How to Start a StartupA Step-by-Step Guide for 2021

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Startups are businesses created with rapid growth in mind that shake up their industry and challenge the status quo. If you’re a self-motivated, passionate, creative, and adaptable person with a great idea; you might be made for startup entrepreneurship. Learn more about how to launch your own business with this guide on how to start a startup.

Recommended: Are you ready to create a startup and become an entrepreneur? Take the Entrepreneurship Quiz to find out!

How to Create a Startup

Are you ready to launch your own startup company?

If you’re reading this, you most likely are ready to be your own boss and create a startup of your own. However, you can’t become an entrepreneur just by wanting it. If you mean business about launching your startup, these are the 11 steps you need to take to get started.

Skip Ahead To:

  1. Determine if You Have What It Takes to Launch a Startup
  2. Build Your Entrepreneurial Network
  3. Find a Startup Idea
  4. Plan Your Startup
  5. Get Startup Funding
  6. Register Your Startup
  7. Obtain Licenses & Permits
  8. Get Business Insurance
  9. Set Up Accounting for Your Startup
  10. Market Your Startup
  11. Grow Your Startup

1. Determine if You Have What It Takes to Launch a Startup

Launching a startup is not for the weak at heart.

Starting and growing any business takes dedication. Launching a startup takes even more.

Creating a startup is not just coming up with a great idea. It also involves building your entrepreneurial network, planning your startup, funding your startup, registering your startup, setting up an accounting system, marketing your startup, and growing your startup. If this sounds like a lot, it’s because it is.

Launching a startup is probably going to involve you doing a lot of learning. But, don’t worry. There are a lot of resources to help you along your entrepreneurial journey.

What Is an Entrepreneur?

What exactly is an entrepreneur? Merriam-Webster defines an entrepreneur as someone “who organizes, manages, and assumes the risks of a business or enterprise.” Similarly, the Oxford definition is “a person who makes money by starting or running businesses, especially when this involves taking financial risks.”

However, while these describe many people who start a business, when we think about startup entrepreneurs, there are a number of characteristics that stand out.

Know the Entrepreneurship Characteristics Required

Although there are numerous types of entrepreneurs, there are a number of common characteristics often attributed to startup founders. Some of the most important entrepreneur characteristics are passion, creativity, motivation, and self-discipline. Entrepreneurs also have to be adaptable, observant, and willing to take risks.

Other common characteristics often attributed to entrepreneurs include:

  • Driven
  • Energetic
  • Innovative
  • Enthusiastic
  • Independent
  • Autonomous
  • Need for Achievement
  • Thinks Outside of the Box
  • Networkers
  • Organizers
  • Curious
  • Open-Minded

2. Build Your Entrepreneurial Network

One of the first things you should do while launching a startup is to begin building and growing your entrepreneurial network. Your entrepreneurial network is your network of other founders, entrepreneurs, advisors, mentors, and other members of your local startup community.

Your entrepreneurial network is a crucial source of resources — including knowledge, advice, and connections to their networks.

As a startup founder, you will go through new challenges every day. You are not going to have all of the answers and will likely need the knowledge and advice of those who have been through it before. Thus, it is important to have the right people in place to reach out to for help.

One place to expand your entrepreneurial network is within your local startup community. Many communities have thriving entrepreneurial ecosystems, with numerous opportunities to network within your local community.

Check out TRUiC’s page on Local Resources to find out more about resources near you.

In addition to providing opportunities to build your entrepreneurial network, your local startup community may provide a host of additional resources, including training programs, mentoring, the use of hackerspaces and makerspaces, and connections to investors.

Another place many entrepreneurs turn to for advice is local SCORE mentor programs. SCORE is a network of more than 10,000 expert business mentors across the US that provides free mentoring to startup and small business owners.

Additional opportunities to build your entrepreneurial network include online networks of founders, entrepreneurs, and executives such as Entrepreneur’s Organization and Startup Nation.

Wherever you decide to turn, it is never too early to work on building your entrepreneurial network and getting involved in the conversation.

3. Find a Startup Idea

If you are looking for startup ideas, one of the first places to begin your search is by looking at what you already know. This includes your capabilities, skills, interests, and passions. The most common sources of business ideas draw from people’s work experience, education and expertise, hobbies and personal interests, and technological knowledge and skills.

