10 Steps to Create a Startup
Are you ready to launch your own successful startup company in 2023? Keep reading or use the links below to find a specific section in our startup guide.
1. Assess Your Entrepreneurial Skills
Launching a startup is not for the weak at heart.
Starting and growing any business takes dedication. Launching a startup company takes even more.
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:
- Willing to take risks
A keen sense of the industry’s problems and challenges acquired through industry experience can give you and your startup a competitive edge. However, not every startup CEO has a technical background or experience to pull from. Many successful entrepreneurs simply have the vision and foundational skills to run a company, and they hire qualified employees to fill the gaps in their skillset.
Recommended: Are you ready to create a startup and become an entrepreneur? Take the Entrepreneurship Quiz to find out! You can also visit the Startup Savant podcast to gain insights and advice from founders themselves.
Listen to our latest founder interview to learn more about what it takes to launch your own startup!
2. Develop Your 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. Keep in mind, however, you are not limited to your current skill set. For example, there are many tech startup founders that are non-technical.
Most often, startup ideas are developed from solving a problem. Whether it is a problem you personally struggle with or one you have identified that could use an alternate solution, forming your startup’s product or service around an identified problem can help you not only develop your minimum viable product (MVP), it can also help you find your target market before you get started.
Analyze the Industry Landscape and Develop Your Idea
Before you launch a startup, analyzing the state of the industry landscape, including the:
- Funding environment
- Market size
- Competitive landscape
- Market structure
- Market size and demographics
- Projected growth
The goal of doing this is to establish whether there is ample opportunity within the industry to support your entrepreneurial goals. You can dive deeper into the process by reading our comprehensive guide on conducting market research.
Validate Your Idea
Now that you’ve got a basic understanding of your industry, competitors, and the industry’s projected growth, your next step is to validate your startup idea and solidify your MVP.
There are a few ways to validate your idea:
- Conduct interviews with customers you think might buy this product. Ideally, you will be able to use this insight to refine your unique value proposition (UVP) or target audience, if necessary.
- Use tools and software available to discover, organize, and learn from industry and market data. Some popular tools are Statistica, Think With Google, and KNIME.
- Utilize startup incubators, startup accelerators, or online startup communities to network with other entrepreneurs that can help with brainstorming and fine-tuning startup ideas.
- Establish the product-market fit and, in turn, market validation.
Recommended: Looking for more inspiration to help you launch your company? Check out our list of the top startups to watch!
3. Create Your Startup Roadmap
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 such as industry, market, and competitive position.
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:
- Business model canvas: Visualization of the key aspects of your venture, including customers, value proposition, infrastructure, revenue models, and cost models.
- Lean canvas: An adaption of the business model canvas. Visualizes your problem, solution, customers, value proposition, key performance indicators, and competitive advantage.
However, 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.
Create a Pitch Deck
Before you secure funding as an early stage startup, there are a few things you need to have in place to increase the likelihood that your pitch is successful, whether you’re reaching out to angel investors or attempting to acquire a small business loan. The most important being your pitch deck. Crafting a compelling story is essential not only to the success of your startup but also to creating an impactful pitch deck.
A startup’s pitch deck should include the following;
- An introduction to your startup
- Examples of problems or issues your startup aims to solve
- Examples of the solutions your product or service provides
- The size of the market and opportunity
- A clear description of your startup’s product or service
- An outline of the projected growth, major goals, and future steps
- An introduction to your core team members
- Define your competitors and establish your competitive advantage
- Prove your financial planning and management ability
- A description of how investment funds will be used and why you need them
4. Build Your Founding Team
Startups with two founders are 19% less likely to scale prematurely than startups with a solo founder. Research shows that aspiring entrepreneurs launching a startup without a cofounder take 3.6 times longer to see significant growth — enough to outgrow the startup stage.
Despite these statistics, not all startup owners need a co-founder to be successful in their startup journey. Bringing on co-founders is all about filling important gaps to ensure all of the company’s needs are met, such as:
- Skills gaps
- Leadership experience
- Industry Knowledge gaps
- Startup experience
- Fundraising experience
- Personality gaps
Hire a Lawyer if Needed
The next step is learning how to find a great lawyer for your startup. Not only will a lawyer be essential in ensuring that your startup is legally formed without a hitch, they can help ensure that your business stays compliant if you plan to implement customized vesting schedules or share allocations.
