You’ve got a vision for starting your own small business, and you’re far from alone. In July 2024, 34.7 million small businesses in America employed a number of workers that ranged from just 1 person to 500.
For the last 25 years, small businesses have been gaining steam. It’s clear that more Americans than ever want to quit working for others and become entrepreneurs. The number of such firms just keeps increasing, from 15.4 million in 1997 to 26.5 million in 2018 and on to today’s total.
While it’s an exciting trend and these numbers pack a wallop, you might also be wondering, “Ok, but what about inflation… supply chain … hiring shortages…?” It seems like there’s nothing but obstacles to launching a business right now—or if you have a business still in early stages, to keeping it alive.
There’s no question that challenges exist to starting and running your own small business. Why else would nearly one in five U.S. businesses fail within the first year?
However, what you might not know is that small businesses showed undeniable strength in startup numbers even during the worst of the COVID-19 pandemic. And post-pandemic, many businesses are reaching for success with more determination than ever, including seeking out funding for business.
Read on for insights, interviews, facts, figures, and tips for starting a small business that will help give you the best shot at success.
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State of Small Business in 2024
If you assumed that the pandemic threw cold water on people’s initiative to start a new business, you’d be mistaken. By 2021 the number of new businesses registered was soaring, and that trend held.
On average, there are 4.7 million businesses started every year. That average is from the past five years of business formation data in America. According to data from the US Census Bureau, the nearly 5.5 million businesses started in 2023 is the highest year on record, beating out the previous record of 5,380,477 new businesses started in 2021.
The total number of businesses started in 2023 also represents a 56.7% increase from the number of new businesses in 2019.
Small business financing represents definite challenges, especially when interest rates are high. Different sources for funding exist, from crowdsourcing to a business line of credit.
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Small Business: Regrouping and Moving Forward
The most popular types of business started are food service, health care, arts and entertainment, website design, auto repair, real estate, and pet services.
Here is the portrait of entrepreneurship in 2024, according to the SBA’s Office of Advocacy:
• 99.9% of businesses are small.
• Small businesses employ 45.9% of American workers, or about 59 million people.
• Small businesses are 43.5% of GDP.
• Small businesses pay 39% of all private sector payroll.
• 26.5% of federal contracting dollars went to small businesses in FY 2022.
Is It an Idea or an Opportunity?
People who’ve studied small business failure rates say that, unfortunately, some weaknesses are baked in from the beginning—it often goes back to the idea for the business.
Being an entrepreneur holds great allure. For many of us, it’s irresistible.
But before you take the plunge, it’s important to make sure your vision for a business is precisely that: a business. Ken Colwell, author of the bestselling book Starting a Business: QuickStart Guide, writes that aspiring entrepreneurs must make sure their idea is an opportunity and one that can be executed.
“Opportunities are actionable, and they have the potential to provide value both to you and the customer,” Colwell writes.
Instead of wracking your brain for an idea that will explode into overnight multi-million-dollar success, when coming up with a small business idea, try to focus on solutions to existing problems. Colwell says, “Simple solutions to common problems have a higher potential for success.”
According to Colwell, a great opportunity has these qualities:
• Solves a problem for a customer
• Exists in a space that isn’t too crowded
• Can be executed in a strategic space where you will hold an advantage
• Fills a critical customer need that may not be obvious to them
• Is not obvious to people who don’t have your background, experience, or insight
Starting a Small Business: The 10 Essential Steps
Ok, so say you’ve come up with your perfect opportunity, and you feel ready to launch. Now you’re truly ready for those tips for starting a small business.
To mistake-proof your business idea, it’s crucial to follow best practices. A lot of people have a dream, but they may lack financial background and experience. To help, the SBA offers many mentorship programs, as do other organizations.
Here, based on the agency’s years of experience, are the SBA 10 Steps to Success:
1. Conduct Market Research
Is your idea really a business? You must gather information about potential customers and businesses already up and running in your area. Use that information to find a competitive advantage.
2. Write Your Business Plan
Your business plan is a roadmap for how to structure, run, and grow your new business. You’ll use it to convince people that working with you—or investing in your company—is a smart choice.
3. Fund Your business
Your business plan will help you figure out how much money you’ll need to start your business. If you don’t have that amount on hand, you’ll need to either raise or borrow the capital. You’ll want to explore startup loans for small businesses.
4. Pick Your Business Location
You’ve heard it before: Location, location, location. Whether you’re setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements, and revenue.
5. Choose a Business Structure
The legal structure you choose will impact your business registration requirements, your taxes, and your personal liability.
6. Choose Your Business Name
Don’t skimp on the effort put into this one. You’ll want a name that reflects your brand and captures your spirit. And make sure your business name isn’t already being used by someone else!
7. Register Your Business
Congrats, you’ve picked the perfect business name. Now it’s time to make it legal and protect your brand. If you’re doing business under a name different from your own, you’ll need to register with the federal government and maybe your state government as well.
8. Get Federal and State Tax IDs
You’ll use your employer identification number (EIN) for important steps to start and grow your business, like opening a bank account and paying taxes. It’s like a social security number for your business. Some states require you to get a tax ID as well.
9. Apply for Licenses and Permits
Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, and location.
10. Open a Business Bank Account
A business checking account can help you handle legal, tax, and day-to-day issues. It should be easy to set one up if you have the right registrations and paperwork ready.
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The Takeaway
New businesses are being launched in record numbers. Running your own business, you’ll want to make sure you have enough funding available. Small Business grants can be essential, and crowdfunding is turning into a make or break for businesses.
If you’re interested in exploring small business financing, SoFi’s marketplace can help you compare options and get fast funding.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
Photo credit: iStock/Bill Oxford
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