You should also consider how close the startup idea is to your sweet spot. What is your sweet spot? Think of it as the place where your capabilities and skills and your interests and passions all align with an attractive opportunity. When brainstorming or searching for ideas for startups, look for those within this sweet spot.

Startup Ideas diagram.

Attractive startup opportunities, those created with rapid growth in mind, are desirable, feasible, sustainable, and timely. Feasibility indicates that you have, or can acquire, the skills and resources needed for the project. Desirability means you want to do it — the risk vs. the reward is worth it to you. Sustainability means that it will last and is economically viable, socially responsible, and environmentally friendly. Timeliness means that now is the right time for the market, the idea, and also for you.

Use Free Tools and Resources

TRUiC provides a number of free resources and tools to help you come up with business ideas:

  • How to Come up With Startup Ideas: TRUiC’s guide to coming up with startup ideas provides pointed tips on finding and evaluating startup ideas.
  • Startup Ideas Guides: TRUiC provides a number of additional guides on coming up with startup ideas as well as popular startup ideas by category.
  • Business Ideas Generator: TRUiC’s free business ideas generator allows you to explore a curated list of business ideas according to your interests and capabilities with just three easy steps.

4. Plan Your Startup

Name Your Startup

Naming your startup is a very important consideration. Choosing an optimal name depends on the type of business, industry, and target market. 

Once you have chosen a name, you will need to ensure that the name you choose is not already in use and that the domain name is available. You can do this by searching the web, Federal Trademark Records, and your state’s Secretary of State website (or equivalent state department).

If the name you were hoping to use is already in use, you will have to come up with another. If you end up having trouble coming up with a name, here are a few tools that might help:

  • How to Name a Startup: TRUiC’s How to Name a Startup guide discusses how to choose a name for your startup, register your startup’s name, and find a domain name for your business.
  • Business Name Generator: TRUiC’s free business name generator allows you to search for available startup names by keyword, location, and industry.
  • Business Name Generator by Industry: TRUiC’s business name generator provides names for a variety of industries so you can find an available startup name that aligns with your business goals.
  • Business Name Generator for Local SEO: TRUiC’s business name generator for local SEO fine tunes your startup name options to optimize your site traffic locally using your city, state, and keywords.

Write a Business Plan 

Once you have zeroed in on a startup idea and name, you will then need to develop your idea into a viable startup. This is the process of business planning. And, one of the first steps in business planning is writing it down.

Whether you begin with an informal or formal business plan, the process of writing your business plans down requires you to think through all of the key elements of your business. It allows you to take an in-depth look at your industry, market, and competitive position. It helps you set goals, determine your keys to success, and plan your strategies. It requires you to explore your financial projections and manage cash.

There are many different types of business plans, depending on the stage of your venture and the purpose of your business plan. In the earliest stages of your business idea, you may want to start with an informal business plan such as the business model canvas.

Once you are ready to begin seeking investments, you will most likely be required to provide a formal business plan to lenders and potential investors.

Informal Business Plans

Informal business plans can include anything from writing an idea down in an idea journal to jotting down a quick three-sentence business plan or sketching out a lean canvas or business model canvas.

The business model canvas, created by Eric Ries in his book The Lean Startup, helps map out the nine key areas of a startup. These nine areas include:

  • Customer Segments — describes your target market(s)
  • Value Proposition — depicts the value that your product or service provides
  • Channels — summarizes how you will communicate with and reach each customer segment
  • Customer Relationships — describes the types of relationships (and how) that you will establish with each customer segment
  • Revenue Streams — reports on how you plan to generate income from each customer segment
  • Key Resources — describes the assets required to make your business model work
  • Key Activities — describes the most important activities your business must do to make your business model work
  • Key Partnerships — identifies who you will be forming relationships with in order to maintain customer relationships, reach customers, acquire resources, and completing key activities
  • Cost Structure — provides an overview of the cost structure to operate your business model

Formal Business Plans

Formal business plans lay out the story of your business. Although there are no set formats for formal business plans, they can typically be classified into one of two main types: the story business plan and the traditional business plan.

The story business plan tells the story of your business, describing the problem you are solving, the solution you have come up with, what the market and industry look like, and how you will be the startup that solves the problem (and hopefully makes a lot of money).

The story business plan is typically a 10 to 20-page document and follows the format of a business plan presentation — engaging the reader and walking them through the story of your startup.