Network Network Network
Networking is one of the most impactful tools for startup entrepreneurs to grow and support their businesses. There are many different networking resources available to entrepreneurs, such as startup incubators, networking events, and local entrepreneur communities to make connections.
To develop the most impactful networking strategy, you need to connect with a wide range of people, such as:
5. Formally Establish 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 audience.
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).
You can also search GoDaddy for available domain names:
Find a Domain Now
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.
- Startup Name Generator: TRUiC's free Startup Name Generator makes selecting a unique startup name simple — just enter a couple of keywords and your industry.
Choose a Business Structure
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).
These are the main types of legal structures for startup ventures:
- Sole proprietorships and General Partnerships: 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.
- Limited liability companies (LLCs) and Corporations: 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.
Choosing the legal structure of your startup, in part, depends on:
- Whether you are launching your startup alone or with co-founders
- The stage and growth plans of the venture.
The most popular corporate 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 establishing your business as a formal legal entity, read our comprehensive guide, How to Incorporate a Startup.
Considering Using an Incorporation Service?
Hiring a professional service will help simplify the formation process for you. Click below to check out our review of the best online incorporation services for startups!
Choose a Location
While some locations such as Silicon Valley have become synonymous with startup culture, generally the best location to start your startup is the state you’re already located in. Starting a business in a state other than the one you’re located in requires more complicated paperwork and complex tax requirements. However, if you’re thinking of starting your startup in another state, some states are more business-friendly than others.
For example, many founders choose to incorporate their startups in Delaware due to their immense business-friendly policies. Startups that form in Delaware are able to do business in other states and therefore bypass the state income tax — a huge tax advantage for any business. However, this isn’t the case in every state. We recommend consulting with a tax professional or attorney before deciding to do business in another state.
Choose your state from the list below to read more on starting a startup in your state:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington D.C.
- West Virginia
If you’ve chosen a physical location for your startup and understand the laws, regulations, and potential benefits of the state you’ll reside in, it’s time to start searching for office space. We'll help you decide the right office space for your startup based on the stage your company is at, its needs, and the many types of office spaces available with this guide to selecting and leasing a startup office.
If your startup is primarily run online, especially when it comes to ecommerce, your business website is most likely the lifeblood of your company. If you don’t currently have a website, consider building one or having one built for you. You can read more about business websites and their role in your startup’s branding in Step 8 below.
Create a Founder Employment Agreement and Vesting Agreement
Startup owners aren’t typically bound by severance agreements that would be applicable to other employees. Instead, founder employment agreements represent the legal agreement between the founder and company.
A vesting agreement is an agreement between the company and a shareholder (typically an employee) that provides restrictions for the shareholder’s ownership of the company. In short, the employee will not be granted their share until the vesting requirements are satisfied.
Formalize Advisory Agreement
If your startup chooses to involve startup advisors and equity is involved in the relationship, you will need to also formalize an advisory agreement. Essentially, this means that all the requirements and stipulations of the relationship between your company and the advisor are outlined including terms of equity and confidentiality.
Startup advisors can be especially helpful during the beginning stages of startup ownership if you aren’t fully confident in a specific aspect of business ownership, such as legal and compliance requirements, marketing, or manufacturing.
Looking for startup advisors? For high-scale startups, investors (venture capitalists or angel investors, typically) are often great startup advisors. However, if you’re launching a business that doesn’t have high growth in mind, you can find startup advisors through resources such as SCORE or the Small Business Development Center (SBDC) in your area.
Create Cap Table and Issue Shares/Certificates
A capitalization table, otherwise known as a cap table, is a document (such as a spreadsheet) that outlines the equity capitalization of your startup company. The cap table outlines your startup company’s securities (e.g., stocks, warrants, certificates, etc.), who owns each security, and the percentage of ownership they have.
Next, you will want to issue shares or certificates of your company to each party based on the cap table you’ve created.
