. You’ll be pulled in a million different directions.
A survey found that 56% of business owners have anxiety, depression, or another stress-induced illness, while 75% of small business owners are worried about their mental health. If you don’t have the bandwidth to take that on, then starting a business may not be for you.
Also, if you have a family, you need to consider how starting a business will affect them. Will your spouse have to become the sole provider for awhile? Will you have to cut back on retirement savings or contributions to your child’s college fund?
Answering these questions first can help you decide not only if you’re up to having a business but also what kind of business you want to start.
Bill Brigham says
Great advise from Paul! Of the 1,000 entrepreneupers, we assist annually the keys components for any startup are
Planning, Experience, and Capital.
I was so excited when he was gracious enough to share his thoughts!