How to start a business from scratch in 2025

1. Start with a business idea and conduct market research

A business without a vision is like a ship without a sail. Defining your business’s vision sets everything else in motion.

Drafting a mission statement should serve as the foundation for your vision. In a few paragraphs, identify your company goals and the high-level strategies you’ll use to accomplish them.

Find your big idea

To find a good business idea, consider these key points:

• Do something you love: Passion is essential for sustaining a business through challenges and setbacks. Choose something you enjoy and will remain enthusiastic about in the long run.
• Do something you're passionate about: Leverage your existing skills and knowledge to build a strong foundation for your business.
• Do something profitable: While passion is important, your business needs to be financially viable. Make sure there's a demand for your product or service and that you can generate a profit.

Finding the right business idea requires a balance of passion, skills, and market demand. Take your time exploring different options, and don't be afraid to brainstorm and experiment until you find the perfect fit.

Research the market 

Once you have a promising idea, it's time to validate it through market research. This involves:

• Selecting a product or service: Decide your value proposition and unique selling proposition, which is what you’ll sell and how you plan to stand out from the competition. 
• Validating your product idea: Research the market and see what’s trending around your product, pitch to your target market and see the response, and test if your product generates leads. 
• Defining your target market: Identify your target market with demographics like age, gender, income, and location. Then, create personas and a customer journey map. 
• Knowing your market size or opportunity: Figure out the total addressable market (TAM) of your potential customer base. Estimating the current and future value of your business idea and setting reasonable goals can help you win a piece of the pie.

Conduct competitive analysis

Another component of market research is conducting a competitive analysis. This helps you understand the playing field, identify opportunities to differentiate your business, and develop effective strategies. A SWOT analysis is a valuable tool for this purpose:

• Strengths: What are your competitors good at? What advantages do they have? 
• Weaknesses: Where do they fall short? What could they improve? 
• Opportunities: Are there any gaps in the market that you can fill? Are there emerging trends you can capitalize on? 
• Threats: What external factors could negatively impact your business? 

Understanding your competitors' strengths and weaknesses will help you develop strategies to position your business for success. 

2. Create your business plan

Creating a business plan is the next important step for starting a small business. Keep in mind that your first business plan isn’t final. Parts of it will likely change as you learn more about your market and grow your company.

You can start with a business model canvas, a one-page document covering the critical information you need to get started. This option can save you time and get you up and running faster.

Your business plan should include the following:

• Executive summary
• Business description
• Market analysis 
• Organization and management
• Products/Services
• Marketing and sales strategy
• Operational plan
• Financial plan
• Risk analysis
• Appendix

Your business plan will help you focus on concrete objectives and attract talent and investors. 

3. Determine your business structure

Next, choose the legal structure of your business entity. Are you better off as a sole proprietor? Do you have a partner? Do you plan to incorporate your business?

Each business structure option has its advantages, tax reporting responsibilities, and regulatory requirements.

Here are some popular business structures: 

• Sole proprietor or sole owner: This is a popular option for anyone who doesn’t have a lot of liabilities (e.g., no employees or significant investments) when they start and an excellent option for those with a small side hustle or day job.
• Business partnership: If you’re going into business with a partner, you will need to register as a business partnership or limited partnership. Expect to work with a lawyer and a tax professional to lay out your partnership type, terms, and tax implications.
• Incorporated business: Some notable benefits of incorporating your business are tax breaks and liability protection. Due to upfront costs, many sole proprietors wait until they have earned enough funds and are at the right stage to incorporate.
• Limited Liability Company (LLC): A form of a private limited company that safeguards business owners, managers, and the LLC itself against certain types of personal liability. Personal liability is an important consideration if you plan to operate from a brick-and-mortar location. Should someone get injured on your property, you may not be personally liable for the damages.

If your business is an LLC, corporation, or partnership, you’ll likely need to register your business with any state where you conduct business activities. You may also want to opt for a federal tax ID number or an Employer Identification Number (EIN) instead of using your Social Security number. The IRS uses this number to associate you with your business.

4. Register your business and apply for licenses

Before you start a new business, consult a lawyer to ensure you’ve considered all the legal requirements. A reliable lawyer can help you solve legal and contract disputes and give advice before you sign a new contract.

Here are some essential questions to ask your lawyer:

• Should I trademark my company name or logo?
• Do I need a patent, copyright, or intellectual property protection?
• Can you create standard contracts for negotiating with other businesses and vendors?
• How do I form a sole proprietorship, partnership, or corporation?
• What’s the process for sharing equity when seeking private investors?

Different laws apply to every type of business, product, or service. Every country, including the United States and regions within, will have its own set of rules. Your local and federal government websites are an excellent place to begin your research about legal requirements.

You should also consult national consumer and privacy laws for collecting personal customer information.

Business name

You can change your business name and logo down the road but try to start with a name and brand that you can stick with. 

Here are a few things to remember before finalizing your choice of business name:

• Web-friendly naming: Keep your URL under three words if possible.
• Consistency: Use the same name across the board.
• Unique but not hard to spell or pronounce: You don’t want customers guessing what your name says.
• Scalability: Avoid names that can limit the expansion of your business in the future. 
• Industry fit: A formal name will work best for certain industries, while a more quirky name will benefit creative businesses. 
• Availability: Enter your desired name into the domain name search and check with the secretary of state’s office to ensure another company isn’t using the name.

Choosing a business name is an important decision, so take your time and consider all the factors involved. A well-chosen name can be a valuable asset for your business.

Licenses and Permits

Visit your government services or the Small Business Administration (SBA) to determine whether your business requires any national or local licenses and permits.

