How to Start A Small Business

By T. Leigh Buehler  |  09/08/2026

Taking on the role of entrepreneur and starting your own small business can be a thrilling, nerve-wracking experience. It is an empowering step in your professional life and represents independence and creativity. Starting a small business is also an opportunity to transform an idea into a meaningful product or service.

The process of starting a small business can feel overwhelming and filled with questions, such as:

• Where do I begin?
• How do I protect my personal and business finances?
• What about managing finances?
• Are there any legal issues that need to be considered?

Learning how to start a small business begins with understanding that entrepreneurship is both a strategic and emotional journey. According to the U.S. Small Business Administration’s (SBA’s) Office of Advocacy, more than 36 million small businesses operate in the United States today (about 99.9% of all U.S. businesses).

Most successful companies began with limited budgets and unorganized systems. Apple® began in a garage, and Airbnb® started with two air mattresses on a living-room floor. Even Starbucks® started as a single store, selling coffee beans and equipment. But just because a business starts small, that does not mean it must remain small.

Entrepreneurship is about learning and adjusting as you go. Once you understand the process unfolds gradually, the journey to starting your own business becomes far less intimidating.

What Is A Small Business?

The SBA defines a small business as a business that is independently owned and operated, and it typically has fewer than 500 employees. However, the exact definition of a “small” business varies by industry.

The Small Business Administration plays a major role in supporting entrepreneurs who want to start their own small businesses. For example, the SBA offers free education, mentoring, funding programs, and other tools to help small businesses owners navigate regulations and grow sustainably.

The SBA’s resources are valuable for first-time founders who need guidance and education on business considerations, such as:

• Financing
• Planning
• Operating legally

How to Start A Small Business: Key Steps

Starting a small business includes paying attention to strategic planning and legal compliance. You will need to:

• Develop a strong business idea
• Conduct market research
• Create a business plan
• Choose the right business structure
• Register your business
• Select a business name
• Get licenses and permits
• Fund your small business
• Build your brand
• Understand your target audience
• Advertise your small business with social media
• Choose a business location and hire employees
• Manage taxes and laws
• Launch your business

Developing A Strong Small Business Idea

Every company starts as a business idea. However, that idea doesn’t need to be revolutionary.

In fact, some of the most successful businesses were grown from simpler observations or personal frustrations. Sara Blakey, the founder of Spanx®, created her billion-dollar company after cutting the feet off her pantyhose to create a smoother look under white pants.

Her business idea was not complex; it was practical and relatable to customers. More importantly, it was rooted in a real need.

A strong business idea solves a problem, fills a gap, or improves an existing solution. It should align with your interests and strengths.

If you are unsure where to begin, pay attention to the questions people ask you, the tasks you enjoy completing, or the problems you tend to repeatedly solve. Most likely, your best idea is hiding in plain sight.

Conducting Market Research

Conducting market research helps you develop strong decision-making skills. It helps you understand who your potential customers will be, what demographics involve your customers, and who your real-time competitors are.

In addition, market research allows you to develop an overall view of your industry’s landscape. Not conducting a market analysis can cause you to risk building a product or service that does not resonate with customers.

Market research does not need to cost a lot of money or be a formal process. It can be as simple as reading pricing structures and customer reviews on competitor websites or observing trends and comments on social media.

Many entrepreneurs talk to family and friends to find who may be a good fit for their target audience. Your goal is to understand:

• What people need
• What they are willing to pay for
• How your business can offer something different or valuable to them

Creating A Business Plan

A business plan outlines what your organization will do, how it will operate, and how it intends to grow. This document doesn’t have to be complicated. Creating it helps you think through your goals, your market, your finances, and your strategy.

Entrepreneurs who create a formal business plan are more likely to achieve business viability than those leaders who do without a plan. A plan helps you stay focused, anticipate challenges, and make informed decisions.

It also becomes essential if you want to seek funding or other support from lenders or investors. They will want to see a business plan and read an executive summary before agreeing to any funding.

Think of a business plan as a living document. It is something you can update as your business evolves.

Choosing The Right Business Structure

Your business structure will determine how your company is taxed. It also determines how you will operate legally and how your personal assets are protected.

The most common structures for small businesses are:

• Sole proprietorships
• Partnerships
• Limited liability companies (LLCs)
• Corporations

Your personal assets could be at risk if the business faces legal or financial trouble, so it is essential to consider what risks you want to take. For instance, a sole proprietorship is the simplest option but offers no personal liability protection.