An outline of the sections in a story business plan would look like this:

  • Introduction — an introduction to your business (also serving as a shorter executive summary)
  • The Problem — a description of the problem you are solving for your users or customers
  • Our Solution — a depiction of your solution to this problem and how it works
  • Target Market — analysis of the market and your target customer
  • The Industry and Competition — analysis of the industry and current and future competitors
  • Our Business Model — an overview of your business model, cost structure, and revenue streams
  • Our Team — a summary of the members of your management and leadership team
  • The Money — financial statements and projected financials of your business
  • Where We Are Now — a report of the progress you have made thus far (traction)

The traditional business plan is typically a 20 to 40-page formal document that describes what your business does, what your objectives are, and how you plan to achieve them. It lays out your plans for operating, marketing, and managing your business, along with your goals and financial projections.

If you’d prefer to present a traditional business plan, an outline of these sections may look like this:

  • Executive Summary — a high-level overview of your business or business idea
  • Venture Overview — a description of your company, vision, mission, and goals
  • Product or Service Description — a detailed description of your product or service
  • Industry and Market Analysis — analysis of the industry and market you compete in
  • Marketing Plan — your overall strategy and specific plans to capture market share
  • Organizational Plan — the legal form of the business and the key players
  • Operational Plan — how you will operate the business and your key resources
  • Goals, Milestones, and Risks — short and long-term goals, milestones, and risks
  • Financial Statements — financial statements and projected financials of your business.

Recommended: Business planning software can help you write a professional business plan that will lead you to success.

Test and Validate Your Startup Idea

Part of planning your startup is testing and validating your startup idea and determining if people will actually buy your product. This is an integral part of customer discovery and the lean startup methodology and can be an effective way to develop and evolve your idea in the early stages of your startup.

Testing and validating your startup idea involves determining who your target market is. Your target market is the specific group of customers to whom your product is intended. And, no, it is not everyone. Although every new venture founder would love to sell their product or service to everyone, your focus should be on your target — your ideal customer.

Once you identify your ideal customer, you will next need to research and reach out to them. Track them down, ask them questions, survey them, and gather feedback.

Begin by exploring the problem that your company is solving and how your target market is solving this problem now. Who is the competition? What will set you apart from them?

With this information in hand, you can evolve your features, functions, and messaging to align with your target market’s most important wants and needs.

5. Get Startup Funding

Startups require funding for a number of reasons. Startups often need capital to cover their initial expenses until they become profitable, and they need money again to expand, grow, build inventory, and even get through slow seasons.

When planning your business, you should determine what types of business funding options your company will need and when. You need to be completely aware of startup costs and your financials and financial projections before seeking outside funding. Knowing exactly what you need and when is the best way to choose the right kind of funding.

The most common types of business funding are:

Recommended: Establish financial credibility for your startup with a business bank account and a business credit card.

6. Register Your Startup

Prior to opening for business, you will need to register your startup. Registering your startup begins with choosing a business structure and may include registering your business with the IRS and registering for sales tax.

One of the first things you will need to do to establish your startup as an actual business is to choose your business structure (i.e., the legal form of your startup).

There are four main types of legal structures for startup ventures:

Choosing the legal structure of your startup, in part, depends on (1) whether you are launching your startup alone or with co-founders and (2) the stage and growth plans of the venture.

Many startups begin as sole proprietorships and general partnerships. They begin as an idea, or a hobby, or as a low risk way to test and validate an idea.

Sole proprietorships and general partnerships are informal business structures. In informal legal structures, the startup is considered an extension of the owners, and the owners bear the tax and liability burdens of the business.

However, as the idea evolves and launching a startup begins to look more likely, the need for a formal business structure emerges.

LLCs and corporations are the two primary types of formal business structures. These forms of legal structures require registering your venture with the state as an independent entity. Because the venture is an independent entity from its owners, formal legal structures provide liability protection for the owners and unique tax benefits for the business.

The most popular business structure for startups with aspirations of high growth is the c corporation. This is because most investors prefer C corporations. A C corporation (C corp) has investor-friendly taxation rules, simple transfers of ownership, and natural exit strategies, and many angel investors and venture capitalists will not invest in ventures that are not incorporated.

For more information on business structures, read our guide on How to Choose a Business Structure.Once you've chosen a structure, consider hiring a professional service to help you form your business.