Tax

Check to see if you qualify for any tax deductions and credits. Many local governments design special credits to help small businesses grow faster.

You will need an EIN if you plan to hire employees or open a business bank account. This will also serve as the tax ID you'll use to pay federal, state, and local taxes.

5. Plan your starting finances and fund your business

Whether you’re self-funded or you work with angel investors, you still need to understand the costs of a small business startup. 

Start by mapping out all of your anticipated costs for the next year. Then, determine how much money you need to earn every month to stay in business—for example, your operating income and salary—and be mindful of costs like business taxes.

It can take time to build up your revenue, so recognizing costs and cash flow management trends early on is critical.

Here are some ways you can fund your startup costs:

• Personal savings: Using your savings can seem daunting, but you’ll own your business outright, won’t have to give away ownership, and you’ll eliminate the hassle of acquiring debt. Consider savings, bootstrapping, and retirement accounts.
• Crowdfunding: Crowdfunding is a popular route for many new business owners. You can use it to seek funds from many people rather than one major investor.
• Microloans: These are small business loans, often less than $10,000, that you can use to get your business off the ground. Research microloan options in your city, state, or country, as there are many different services.
• Personal loans: If you have a good credit rating, you can take out a personal loan instead of a business loan. Just be aware of long-term interest and tax implications.
• Grants: You may be eligible for grants from your government or private organizations. Again, you’ll have to do some research to find out what you qualify for and how to apply.
• Business incubators and accelerators: Besides funding, they can provide you with mentorship and resources in exchange for equity or a fee.
• Friends and family: Many businesses have started due to the financial support they received from their close ones, so don’t disregard this option. 

Securing funding is a critical step in launching your business. Carefully consider your options and choose the funding sources that best align with your needs and goals.

6. Open your small business bank account

Your new business will need a business bank account to track business expenses and take advantage of tax deductions and credits available to small business owners. If you’re an LLC or corporation, you must have a separate bank account for company finances.

There are other benefits to opening a business bank account, including:

• Opens the possibility of lines of credit
• Credit card availability
• Access to in-house loans
• Enhanced legal protection
• Tax benefits and deductions
• Mobile payments can go straight to your account

Meet with a business banking specialist to determine which type of account is right for your business.

9. Outsource essential functions

When starting a business, you might be tempted to do everything yourself to save money. But spending time on tasks that aren’t in your skill set can cost you even more time and money.

Delegate or outsource tasks that aren’t your area of expertise, like accounting, administrative work, or public relations. It might be tough at first to trust other people with your business. But if you hire great employees, you’ll question why you didn’t hire them sooner. If money is tight but you still need help, you can enlist contractors or freelancers. 

Platforms where you can find contractors or freelancers for your small business:

• Fiverr
• Upwork
• Freelancer
• Toptal
• 99designs
• Dribble
• PeoplePerHour
• GitHub Jobs
• ProBlogger

Depending on the nature of your business, you might want to consider finding an accountant, virtual assistant (VA), web developer and designer, digital marketing specialist, customer support representative, and so on. 

10. Extra tips for small business owners

If you’re uncertain about how to start a business, it’s probably because the entire process seems overwhelming and time-consuming. Running a small, thriving business is an ongoing process that requires adjustments and implementation of new aspects. Consider other items to add to your ‘starting a business’ checklist. 

Find the perfect business location

If you’re preparing to open a brick-and-mortar food or retail business, picking the right location is extremely important. You will not need to search for a physical location if your business is entirely online. Instead, ensure your website is presenting your business in the best way possible. 

As you scout locations, there are a few things you need to keep in mind:

• Demographics
• Foot traffic
• Competition
• Business community
• History of the location
• Rent

Take your time to explore different options and weigh the pros and cons of each before making a decision.

Perfect your sales pitch

If you plan on going after investors or financing for your business, you’ll want to create an elevator pitch. An elevator pitch is three to four sentences that tell an investor:

• What your business does.
• Why your business is unique.
• How they will benefit.
• How can they help your business through their investment?

If this is your first time creating a sales pitch, consider using the following tools:

• Canva: An easy-to-use platform for designing pitch decks with templates.
• Google Slides: Free, cloud-based, and collaborative tool for creating and sharing pitch decks.
• Adobe Express: For creating custom graphics or mockups to enhance your pitch deck.
• Unsplash: Free high-quality stock images to enhance your slides.
• Zoom: Record yourself delivering a live pitch for remote presentations.

Remember to tailor your pitch to your specific audience and keep it concise and engaging. 

Explore business partnerships

Consider also partnering with other companies for collective growth. There are several ways to form partnerships, such as: 

• Revenue share: Work with partners to help them sell services in exchange for revenue share. Common for small business owners who want to expand without hiring more full-time employees. 
• Referrals: Offer a commission to a partner who helps introduce and assist you in closing a prospective customer.
• Joint ventures: If you plan to build a tower for office space or expand, consider forming a joint venture with another business or group of companies that have more capabilities. 
• Cross-promotions: If two businesses have similar target customers, it often makes sense to partner on a cross-promotion.

By strategically aligning with other businesses, you can create a support network and open up new avenues for growth. 

Drive customers to your business

Starting a new business and launching your website is one thing, but you should find ways to drive customers to your business to stay competitive. 

Depending on your type of business, you should consider:

• Online ads: Ad placement on a popular website and social media.
• Print advertising: Ad placement in a magazine or newspaper.
• Networking opportunities: Attend business events in your community.
• Referrals: Ask for referrals from your customers either through word-of-mouth or sharing on their social media.

Even with these tools, time and commitment are necessary to build brand reputation and customer loyalty.