Facebook and Instagram are social media powerhouses. As a small business owner, you can use them to show off your best work, tell people you’re running a sale, and have conversations with customers at any time or place.
But before you can start taking clients and open shop, there are a few things you need to do to officially start your business.
We’ve compiled all of the resources you need to start a business in the U.S. before you open your doors. Here’s how to start your own business, from starting a business plan to launching your first marketing campaign.
How to Start a Business, Salon, or Studio in 5 Steps
- Create Your Business Plan
- Find Your Business Location
- File Your Business and Ensure Business Compliance
- Market Your Small Business
- Land Your First Client
1. How to Create a Business Plan
Every successful business starts with a plan.
A business plan is a written document that outlines the purpose of your business and your goals. This is where you lay out all the methods needed to achieve those goals, as well as your timeline.
It’s basically the blueprint for starting your business. When considering how to start a business plan, the best way to begin is by asking a few key questions. Some of the answers you want to include in your business plan are:
What Type of Business Structure Is Right For You?
There are different types of business structures to choose from. Your business structure is how you’ll be viewed and categorized by the government.
From a corporation to a sole proprietorship, each structure has different benefits and systems in place under the government.
Here are the different business structures and the pros and cons of each.
Most service-based small businesses are sole proprietorships, which is a simple, straightforward business structure that indicates that you alone own your business. You don’t have any partners in a sole proprietorship and “there is no distinction between the business and you.”
Quick and Easy – Lowest cost and easiest to set up
Complete Control – Control 100% of the business
Easy for Taxes – Easiest to file and the lowest tax rate of all the business structures.
Unlimited Liability – This is a very important distinction: If you get sued, you will be personally held liable. This also applies to the actions of your potential employees.
A general partnership is a business partnership where everyone is responsible for contributing to the day-to-day operations of the business. Typically, the roles and responsibilities are outlined in the partnership agreement.
More Resources – With more partners, now you have more people that care to make the business succeed. This alleviates the burden of having to do everything yourself.
More Opinions Involved – Decision making can be challenging if everyone doesn’t agree.
Some Partners Don’t Work Hard as Others – Depending on your partner, some may not contribute as much as others, which can lead to partner conflict.
More Partners Means Less Ownership – By having more partners, you will have a smaller percentage of the business.
A limited partnership is a business partnership where the limited partner is not involved with the day-to-day operations of the business. Another term for this is a “silent partner.” These types of partners usually act as an investor and only provides the capital.
More Money – Having a limited partner means more working capital to help get your business off the ground.
More Opinions Involved – Like general partnerships, you’ll need to consider more opinions when making business decisions.
More Money Now Means Less Money Later – By taking on a limited partner now means receiving less percentage of your business and less potential profit in the future.
Now it’s time to talk corporations. A corporation is a legal entity formed in order to conduct business. When creating a corporation, they all start as a C corporation.
Limited Liability – A corporation provides legal benefits in case you are sued. Because a corporation is defined as a separate legal entity, you will not be personally liable.
Double Taxation – C corporations are double taxed, meaning the income generated from the business is taxed, then the profit you receive is taxed as well.
Costs More Money – Forming a corporation will take more time, money, and paperwork than the other business structures.
An S corporation is much like a C corporation. An S corporation starts as a C corporation, and you will have a few months to decide to change it to an S corporation. The most important distinction between a C and S corporation is mainly how they are taxed.
Limited Liability – Like a C corporation, you will receive the same legal benefits in case you are sued. Because a corporation is defined as a separate legal entity, you will not be personally liable.
Better Taxation – This is the biggest difference between a C and S corporation. With an S corporation, the profits are passed through to the owner and taxed one time, similar to a sole proprietorship or partnership.
Costs More Money – Just like a C corporation, forming an S corporation will take more time, money, and paperwork than the other business structures.
Here’s where it gets confusing with an LLC.
The IRS automatically taxes single-member LLCs as sole proprietorships and multi-member LLCs as partnerships. However, an LLC can also choose to be taxed as a C corporation or as an S corporation.
Again, the major differences between LLCs and C and S corporations is how they are taxed.
Definitely, take time to speak with an accountant on other tax benefits and consequences to see if which organizational structure taxation is best for your business.
How will your business compete?
It’s true that it’s a competitive market out there. While there are more and more companies taking it online and opting for an internet-business-only model, there are still a lot of local businesses in the market. And each local business near you in the same market is competition.
So how can you stand out from the competition with your service business?
Who will be your target clientele?
Who is your dream clientele? What traits, demographics, and beliefs do they share?
If you want to get an edge over the competition, is determine exactly who you’d like to serve – and how you’d like to serve them.
Knowing this will help you define who your most fierce competition will be – those businesses who target the same type of client – which will help you know what you’re up against.
Let’s say you were opening a hair salon that is targeting a young, female client who obsesses over the new style trends. It would be far more compelling for that client base to visit a salon that uses vivid colors and fun, social media language in their marketing material. Compare this with a hair salon that uses timeless, classic colors and uses refined language, and you’d be attracting vastly different clientele.
What makes you unique?
In marketing, there is a term that is thrown around a lot: Unique Selling Proposition (sometimes also called a Unique Value Proposition). A unique selling proposition, or a USP, is a way of asking the very important question: What makes your business unique?
Or, put in a more simple way: Why should anybody decide to do business with you rather than the dozens (even hundreds) of other businesses out there?
Apple’s USP is its cutting-edge technology. Walmart’s USP is its pricing model. What is yours?
It’s important to know the answer to this question before you open your business, so you can stand out from the competition.
