How to Start a Business in 11 Steps

These time-tested steps on how to start a business, whether it’s your first or your 10th, will help you with everything from finding and validating your money-making idea to figuring out your shipping strategy to finally launching your product or service. This checklist guide is for entrepreneurs who want to understand the first steps of starting a new business.

1. Find a Business Idea

The first step in starting a business is figuring out what you want it to be. Finding small business ideas is a task you can approach systematically by relying on time-tested approaches that have worked for other entrepreneurs. Be sure to perform a market analysis to make sure there is enough demand and that the competition is not too crowded.

Next Step: If you’re looking for business idea inspiration, we’ve got you covered:

2. Write Your Business Plan

As the proprietor, writing a business plan helps formalize your idea and can streamline the business-creation process by getting you to sit down and think things through methodically.

Having a firm grasp of your “known unknowns” is important because all it means is that you’re actively not prioritizing finding a solution right now; that’s a lot better than being unprepared or caught off guard, especially if you struggle to answer these questions while seeking funding.

Business plan outline

  • Company name and description
  • Market analysis
  • Management and organization
  • Products and services
  • Customer segmentation
  • Marketing plan
  • Logistics and operations plan
  • Financial plan

Next Step: For inspiration, it can be helpful to look at some business plan examples to kick things off. If you’re interested in writing a plan but turned off by lots of paperwork, we’ve developed a free business plan template that you’ll actually use.

Choose a business name

For starters, your business name is a universal facet of your marketing—it shows up everywhere you do. Keep things simple and focused: find a name that makes it clear what you do, that’s short and memorable, and that aligns with your mission and vision statement. This isn’t an effortless task, but it’s very achievable with a bit of ingenuity.

Next Step: Our business name generator can help you come up with an initial set of ideas—the rest is up to you. If you’re starting from scratch, there are also a few time-tested practices to lean on for direction.

Conduct market research

One of the best ways to start a business is to conduct a market analysis. The goal of market research is to better understand your target market and competitors in order to craft an effective business plan. 

What's the potential opportunity size?

Entrepreneurs are often too dismissive of small markets. Yes, the market size should match your ambitions, but the opportunity size of a specific niche is determined by a few other dimensions. For example, if a product category has relatively few active customers, but the price of the product is relatively high and requires repurchase, that’s an attractive opportunity that founders focused on market size might miss.

Who’s your competition?

What does the competitive landscape look like for your target market? Are there many competitors, or very few? If there are a lot of competing businesses in your niche, it’s often a sign that the market is well established. That’s good for ensuring demand exists, but it will also require you to differentiate what you offer (to some degree) in order to attract customer attention and build market share.

Next Step: Find your competitive edge and learn how to do a SWOT Analysis with our guide and free template. 

Who is your target audience?

A target audience is a group of people you plan to sell your products and services to. Understanding your target audience makes it easier to find new customers and bring interested buyers to your website. From higher engagement on your social media channels to a greater ROI for your ads, defining your buyer personas upfront can help you succeed.

3. Secure Financing to Fund Your Business

Your business plan will help determine how much money you’ll need to get up and running. 

Common ways to fund your startup

  • Business loans

    If you have a good personal credit history and need startup financing, a business loan from a lender could be a good idea.
  • Business grants

    Grants are often given to target businesses based on a variety of factors including, veteran-owned, minority-owned, specific for-profit, women-run, and more. See the SBA Grant page for more info.
  • Shopify Capital

    You potentially can receive financing that helps approved merchants get the funds they need, without lengthy bank approvals or giving up part of their company.
  • Crowdfunding

    If you don’t want to go the traditional funding route, you could always crowdsource funds from a group of people online.
  • Personal investors

    Startups also fund their companies through VC or angel investors, or friends and family in the early stages. 

Next Step: Find out the options for starting a business with no money.

4. Choose a Business Structure

Choosing the right structure is about balancing the legal and financial protection you need with the flexibility offered by different options. It’s an important decision, and it’s one you should consider carefully before you launch your business.

Business structures vary based on your country and area, but common types—that may go by different names in your country—are sole proprietorship, limited liability company (LLC) and corporation. 

See our extended state specific guides for Florida, California, Texas.

Sole proprietorship 

A sole proprietorship is great if you’re the only person involved in the business, and is usually the lowest-effort structure to pursue, but it leaves you personally liable for the business and its activities. As a sole proprietor you can hire employees, but you’ll need an employer identification number (EIN) to do so, which means registering your business entity.