Register Your Business

In addition to obtaining any required licenses or permits, you also may be required to register your business and to collect and remit the appropriate taxes such as sales taxes and employment taxes.

Register Your Business with the IRS

It is recommended that one of the first things you should do is register your business with the IRS by obtaining an Employer Identification Number (EIN). An EIN is the IRS’ way to identify a business.

There are several reasons you may need an EIN for your business:

  • EINs are required for many business structures such as corporations, partnerships, and multi-member LLCs.
  • EINs are also required if you have any employees.
  • Most banks require you to have an EIN to open a business bank account.

You can apply for an EIN for free on the IRS website or by mail, by fax, or by phone. For more information on how to apply, read our guide on How to Get an EIN (For Free).

Register Your Business for Sales Tax

Depending on the nature of your product or service and the state you live in, you may need to collect a sales tax.

Sales tax, or "Sales and Use Tax," is a tax charged by states, counties, and municipalities on the sale of certain taxable goods or services. Each state, and certain counties and municipalities, has its own set of rules and rates on what is taxable within that jurisdiction.

Check with your state’s Department of Revenue (or equivalent state department) as well as your local tax office to find out what you are required to collect sales tax on in your state.

If your state or local government has a sales tax imposed that applies to products or services you provide, you will need to obtain a Sales Tax Permit or a Sales Tax Certificate of Authority so that the state can track sales tax revenue. You will also be required to collect sales tax from customers and submit tax payments to the appropriate agency.

7. Obtain Licenses and Permits

In addition to registering your business, you will likely need to obtain a number of licenses and permits from your local, state, and federal government.

Federal Permits and Licenses

If your business falls under the regulation of any federal agency, you will likely need to obtain the appropriate permits from that agency. These include commercial activities in:

  • Agriculture
  • Alcoholic Beverages
  • Aviation
  • Firearms, Ammunition, and Explosives
  • Fish and Wildlife
  • Commercial Fisheries
  • Maritime Transportation
  • Mining and Drilling
  • Nuclear Energy
  • Radio and TV Broadcasting
  • Transportation and Logistics

For more information on federal licensing, visit the Federal Licenses and Permits page on the website.

State Permits and Licenses

Most businesses are required to file for a permit or license to operate legally within their state. The permits and licenses you may need vary widely by state and type of business.

To find out more about the permits and licenses in your state, use TRUiC’s Business License guide to find business license resources for your state.

Local Permits and Licenses

Most businesses will need some kind of local license or permit to legally conduct business within their town, city, or county. These may include anything from occupancy permits and food and beverage permits to special permits and licenses for signage, lighting, and noise.

You will need to check with your local county clerk’s office about the types of licenses and permits required.

8. Get Business Insurance

Most startups will need insurance in one form or another. Some forms of insurance, such as worker’s compensation or unemployment insurance, may be required by your state. Other forms of insurance may be optional but are important to protect you and your company from disaster.

You may choose to carry several types of additional insurance, such as general liability, professional liability, property, or auto, among many others. Or, you may choose to bundle several types of insurance together in what is known as a business owner’s policy.

To learn more about the types of business insurance you may need, or search for our specific guides on business insurance recommendations in over 650 types of small businesses, make sure to read our Small Business Insurance guide.

And when you are ready to start shopping for business insurance, read our guide on the Best Small Business Insurance Companies.

9. Set Up Accounting for Your Startup

Business accounting is an important (and required) aspect of operating a startup. Accounting allows you to know how you are performing financially, track benchmarks and goals, and lets you know how much your startup is worth. In addition to serving legal and tax-related purposes, you also need an accounting system in place to accept payments, pay your employees, and manage your startup’s finances.

There are a number of options for handling your business accounting, including hiring an in-house accountant, hiring a bookkeeper, using a payroll service, or using small business accounting software. However, no matter how you handle your startup’s accounting, you will need to have an accounting system in place.

Recommended: Schedule a consultation with a business accountant today to find out how much time and money your business could save on tax, payroll, and bookkeeping services.

10. Market Your Startup

Just because you build an awesome product, service, or experience does not mean that customers are going to show up at your door. You are most likely going to need to find them first and let them know about your startup and what you have created. You will need to build your brand.

Design a Logo

One of the first things you will need to do is to design a logo for your brand to begin building awareness and recognition. A well-designed logo helps people to identify and remember your brand and builds trust.