By contrast, an LLC creates a separate legal entity and offers personal liability protection while remaining flexible and relatively easy to manage. Some small businesses in the U.S. choose to operate as an LLC for this reason.

When thinking about your structure, consider your long-term goals, your risk level, and how you plan to grow. The SBA is a great resource for information on each of these business structures.

Registering Your Business

Once you decide on what kind of structure you want to use, the next step is to register your business with your state. This process typically involves:

• Filing formation documents
• Developing a “Does Business As” (DBA)
• Paying a registration fee
• Obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS)

An EIN is like a Social Security number for your business. If you intend to hire employees, open a business bank account, and file your taxes, then you will want to have an EIN.

Registering your business helps to ensure you are operating legally. Also, it gives your small business important financial tools like credit, insurance, or funding.

Selecting A Business Name

A business name is one of the first impressions customers experience with a brand, so it should be memorable and meaningful.

More importantly, your business name should be legally available. Before any new business finalizes its name, the owners will need to look through their state business databases, trademark records, and domain availability to ensure the name is available.

A strong business name supports your brand identity and helps you stand out. Airbnb originally launched as “Air Bed & Breakfast” to reflect the founders’ early concept of renting air mattresses to conference attendees. But as the company grew and evolved, the name evolved with it.

Getting Licenses and Permits

Most small businesses need some form of license or permit to operate legally. Requirements vary by city, state, and industry.

Common examples of legal requirements for your business include:

• Sales tax permits
• Health department permits
• Professional or occupational licenses
• Permits to operate from your home (in some areas)

The SBA and local government websites offer searchable tools to help you determine exactly what your business needs. Obtaining the proper required licenses early helps you to avoid fines or delays in operation and avoid any issues with compliance down the road.

Funding Your Small Business

Startup costs vary greatly depending on your industry and business model. An online business may require minimal upfront investment, but a brick-and-mortar store may need funding for rent, equipment, and inventory. You may also want to start up a small business bank account.

According to Business News Daily, the SBA estimates that the average microbusiness costs around $3,000 in startup costs. Many home-based businesses cost even less. Understanding your startup costs helps you plan your budget, determine whether you need funding, and avoid unpleasant financial surprises.

There are several ways to fund a small business, and the right option depends on your goals and your financial situation. Viable paths to funding include:

• Personal savings
• Bank loans
• SBA loans
• Grants
• Crowdfunding
• Investors

SBA loans are known for their favorable terms, but they require strong credit and a detailed business plan. Crowdfunding platforms like Kickstarter® allow entrepreneurs to raise money without giving up equity. However, success with a crowdfunding platform depends on marketing and community support.

A lot of entrepreneurs take the path of starting small and reinvesting their profits as they grow. This strategy helps to reduce risk and builds financial discipline.

Building Your Brand

A brand is the personality of a business. It includes the mission, the value, the visual identity, and the overall experience for the customers. A strong brand builds trust and differentiates you from your competitors.

Branding does not need to be complicated; it can start with a clear message and a consistent look. Companies like Patagonia® and Starbucks built their brands around emotional connection as well as their products.

For instance, Patagonia combines customers’ love of the outdoors with high-quality, sustainable materials. Starbucks is based around customer appreciation for coffee and a need for a caffeine jolt. Your brand can do the same, even on a smaller scale.

Understanding Your Target Audience

Your target audience is the driving force behind each decision your company makes from your pricing strategy to your marketing and product design. Knowing and understanding your customers and what they care about helps you create offerings that resonate with them.

When you know your audience, you can speak their language and develop a marketing plan designed to attract those customers. Also, you can tailor your products and services to meet their needs more effectively.

Nike® is a classic example of a company that truly understands its audience. Nike’s messaging speaks directly to the motivations of athletes and fitness enthusiasts. This company creates a sense of empowerment and identity for its target audience.

Advertising Your Small Business with A Website and Social Media

A professional website and a strong social media presence are powerful, affordable marketing tools and add legitimacy to your business. In fact, social media is quickly becoming a necessary component of marketing plans, even for the smallest company.

Platforms like Instagram®, Meta® (formerly Facebook®), TikTok®, and LinkedIn® allow you to reach customers and build community in a virtual way.

Consistency matters more than perfection in social media. Posting helpful tips, behind-the-scenes content, customer testimonials, and product demonstrations can build trust and engagement among your customers.