Limited liability corporation (LLC)

A limited liability corporation (LLC) is a common type of small business entity in the US. It provides liability protection for the business owner(s), so you are not financially responsible if legal claims are brought against your business. An LLC can be formed by one or more owners. 

See our state-specific LLC guides for California LLC, Texas LLC, and Florida LLC.

Corporation

A C corporation is a business structure where proprietors are taxed separately from the entity. Shareholders own the business and each has a fractional share of the company. The benefits of a C corp are normally enjoyed by large, multinational corporations, like Walmart and Apple. However, they can be leveraged by small businesses that want to garner investment by issuing stock.

Legal structure factors

  • Where is your business located

    Your country’s laws will outline the different structures you can form and whether or not you need a business license to get started.
  • What kind of business are you starting

    Some structures are more suited to businesses of a certain scale or within a certain industry. There might come a time when you need to restructure in order to work with new partners. It’s not uncommon for large businesses to ask that their suppliers or partners be incorporated, for example.
  • How many people are involved

    If you’re going it alone as a solo founder, you may be able to look at streamlined options. If you have a business partner or multiple people with ownership in the company, you’ll need to look at more advanced options to ensure everything is set up and shared properly.

Next Step: An accountant or lawyer can be helpful in evaluating the different options available in your area and with the process of setting up a business. You can also check out this sole proprietorship vs. LLC comparison. 

5. Get Federal and State Tax ID Numbers

Federal tax ID (EIN)

A federal tax ID, also called an employer identification number, or EIN, is a nine-digit number the IRS assigns to businesses and organizations for tax purposes. Think of it as your business’s Social Security number. 

You’ll need an EIN if

  • Your business has any employees other than yourself
  • Your business is incorporated
  • You have any partners in your business (i.e., it is a multi-member LLC)
  • You take over an existing business either through purchase or inheritance
  • You have a retirement plan for self-employed individuals (like a keogh plan) or solo 401(k) retirement plan
  • You want to open a bank account (Not all banks require an EIN, but most do.)
  • You file for bankruptcy

Having an EIN will

  • Help you when you file taxes
  • Protect you legally
  • Help protect your personal information
  • Help you establish credit

Next Step: The application process to get an EIN is simple. You can just go to the IRS website and fill out an application online. Then the IRS will conduct a compliance review and, once you’ve been accepted, will send you your EIN paperwork either in the mail or to your email inbox as a PDF. 

Helpful resource: Employer Identification Number: Understanding Your EIN (PDF)

State tax ID

A state tax ID is separate from your EIN. An EIN is assigned by the federal IRS, while a state tax ID is assigned by your state. 

A state tax ID has a similar purpose to an EIN in that it helps your business comply with state laws. However, each state has different requirements, regulations, and even tax laws. So you’ll have to research your individual state’s laws to see whether your business will need a state tax ID. 

Laws vary from state to state. A good place to start is your state’s taxation department, department of treasury, or secretary of state. Get in touch with them to find out any state tax ID requirements you may need.

6. Obtain a Business License and Permits 

Once you understand how to start a business, look into what local, state and federal licenses you need to operate legally. It’s worth consulting with a small business lawyer to get advice before you launch your business.

Your startup is subject to the laws governing businesses in your area, as well as laws and regulations specific to your industry. For instance, a food service business needs to follow specific licensing and regulations for handling what it sells, but it also has to pay attention to the legalities of its marketing efforts and to trademark and copyright laws.

Next Step: Ready to get started? Learn how to get a business license and the required documents needed to obtain it.

7. Open a Business Bank Account

To make managing your finances far easier, take the time to open a business bank account and obtain a business credit card. Keeping personal and professional finances separate makes doing your taxes much simpler and can help you automate some of the financial steps to running a business as well. Doing this will be especially helpful if you want to know how to start with no money.

8. Get Business Insurance 

Business insurance helps protect your small business and personal assets from anything that could go wrong. Every state has different laws and requirements when it comes to insurance, but even if your state doesn’t require it, it’s always a good idea to give yourself and your business extra protection.