Try our free logo maker to generate thousands of professional, high-resolution, downloadable logo options for no charge. You can also find alternatives by reading our review of the Best Logo Makers.

Build a Business Website

Every legitimate business needs a website. And sooner than later, your startup is going to need its own website too.

If you have never built a website before, don’t worry. It is easier than ever, and TRUiC’s How to Build a Business Website guide walks you through it.

When choosing a website builder, there are many to choose from depending on your needs. Website builders like GoDaddy offer a multitude of features, functions, abilities, and applications based on your company’s needs.

One thing to keep in mind when designing and writing content for your website is your search engine optimization strategy. Search engine optimization (SEO) is the process of increasing your website traffic (and your brand) by designing your site and content to rank higher in search engine results.

Recommended: To learn more about how to implement SEO on your startup’s website, check out our beginner’s guide to SEO: How Do People Find Your Website - SEO 101.

Establish a Social Media Presence

In addition to building a website, you will also likely need a social media presence to establish your brand and grow your startup. Social media provides a way to reach, connect, and engage with customers and potential clients.

The most popular social media platforms include Facebook, YouTube, Instagram, TikTok, Snapchat, Twitter, LinkedIn, and Pinterest. However, additional platforms such as Yelp, Reddit, and Quora all have large followings of niche users. The social media platforms and strategy you choose to establish your startup will depend on the nature of your product or service and your target market.

To learn more about establishing your startup’s presence on social media, feel free to read our Social Media Guide for Small Business.

Distribute Press Releases

Another way to let people know about your startup is by creating your own publicity by writing press releases. Press releases create visibility and help you establish your brand.

So what is a press release? A press release is an official statement by your company written by you and distributed to the press to provide public knowledge and promote your business and brand.

Of course, you can hire professional press release writers or press releases distribution services such as Sitetrail, but if you choose to write your own press releases, here are some things you should know:

  • Press releases have six major parts:
    • The date, location, and logo
    • A headline
    • An introduction
    • The content
    • Your company’s boilerplate (i.e., an “about us” section)
    • Information to reach your press contact
  • To distribute press releases yourself, you will need to assemble a list of outlets that might be interested in publishing the information. A good place to begin is with local business outlets that are more apt to publish information on your business.

To learn more about writing press releases, read our guide on How to Write a Press Release.

11. Grow Your Startup

The work doesn’t end at launch or after your first sale. You will then need to focus on carrying out your plan and growing your business. This will require dedication, perseverance, and the willingness to seize opportunities to grow.

These opportunities might include expanding to new regions, seeking additional target markets, or expanding your product or service offerings.

Opportunities for growth also might come along in the form of innovation, quality improvement, customer-focused development, and streamlining your business model.

Or, opportunities for growth might include internal growth factors such as building your entrepreneurial network, growing your team, and building a strong company culture.

Recommended: Read our guide on How to Grow Your Business for tips on seeking and finding opportunities for growth.

Startup FAQ

How do you define a startup?

A startup is a young company born out of a desire to solve a problem, fulfill a demand, or bring a unique product or service to the market. Typically, startup companies are funded solely by their founders or with the help of friends and family.

What are the types of startups?

There are six types of startups:

  • Scalable startups that are built for rapid growth
  • Large company startups that are built to innovate
  • Social entrepreneurship startups that work to positively impact the world
  • Buyable startups that are built to be acquired
  • Lifestyle startups that are centered around the founder’s passions
  • Small business startups that are created to fulfill the needs of its founders

Startup vs. small business: What is the difference?

The fundamental difference between a startup and a small business is longevity. Generally, while small businesses are focused on sustained growth, startups tend to focus on gross revenue and rapid growth since this is a temporary business model. Learn how to start a small business by reading our guide.

What is a lean startup?

A lean startup is a methodology that tests the viability of a startup company or product through experimentation and hypothesis testing. This method is based on gauging the interest of customers to produce a product or service with a built-in market.

What makes a startup successful?

There are a multitude of ways to make a successful startup, but the foundational reasons startups succeed are because they offer a usable and unique product or service, have sufficient financial backing, and have an unrelenting dedication to making their business succeed.

What makes a good startup founder?

Starting a business takes a great idea and an even greater entrepreneur to make it all happen. Great startup founders are passionate, adaptable, confident, and have an eye for detail.

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