Takeaways
- Starting your own online business can increase your income and boost flexibility.
- Many people turn their hobbies or passion projects into full-time businesses.
- Choosing the best legal entity can help you raise capital and grow your business.
- Business startups range from consulting, writing, freelancing, and other offerings.
- Automating your business processes can help you boost your business income.
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Starting your online business takes boldness, know-how, determination, and a dash of good fortune. The great news is that the internet is exploding with new business opportunities. From freelancing to consulting, you can start your own company in a fraction of the time it used to take and be up and running in days.
If you want to start your own business, you are not alone. 2023 was a banner year for starting new companies, and the U.S. Census Bureau forecasted over 5 million new businesses would be created [1]. If you want to be among the millions seeking the opportunity to start your own business, whether to be your own boss, increase your income, or regain control of your time, setting up your online business the right way from the start will set you apart from the competition.
9 Steps to Start Your Own Online Business
All businesses develop from the same natural arch. Here are the 7 essential steps to select the right business idea, implement the right business strategy, get the best bank account, and get your online business up and running today.
1. Research Your Business Idea
The natural first step to starting a business is to develop a concept for what type of business you should start. If you think you have a good idea, you probably think you have a great business concept. Once you have a solid understanding of the business model you want to start – consulting, freelancing, marketing, sales – you should conduct market research.
Market research will give you an industry-level understanding of the originality of your idea, the competition in the space, and the hurdles you may face as a business owner. This is when you can think about where you want to position your company in the marketplace.
Because startup costs have decreased dramatically over the last several decades, you can now start a business from home. The next step is to contemplate whether you are going to work on building your business full-time or if you are going to start a part-time side hustle. This decision will dictate how much time and capital you need to invest in your business.
Need some help thinking about what type of business to start? Here are 29 side hustle ideas to help you make more money.
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2. Create a Business Plan
With your initial ideation and business research complete, you can put pen to paper to contemplate the tactical execution of your business. A well-crafted business plan can help transition your idea into reality.
A business plan helps stress test your business idea and forces you to think critically about creating a successful business. Here are the critical components of a strong business plan:
Elements of a Business Plan
- Executive Overview
- Business Description
- Products or Services
- Employment Opportunities
- Marketing Plan
- Competitive Analysis
- Funding Requirements
- Company Structure
If you want to raise capital for your business, you will need a business plan and a pitch deck to show to investors and potential lenders. These documents will help you navigate the complexities of running your business.
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3. Select a Business Structure
Now that you have a complete business plan, your next step is to think about which type of legal entity makes the most sense for your business. The legal structure you select has implications for how easy it will be to raise capital, the complexity of your business taxes, and the degree of your liability.
The legal entity you pick when you start your business can change over time, but it is much cleaner and hassle-free to choose the best structure when you start your business. Here are some common business structures to consider:
- Sole Proprietorship
- Limited Liability Corporation (LLC)
- S Corporation
- C Corporation
Once you set up your business structure, you can get a federal tax ID that will allow you to open business bank accounts and meet other essential business needs.
Not sure where to start? Check out resources, like RocketLawyer, to help set up your company fast. If you aren’t sure what legal entity structure is best for you, consider consulting with a legal professional.
4. Set Up a Bank Account
Getting your business bank account up and running will allow you to separate your personal finances from your business finances, which is critical for business structures like an LLC or a C Corp. Not only does it allow you to bifurcate your personal expenses from your business life, but it also creates a business account to help you streamline your business.
Learn More -> Best Online Checking Accounts
Many bank accounts can link to backend office software functions that expedite the creation of financial statements, tax preparation, and financial planning and analysis.
5. Secure Your Domain Name
With momentum on your side, it’s time to choose your company name and purchase your domain name. Searching for a domain name can be a creative and fun process. Website hosting companies offer services such as purchasing your domain name, setting up emails, hosting your website, and even providing website design services.
Popular and efficient website hosting services, like BlueHost or GoDaddy, can get you up and running in a couple of business days.
6. Choose an Accounting Software
With your bank account, website, and business up and running, it is vital to start focusing on executing your business plan. Streamlining backend office work, such as creating financial statements and bookkeeping, can save you time, money, and energy.
Here are some of our favorite accounting and bookkeeping software programs for online businesses:
By spending time upfront outsourcing non-critical functions of your business, you can automate some of the mundane aspects of business. By automating nonvalue-adding elements of your business, you can focus on bolstering the bottom line and accelerating revenue growth.
7. Prepare Your Taxes
As an online business owner, you will be responsible for running all aspects of the business, including filing your taxes. Business taxes can become complicated quickly. So, consulting with a tax professional and getting proper counsel and advice is paramount for long-term success.
Smart Tip:
Tax planning will allow you to plan for critical business tax situations. Working with seasoned experts, such as CPAs and lawyers, can help you save time and money.
If you plan on filing your business taxes yourself, check out Smart Money’s best online tax programs. Whether you need top-notch tax advice from CPAs and tax experts or want the most budget-friendly filing solution, there is an option for you. Some tax software services offer additional features like data-driven tax recommendations, quick tips, year-end planning, and video conferencing with CPAs and tax professionals.
8. Raise Capital
One of the main reasons businesses fail is because businesses run out of cash to continue their operations. This could be from pool planning, seasonal business trends, or a business model that takes longer than anticipated to generate revenue.
Entrepreneur and author Grant Cardone emphasizes this concept in his best-selling book The 10X Rule by suggesting that successful businesses take more time, more money, more people, and more effort than most business owners anticipate.
Because of this, raising capital to help get your business off the ground is essential for some business models, particularly those not forecasting revenue for many years. Many entrepreneurs seek funding through crowdsourcing platforms or meetings with accredited investors, venture capital funds, and institutional funds.
9. Grow Your Business
Once your business is up and running, growing your customer base, subscriber list, and online presence will be critical for meeting your forecasted revenue projections. With a fast-growing business, you will need to think about hiring the right employees, finding an office, building a strong company culture, and creating a business built for success.
How fast you grow your business depends on the marketplace, how quickly you can gain traction online, and if you have a solid business model. Focusing on continuous improvement and growth can catalyze a business to become a market leader.
Smart Summary
Owning your own business can dramatically increase your net worth. Building a successful online business is not for everyone. If you have a great idea and the determination to execute your business plan, you can dramatically change your lifestyle by running your own business. Whether you work full-time on your business or start a side hustle first, financial experts recommend ensuring you are financially prepared to start your own business by saving an emergency fund and slush fund. Creating this financial cushion before you begin your entrepreneurial journey is a smart money move.
(1) Census. Business Formation Statistics, November 2023. Last Accessed January 4, 2024.