Social media can also provide real-time feedback from customers. That feedback enables entrepreneurs to understand what their target audience responds to and how to improve the customer service experience.

Choosing A Business Location and Hiring Employees

Your business location affects your company’s visibility, costs, and customer access. For many entrepreneurs, a home-based business or fully online model is the most practical option. Other small business owners might choose a commercial space or a co-working environment.

The right location will depend on your industry and your customers; you'll want to keep storefront needs and local regulations in mind. A bakery needs constant foot traffic, while a freelance designer may only need a laptop and a strong internet connection.

If your business grows to the point where you need additional hands, hiring employees can expand your capacity and improve your customer service. Most small businesses have five or fewer employees.

Before you hire employees, however, it is important to understand laws around employment, payroll requirements, and training needs. Starting with contractors or part-time help can free you from time-consuming tasks and allow you to focus on higher-level responsibilities.

However, it is crucial to familiarize yourself with local and federal employment laws. When your business is in a position to hire employees full-time, you may also want to provide benefits to attract top talent.

Managing Business Taxes and Legal Requirements

Taxes are an unavoidable part of running a business, but they do not need to be overwhelming. Your tax obligations will depend on your business structure.

Also, your taxes will depend on the type of work that you do. Sole proprietors typically pay a self-employment tax, and LLCs and corporations have different filing requirements.

Your state may have additional tax or legal requirements outside of federal taxes. In addition, don’t forget to investigate your employment tax filing requirements. Using accounting software or working with a tax professional can help you stay organized and avoid costly mistakes.

Launching Your Small Business

When you are ready to launch your business, you may have feelings of excitement or worry. That’s normal.

But if you planned out the steps of your business launch properly and strategically, that planning should help ease your tension. A successful launch does not need to be elaborate, just intentional.

Some simple ways to launch your business include:

• Announcing your business on social media
• Hosting a small event
• Offering a limited-time promotion
• Reaching out personally to your first potential customers

A thoughtful launch helps build early momentum, creates public awareness of your company, and gives you valuable feedback to refine your offerings as you grow.

How to Grow Your Small Business for Long-Term Success

The long-term success of your business will require you to be adaptable, financially aware, and willing to learn. As your business grows, you’ll refine your processes and adjust your goals. But when you think you have everything figured out, your industry can shift and you’ll need to adapt again.

Organizations that thrive over time tend to prioritize customer relationships, stay open to innovation, and maintain strong financial habits. Starting small and staying consistent can lead to meaningful and sustainable growth.

Starting a small business is a rewarding and exciting journey, allowing you to blend creativity with planning and persistence. By developing a strong idea, conducting market research, choosing the right business structure, and building a solid foundation, you can set yourself up in a better position for success. With the right tools, support, and mindset, your business can grow confidently and sustainably into the future.

The Bachelor of Arts in Entrepreneurship at APU

For students seeking the knowledge to become entrepreneurs and start their own businesses, American Public University (APU) provides an online Bachelor of Arts in Entrepreneurship. For this degree program, students can enroll in different courses such as business plan foundations, idea generation, and innovation design and prototyping. Other courses include strategic growth, the foundations of entrepreneurship, innovative marketing, and technological innovation.

This B.A. in entrepreneurship has four concentrations. Adult learners interested in starting small businesses may find the Small Business concentration especially helpful since it offers courses in small business customer service, social media to grow small business, and virtual small business.

This bachelor’s degree also has specialty accreditation from the Accreditation Council for Business Schools and Programs (ACBSP). This accreditation shows that this program has been rigorously checked for high academic standards.

For more details about this bachelor’s degree in entrepreneurship, visit APU’s business and management degree program page.

Apple® is a registered trademark of Apple, Inc.
Airbnb® is a registered trademark of Airbnb, Inc.
Starbucks® is a registered trademark of Starbucks Corporation.
Spanx® is a registered trademark of Spanx, Inc.
Kickstarter® is a registered trademark of Kickstarter, PBC.
Patagonia® is a registered trademark of Patagonia, Inc.
Nike® is a registered trademark of Nike, Inc.
Instagram® is a registered trademark of Instagram, LLC.
Meta® and Facebook® are registered trademarks of Meta Platforms, Inc.
TikTok® is a registered trademark of TikTok, Ltd.
LinkedIn® is a registered trademark of the LinkedIn Corporation.