Common types of business insurance

  • Liability insurance

    Liability protection insurance covers your business for any legal actions due to accidents, injuries, or negligence.
  • Commercial property insurance

    Will help your business if any property is damaged or destroyed due to fire, storm, or theft. It will help pay to repair or replace property, inventory, and equipment.
  • Commercial auto insurance

    Will cover any damage caused to or by any vehicles you use for your business. (i.e., delivery vehicles, moving trucks, forklifts, etc.). It will pay for medical expenses, legal bills, and property damage, should one of your vehicles be the cause of an accident.
  • Workers’ compensation insurance

    Pays for the medical care and lost wages of any employees who are injured on the job. Most states require employers to have some sort of workers’ compensation insurance based on how many employees a business employs.
  • Professional liability insurance

    Protects people who are in service-related jobs. It protects them from liability for negligence or malpractice (for example, estheticians, hair stylists, bartenders, etc.). It is also known as errors and omissions insurance.
  • Product liability insurance

    Protects manufacturers, wholesalers, distributors, and retailers. It protects them from liability if a product they make or sell turns out to be unsafe and injures someone.
  • Business interruption insurance

    Will cover the operating costs if it has to shut down or move (for example, because of a fire or hurricane). It will cover the cost of relocation, paying employees, and paying rent.
  • Cyber liability insurance

    Provides liability coverage to businesses that suffer a data breach. Depending on the insurance, it can also cover the cost of letting your customers know about the data breach, as well as providing services to customers who are victims of identity theft because of a said data breach.
  • Umbrella insurance

    Gives you extra coverage to help pay for anything that may have exceeded your policy limits on other types of insurance. 

To help you decide on what insurance you may need, you need to understand the risks of the industry you’re in. A dog-grooming business in California is going to have an entirely different set of needs than a t-shirt printing shop based in North Carolina.

    After you’ve found the types of insurance your business needs, shop around. There are a lot of companies offering all kinds of insurance with varied policies. If you find it overwhelming, it’s a good idea to go through a reputable licensed agent. A commercial insurance agent will help you find policies that match the needs of your business and your price point.

    Learn more: Commercial Insurance: What Is It, And Do You Need It For Your Ecommerce Store?

    9. Select Your Tools and Software

    Taking the steps to start a business means having more to do than reasonably can be done. That’s why small business owners shouldn’t underestimate the value of good software—it’s one of the best ways to reduce the heavy lifting involved in running a business.

    Are there repetitive tasks in that list that don’t require much decision making? Entrepreneurs use software for streamlining or automating that sort of work. You can also deploy software early to support some of your marketing and sales work. While there’s a genuine risk of getting distracted with excess tools, there’s a portion of marketing that will benefit from automation from day one.

    Software to help you manage

    • Accounting

      With numerous options to help you track everything from a meal with your business partner to a big inventory order, accounting software is one of the best ways to start your business off on the right financial foot. 
    • Email marketing

      Most businesses will benefit from setting up cart abandonment and welcome email sequences even before they’ve made their first sale. An email list is one of the few things, alongside your online store, that you truly own on the internet. It provides a direct line to your customers that isn’t dependent on third-party algorithms. Invest early and start for free with Shopify Email.
    • Ads

      Paying for ads is a necessary cost, especially for online, but there’s marketing software that can help streamline the process and make the most of your advertising budget—no matter how much you have to spend. Marketing in Shopify can help you reduce the time it takes to create, test, and track your campaigns, but if you plan on scaling your paid advertising, it’s smart to familiarize yourself with their individual platforms.
    • Project management

      Even if you’re a sole proprietor, having one place to plan your work and keep track of important tasks can help you stay on schedule. Tools like Trello and Asana can help you keep your finger on the pulse, and connective apps like Zapier are great for stitching together and automating your most common workflows.
    • Website or online store

      Choose a website builder or ecommerce platform that allows you to easily manage all the critical tasks involved in running your business. Look for a theme that supports your product lines and gives you the ability to take and manage orders easily. For commerce businesses, site performance, payments and checkout, and omnichannel capabilities are especially important considerations.

    10. Hire Your Team

    Now that you know how to start a business, it’s time to dive into building your team with employees that will manage it.

    How much work will you need to do, and what skills will be required to launch your small business? These are fundamental questions you’ll need to answer, because they’ll guide both your timeline and your level of investment in your launch.

    If you plan to do all of the work yourself, you’re limited by the time you have available to invest. If you plan on hiring employees, you’ll need to account for those costs—as well as the time involved in finding and onboarding freelancers or employees.