Establish Corporate Governance
Corporate governance is essentially the rules, regulations, and guiding principles that govern a company. Not only does the corporate governance provide much-needed structure to help the startup obtain its goals and objectives, it balances the needs of each company participant. From shareholders to employees and the community, corporate governance ensures every need is balanced and met.
Appoint a Registered Agent
A registered agent is an individual or entity who will receive documents and other legal communications on behalf of your startup. Most states require every business to designate a registered agent when forming a corporation or LLC.
We recommend hiring a professional registered agent service to help you stay compliant with the law and provide you with peace of mind.
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.
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.
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:
- Alcoholic Beverages
- 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 sba.gov 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.
Get Insurance for Your Startup
Most startups will need business 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.
To learn more about the types of insurance you may need, or search for our specific guides on startup insurance recommendations in over 650 types of small businesses, make sure to read our Small Business Insurance guide.
Protect your startup in just a few minutes with Next Insurance. Get an online quote.
Protect Intellectual Property (IP)
Protecting your startup’s competitive advantage means you need to obtain the proper patents, copyrights, and trademarks to ensure your intellectual property (IP) is protected. By registering ownership of intellectual property, you mitigate the risk of competitors utilizing the ideas, designs, or concepts that are protected.
Furthermore, developing a Founder Intellectual Property Assignment Agreement essentially transfers the founder’s IP rights to the company, allowing the startup to utilize the IP while still maintaining its protection. Since founders are typically also shareholders in the company, they still benefit financially from their IP.
6. Get Startup Funding
Startups often need capital to cover their initial expenses until they become profitable, and they need to raise 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.
Recommended: A business bank account will boost your startup's credibility and show potential investors that you're prepared for growth. Open an account with Mercury today and earn a $200 bonus when you deposit $10,000 or more.
The most common types of business funding are:
- Friends and Family Loans
- Business Loans
- Business Credit Cards
- Business Grants
- Angel and Venture Capital Investors
Keep in mind, your business will require different funding sources during different stages of development. For example, during the seed stage, bootstrapping or friends and family loans may be the best funding choice. However, as your startup becomes more established and reaches the growth stage, a venture capitalist or angel investor are more likely to want to invest.
That isn’t the only factor you need to consider, however. The type of startup you’re operating also plays an important role in determining the right funding source.
7. 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
- 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.
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.
8. Establish Your Startup's Brand
Just because you build an awesome product, service, or experience does not mean that customers are going to show up at your door. To generate a successful startup, make sure to build your brand identity.
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.
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 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: Build your startup website today with GoDaddy.
Establish a Social Media Presence
In addition to building a website, you will also likely need a social media presence to establish your brand identity 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.
To learn more about establishing your startup’s presence on social media, feel free to read our guide, How to Improve Your Startup's Social Media Strategy.
Distribute Press Releases
Another way to let people know about your startup is by creating your own publicity by writing press releases.
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.
9. Hire a Team
A company is only as strong as its team. Building a team that is passionate about what your company does, skilled at their jobs, and trustworthy is vital to the success of your startup.
To begin, startups typically need to fill the following roles:
- Chief Executive Officer (CEO)
- Chief Operating Officer (COO)
- Marketing Director
- Product Developer or Engineer
- Head of Sales
- Customer Service Representative
But, before you can hire for these essential roles, you need to solidify your startup mission statement to accurately describe your company’s purpose and values. Additionally, learning to write effective job descriptions helps parse out candidates that may not be a great fit for the role by providing them with accurate information about the job and your company.
Once you’ve established the roles you need filled, the next step is to work towards finding the right candidates to make up your team. A few common methods for finding talented candidates to choose from are:
- Word-of-Mouth Recruiting
- Online Job Boards
- Recruitment Agencies
- Internal Hiring
Recommended: Find freelance talent with Fiverr.
Additionally, it can be beneficial during the hiring process to amplify your job offer by offering incentives such as stock options to employees. This is most common for venture capital-funded startups and has the potential to not only build brand loyalty but also provide the team with an incentive to work actively to propel the company forward.
Employer Legal Requirements
The next step is to register for employment taxes. On the federal level, you will need to register for FICA Tax, commonly known as payroll taxes or withholding tax.
