Launching any business takes careful planning, willfulness and a good idea. Launching a business with the potential for making millions requires all that and an extra dose of fearlessness. But if you’re aiming for financial freedom, then making your own business is a must-do. Business owners have many legal and financial loopholes at their disposal that allow them to build wealth and save (all in the name of capitalism), so take advantage and pursue the greatest job security of all: building your own business.
Here’s the basic 10 steps on how to start a million-dollar business, from creating a solid business plan to structuring your company and more.
Find a million-dollar business idea
While starting a business can be a thrilling challenge, it can also be a very costly endeavor with no guarantee of success. So many entrepreneurs look to launch in a lucrative industry. The fact is, some businesses simply have more earning potential than others.
Start by looking at what skills you already have and how you can capitalize on them. Perhaps you’ve seen a gap in your industry that you could fill. Discovering a disruptive and innovative idea can make a lot of money, as can joining a brand-new industry on its way to major growth. Everyone has a million-dollar idea (or two) floating in the back of their minds, but most people never act on it. Whichever type of business you decide to start, it’s important to conduct proper market research and create a solid business plan.
Write a business plan
As an entrepreneur who’s taking on the risk of launching your own business, it’s important to approach your business idea not only as the owner but as an investor. Write a business plan to formalize your idea and think through your idea methodically. This will allow you to confront potential pitfalls before you even start and possibly improve your idea for better execution.
Business plans look at your business idea from many angles. Sections include:
- Company name and description
- Market research, such as target market, major competitors and target consumers
- Management and organization structure
- Products and/or services offered
- Marketing plan
- Logistics and operations plan
- Financial plan
Make sure you’re honest about the costs and industry when you’re writing up your plan. Only by being upfront with yourself will you be able to truly separate a great idea from the chaff.
Choose a business structure
Business structures have legal and tax implications, so it’s vital to choose a structure that balances your protection with the flexibility your business needs. Don’t panic, however, since you can always restructure your company as your business evolves.
Business structures and terms vary by country and state, but the most popular and common options are the sole proprietorship, limited liability corporation (LLC) and C corporation.
Sole proprietorships are unincorporated businesses with only one owner. The equivalent for two owners is called a partnership. There is no legal distinction between you as the owner and the business, which makes this business structure very low-effort but exposes you to legal liabilities. On one hand, you don’t have to file any paperwork or pay any fees to establish your business. The income from a sole proprietorship is recorded as personal income and filed on your tax return. But on the other, you’re responsible for all aspects of the business, from income to debt, and so if someone were to make a legal claim against your company, you could potentially lose all your personal assets in addition to your company. Common examples are: artist, freelance writer and IT consultant.
Limited liability corporations (LLCs) are small business entities that provide legal protection to owners, meaning that you cannot be held financially liable for your business. A big step up in transforming your side hustle into a lucrative business, switching from a sole proprietorship to an LLC can be a game changer. This business structure allows for more than one owning or managing member, requires paying an annual registration fee and you’ll have to file paperwork as necessary. LLCs are legal entities and allow for different types of taxation.
Lastly, C corporations are another type of common business structure that completely separates business owners from the business entity. Shareholders are the owners of the corporation, and taxes are paid separately by the company and also by the shareholders. This may lead to a double taxation effect, where the company pays corporate taxes and its shareholders pay personal income or capital gains tax. As such, this structure is most often used by larger, multinational companies or smaller companies looking to raise capital through issuing stock.
Get federal and state tax ID numbers
A federal tax ID, also called an employer identification number (EIN), is necessary for your business to file taxes, open bank accounts and perform other essential tasks. An EIN is a nine-digit number issued by the IRS for identification purposes – sort of like a social security number for businesses. You’ll need an EIN if your business is incorporated, has employees other than yourself, sponsors retirement plans or generally needs to conduct business as an entity separate from you as the owner.
A state tax ID is separate from your EIN. An EIN is assigned by the IRS, but a state tax ID is assigned by the state in which your company is registered. Not every state requires a state tax ID, and every state has different requirements, regulations and tax laws, so it’s important to research your individual state’s laws to see if one is necessary for your situation. Start your search at your state’s taxation department, department of treasury or secretary of state website. Contacting them can help you determine any state tax ID requirements applicable to your business.
Fund your business
One of the most common questions we get is how to start a business with no money. While the idea is great in theory, in practice the truth is that every business needs start-up capital. If you’ve been following the Ultimate Guide to Building Wealth, you’ll have reached the point of launching a business after working to increase your personal income and saving more. These savings can and should be used toward funding your business idea.
In a survey of more than 100 millionaires who reached financial freedom by their mid-40s, nearly all of them stated that they saved at least 20% of their net pay. After building an emergency fund, they invested the savings as they continued working their day jobs. Either they invested the full 20% or they funneled these savings into their budding businesses. Once their businesses were turning a profit, they went and invested those profits to continue building wealth.
If, however, your savings aren’t enough or you need extra capital, you can consider the following options:
- Business loans. If you have good personal credit and need startup financing, you could speak to a lender about obtaining a loan.
- Business grants. The SBA often offers grants to small businesses that service targeted industries.