    Roles you may want to hire employees for

    • Inventory manager: to keep your inventory up to date
    • Customer service coordinator: to solve customer problems
    • Social media manager: to create buzz and grow your social presence
    • Ads specialist: to generate traffic to your website
    • Graphic designer: to create assets for your marketing material
    • Marketer: to plan and write material for email, website, and other campaigns

    11. Market Your Business

    Brand your business

    Building a brand from scratch is no easy task, but critical to stand out in a sea of competition. A brand is more than just your logo and name, it’s how people perceive you whenever they interact with your small business.

    Common elements of branding include:

    • Brand logo

      A symbol made up of text and images that identifies your business. An effective logo expresses your values and communicates what you do. Create a logo today with our free logo maker.
    • Company colors and fonts

      Your colors, logo, and font play a role in your visual identity. Visuals tie into human emotions and can help reinforce your position and brand experience.
    • Voice, tone, and messaging

      A consistent and recognizable voice across all your touch points makes your brand sound more human and helps connect with your audience on a personal level.
    • Brand positioning:

       A brand position makes it clear who you serve. It communicates to your target audience why you are the best choice for them and what makes your products different.

    Create a website or online store

    Starting an online store or website for your business is both rewarding and profitable when done right. Having an online presence will gain credibility with potential customers and make it easy for them to access your business, versus going to a physical store. 

    Shopify is the easiest and most reputable way to build an online store.

    For a $29 per month, you’ll get:

    • Your own website and domain name
    • SSL certifications
    • Abandoned shopping cart recovery
    • Fast and reliable web hosting
    • Over 4,000 free marketing, sales, and support apps through the Shopify App Store

    Next Step: If you’re ready to launch an online store, check out our guides on How to Start an Online Store in 8 Simple Steps or How to Build a Website from Scratch.


    Create a marketing plan

    As you near your launch date, you should schedule time to create a marketing plan that can help you promote your business and sell more products and services. This a marketing plan can go a long way toward helping your business find an audience, grow your customer base, and keep your promotional efforts on track over time. 

    Marketing plans often include:

    • An executive summary that summarizes your overall plan
    • A vision and mission statement that outlines your overarching goals and business philosophy
    • Objectives that detail the specific things you want the company to achieve
    • A strengths, weaknesses, opportunities, and threats (SWOT) analysis that helps identify what you’re doing right and what needs to be refined
    • Market research that helps you understand your industry, potential customers, and competitors
    • A budget that keeps your finances under control

    Next Step: Get inspired with these seven marketing plan examples and start creating your marketing plan today.

    Promote your business

    The preparation you’ve already done has laid a solid foundation to support your launch, so you can focus on marketing activities and making your first sale. However, a marketing plan of attack, especially as you’re trying to build traction, can help make your launch even more successful.

    How to boost a business’s first few days of sales:

    • Use your network

      Promote your store first and foremost on free channels that are already available to you, which includes your personal social media and your contacts list. Sending one-on-one emails asking for support, which can be as simple as a social share, can go a long way toward gaining traction.
    • Offer discounts

      Rewarding early customers with a discount code that fits with your profit margins can help you get traction early on, especially when your store is new and may not have many customer reviews or social proof points.
    • Run Paid Ads

      Even if you start with a small budget, paid ads can be one of the most effective ways to get in front of your ideal audience. Testing early and learning from your results can help you drive your first few sales and optimize your ad performance as you scale.

    Illustration by Isabella Fassler



    How to start a business FAQ

    Can you start a business with no money?

    1. Tap into a skillset you have and use free tools.
    2. Save six months’ worth of expenses. 
    3. Ask your family and friends for startup funds.
    4. Find out about local small business grants and funding opportunities.
    5. Apply for a small business loan.
    6. Look into potential angel investors.

    How can I start my own small business?

    1. Find a business idea
    2. Write your business plan
    3. Secure financing to fund your business
    4. Choose a business structure
    5. Get federal and state tax ID numbers
    6. Obtain a business license and permits 
    7. Open a business bank account
    8. Get business insurance
    9. Select your tools and software
    10. Build your team
    11. Market your business

    When should you start a business?

    There’s never a specific right time to start a business. You should start a business when you have the time and attention to commit to it. However, there’s no problem with starting while you are still working another job. 

    What are the most successful small businesses?

    1. Dropshipping
    2. Print on demand
    3. Tax preparation and bookkeeping
    4. Handmade products
    5. Digital products
    6. Photography
    7. Video games
    8. Self-published author
    9. Pet product retailer
    10. Thrifting