Additionally, every state has different tax requirements for employers, but many states require employers to pay some version of unemployment insurance (UI) tax as well as workers’ compensation insurance.
You’ll also need to create an employment agreement, a legal document that outlines the agreement you are making with your new employee. Inside your employment contract, you will include agreements that are applicable to your company as well as applicable policies surrounding the termination of the agreement, reimbursement of expenses, disputes, company clients, and anything else that pertains to your startup.
Here are a few agreements that you may want to consider including in your employment contract:
- Confidentiality Agreements
- Services Agreements
- Compensation Agreements
- Non-Compete Agreements
Set Up Payroll
How will you pay your employees? Setting up an effective payroll system or service for your company ensures that employees are paid on time and that the appropriate taxes are paid and documented for tax season.
Generally, we recommend startups utilize payroll software like OnPay to streamline this process and get their employees paid worry-free.
Startup companies are known for their emphasis on company culture. Before you build a team, you need to ask yourself, “what kind of company ethos do I want to create?” This should be the basis for the personality types and values you look for in potential employees.
A strong set of company values sets the tone for the startup’s success by providing a foundation for the team’s purpose, motivation, and attitude. It can also contribute to better employee morale and retention.
10. Launch and Scale 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, keeping up with industry trends, 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 consumers, 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.
Boost Your Startup Marketing
When you have a solid marketing plan, you’ll know exactly who your target customers are, what marketing channels you’ll use to reach them, and the exact strategy your company wishes to follow in order to boost your customer base.
A marketing plan should be the foundation of your startup’s marketing efforts and is intended to be the “guiding light” for your marketing strategy.
To begin, take note of all of your company's business-critical goals and what you’ll focus on in the near term. Ideally, you’ll want to make these SMART goals:
Once your goals have been identified, figure out who your target buyers are and what kind of compelling message you’ll use to draw your potential customers in. Having a clear, compelling message is critical in order to grab your future buyer’s attention.
After completing those initial steps, your team can begin implementing your marketing strategy and focusing on the marketing channels you believe will generate the largest return on investment (ROI). This can be content marketing, online advertising, PR campaigns, social media campaigns, and more.
Choosing the right marketing channels for your startup can be challenging, but once you identify which channels bring in the best return on your investment, you’ll be able to leverage these channels further and scale up your marketing efforts.
Here are some popular startup marketing channels:
- Social Media: Whether through paid advertising or regular content publishing, social media is a great way to promote your startup’s products and services. Some examples of popular platforms to utilize are Facebook, Instagram, Twitter, TikTok, and LinkedIn.
- Affiliate Marketing: Using affiliate marketing to sell more of your products and services is a great way to establish yourself as a trusted brand quickly. The first step is to compile a list of marketing materials that affiliates can use for their promotions, such as digital ads, emails, or landing pages.
- Loyalty Programs, Deals, and Coupons: A great way to bring customers back to your business and get repeat sales. If one of your past customers loved your brand and the products or services you provided them in the past, a coupon or deal might tip them over the edge and bring them back.
- Sponsored Events: Sponsored events are another excellent strategy when it comes to getting your business in front of potential customers. Aligning yourself with events that are related to your business and getting your brand out there can pay dividends further down the road.
Create a Strategy to Motivate Growth
While growth can happen organically, you are more likely to reach your startup’s desired objectives if you create a strategy for growth. This means, once you’ve captured initial customers, expand your reach beyond early adopters and existing customers to establish a sustainable growth trajectory that includes tactics for both profitable and sustainable growth.
Start by asking yourself the following questions:
- If you plan to raise more funds in the future, what milestones will you need to hit in order to justify a new round of funding?
- How long will it take to get to the stage wherein you will need another funding round?
- What kind of “burn rate” is rational for your startup's expected growth and current operation needs?
Additionally, you will need to work toward not only understanding but improving unit economics such as:
- Payback period
- Customer retention rate
- Lifetime customer value (LCV)
- Customer acquisition cost (CAC)
These unit economics can be measured by channel, customer segment, and product line. By developing strong measurements to better track and understand this data, you’ll be able to more easily develop strategies to grow your customer base and product line as needed.
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?
This is a methodology developed by Eric Ries 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.