- Crowdfunding. This is actually a good way to test the waters and see if your business idea really attracts a lot of interest from potential consumers. Market it on a crowdfunding platform and see if enough people are willing to fund you to see your dream come to life.
- Investors. Many startups find funding from venture capital funds, angel investors and others. You can also ask your parents and/or relatives to help.
Get a business credit card and open a business bank account
While sole proprietorships do not differentiate between owner and business, every other business structure requires a strict separation between your personal finances and those of the business. Given that your business will hopefully evolve into a larger, incorporated company over time, it’s best to launch with that line already in place.
A separate bank account helps you keep your books straight and is easy to set up. Open a business bank account and obtain a business credit card to make managing your finances easier.
Build a website
In this day and age, a strong online presence is vital for any business looking to grow. Build a website for less than $50 and give your business a professional edge. You can launch a simple WordPress site, create a Shopify storefront or build a Square Online or Wix store. Even if you choose not to dive into e-commerce, creating a cohesive online presence makes it easier for new customers to find out more about you.
Get the correct tools and financial software
Starting a new business means learning new management and delegation skills. If you try to do everything yourself, there’s really no difference between you as a business owner and you as an employee – except now you’ve created a situation where you’re responsible 24/7 with no downtime. Instead, give yourself some space and delegate tasks whenever possible.
Small business owners shouldn’t underestimate the power of software to automate everyday tasks. You could, of course, hire an employee to do all these tasks, or you can weigh the costs and go with tech solutions:
- Accounting software. Employing widely-used accounting programs can help keep detailed, accurate books. Specifically, look for software that uses double-entry accounting, generates useful reports, integrates with your business apps and scales as your business grows.
- Email marketing. An email list provides a direct line to your customers, and it’s one of the few must-haves if you’re looking to build your consumer base. Most businesses benefit from setting up welcome email messages and cart abandonment nudges, or you can even send out occasional helpful tips that remind your potential customers why they liked you in the first place. Use software or other subscription tools to build an email list early on.
- Ads. If you’re looking to improve your business presence, online or in person, you’ll likely consider paid marketing. While you can certainly design, upload and tweak ad campaigns manually, there’s also marketing software that streamlines the process and adjusts your campaign to optimize your advertising budget.
- Project management. Even if you’re a sole proprietor, most likely you’ll manage several income streams and projects that form the base of your business. Utilizing project management software tools like Asana, Trello and Zapier can help you keep track of your workflows and ensure you’re still building up your business.
Hire employees
Once your business starts bringing in money, you should consider expanding your team and hiring employees to manage it for you. While this may seem counter-intuitive, reducing your immediate profits, remember that financial freedom is not only making more money to live the way you want – it’s also freeing up precious, limited time to enjoy as you will. You’re creating a system and not doing everything yourself. As your business grows you’ll hopefully recoup the cost of your hires and more, and you’ll have accomplished that all while freeing up time to pursue other interests.
Building a solid management team takes time, however, and careful evaluation. You’ll need to first consider how much you have to do yourself and what additional skills would fuel further growth. Many small businesses choose to initially outsource these roles, and this may prove to be cost-effective for you, too. Potential new hires could include: inventory manager, customer service specialists, social media manager or marketer, graphic designer, content writer and accountant.
Market your business
Lastly, if you’ve created and followed your well-thought-out business plan, you’ll eventually reach the marketing stage. This is all about growing and expanding your business, either by attracting your very first customer or increasing your reach. Creating your website was an initial step in marketing, as it concretizes your brand image and helps legitimize your business in the eyes of many.
Brush up on basic marketing techniques to lay a solid foundation for your launch. Double check your branding, making sure you have a business logo (even a simple word logo is fine) and verifying that your message to your target audience is consistent and clear.
To increase your market presence can take time, so be patient. If you did your market research prior to launching, you’ll hopefully be better positioned than your competitors to provide products and services that people would like. Focus on promoting your business through:
- Your personal network. Lean hard on your personal network and business contacts, your social media presence and any other free media channels. Be aggressive and send one-on-one messages to encourage your friends and family to support your launch or send a simple share. This can go a long way towards gaining traction.
- Pricing discounts. One of the easiest ways to lure in potential customers is by rewarding the firstcomers with free or heavily-discounted goods. They’re your pioneers, willing to take a risk, so thank them by giving back. Consider a pricing strategy that offers free trials or products for five days (a business week), then slowly increase the price over time as more customers come trickling in. This strategy works especially well with low-overhead goods like services or digital products, since you won’t have to pay for promotional inventory out of your own pocket.
- Paid advertising. Even if you start with a teeny budget, paid ads can be one of the quickest ways to get your business noticed in front of the right audience. Testing early and adjusting as necessary can serve as a major driver behind your first sales, and so long as the return on your advertising remains profitable, paid marketing easily scales as your business grows.
Bottom line
The Four Pillars of Building Wealth serve as the vital support for your journey toward financial freedom, and creating your own business is one of them. Importantly, the world’s high-net-worth individuals all benefit from legal and financial advantages limited to owners and investors, and starting a business allows you to take advantage as well. Launching your own business is certainly a risk, but approaching the venture logically and carefully can help your business succeed where others don’t.