When a potential client is given four options for which massage therapy business they could go to, they’re going to choose the one that jumps out at them the most for being different. So spend some time thinking about this question before you open your doors. It will serve you well in the long run!
What are the principles that guide your business?
AKA your business credo.
When you open the doors in your business, tough decisions start rolling in.
You have to decide whether to give refunds, how you’re going to deal with grouchy customers, what types of investments you’ll make, when (if ever) you’ll give discounts – among various other decisions.
These decisions are made far easier when you have some core principles to guide you through them. Setting these guiding principles before you start your business will help you maintain a consistent delivery standard, which helps give you an edge over the competition who don’t have such standards in place.
What problem do you solve?
Every business needs to solve a problem.
If you’re opening a salon, you solve the problem of your client needing a haircut, or a different color, or even a self-esteem boost.
If you’re opening a massage therapy practice, you’re solving the problem of stress, tension, and muscle pain.
It’s easy to pinpoint the exact problem that your business solves, but not many businesses actually define and describe the problem to their target market when in their marketing.
Jay Abraham said: “If you can define the problem better than your target customer, they will automatically assume you have the solution.”
What sounds more compelling to you? The massage therapy practice that advertises:
“Massage therapy from professional Registered Massage Therapists”
Or, the practice that advertises:
“Busy mom? Melt that stress and tension away with a one-hour massage”?
While the last one leaves a lot to be desired as far as defining the problem, it’s far closer to the problem than the first example. By pinpointing exactly what problem your business solves and actually talking about it will give you an amazing competitive edge over your competition every single time.
If you consider these four things before opening your business, you’ll have already gained a competitive advantage over the competition.
How will you raise the capital to open and run your small business?
It goes without saying, but just to be clear, it takes money to start a new business. As you have read above, there are many costs associated with starting a business, so make sure you have a good amount.
Whether using partners, investors, grants, loans, or paying it all yourself, make sure to set aside a healthy budget.
In addition to the above costs, there are also costs that you might not even think about to run your business.
- Location Building Maintenance
- Transaction Fees
- Healthcare and Business Insurance
- Yearly Permit Fees
- Expansion Costs
- Operating Costs
- …and much, much more
Since you will be new, you’ll need to create a new client base. This may take time, so make sure to have extra money to cover bills and living expenses while you get your business off the ground.
In addition to partner, investor, or coming up with the cash yourself, there are also many loan options that can help provide extra money. Look into small business loans and grants that you may qualify for. The Small Business Association is a government agency that helps small business raise capital, as well as provide other beneficial resources. Check out www.sba.gov for more information.
2. Find Your Ideal Business Location
Now for some fun stuff, looking for a new place!
You need to find a new location for your business, but what should you look for?
When you’re looking for a new location for your business, there are a few questions to consider if the location is right for you.
Does the neighborhood have enough traffic to provide you enough clients?Is there enough demand for your service in the area?
Or how about if the location easy to find?
Is there plenty of parking?
How are the neighboring tenants?
What is the lease payment every month?
Is this reasonable for the area?
How much will it cost to build the space?
Your location can make or break your business. The type of neighborhood, the types of neighbors, local tax incentives can all have an impact on your business.
Even though these are some questions to ask yourself, there are additional questions to ask a professional.
Questions to ask your real estate professional
Locking up a location requires a commercial lease agreement. Your real estate professional can be your best resource in understanding all the caveats listed. Be careful with all documents you sign.
What is the type of your Lease Agreement?
You might see terms like “gross lease” or “net lease.” What these refer to is whether your monthly lease payment covers expenses such as property tax, insurance, and other related expenses – or not. This could mean the difference of hundreds of dollars per month.
What are the Lease Terms?
Just like renting a house or apartment, your business lease agreement will have terms set regarding the length of your lease.
Some might be set for one year, or five years, it all can be negotiated.
Take note if the lease payment will increase or even cancel after a set amount of time. If you plan on being at the location for longer than a year, you may want to negotiate a longer lease, or at least put in an option to extend your lease when it is up.
The last thing you want to happen is to get kicked out after you spent time and money getting your business up and running.
Who is responsible for repairs?
Something, somewhere is bound to break and need repair. The question is, who is responsible to pay for it?
If the problem is related to the building itself, usually the landlord will pay for the repairs.
BUT NOT ALWAYS.
Make sure to get this point clarified with your leasing agent.
Even after you figured out your perfect location, lease agreements and other contractual details can be complicated enough to make your head spin. Luckily, there are leasing professionals to help walk you through this process.
3. Make Sure Your Business is Compliant
Now, it’s time to get compliant.
With running a business also comes the responsibility of following all the government rules and regulations. This refers to all the paperwork needed for your business to be in complete compliance. The key documents you need are:
Business Name Registration
This is the fun part of starting your business!
Choosing a business name can be challenging but very rewarding when you make your decision.
If you are opening a sole proprietorship, you have two options:
- Use your own name as your business name (in which case, you would not have to register your business name)
- Register a Doing-Business-As name (DBA).
If you choose not to register under a DBA name, your state will require you to do business under our own name. If you do choose to use a DBA name, be sure to check for trademarks when choosing your business name.
If you’ve decided to register a DBA name and find the perfect name for your business, you can register it through your state’s government or the county clerk’s office, depending on where your business will be located.
Federal Business Tax ID
This is the number you will use to pay your taxes.
No matter your organizational structure, you will need to apply for an EIN, also known as an Employer Identification Number. You only need a Federal Business Tax ID if you:
- Have (or will have) employees
- Operate your business as a corporation or a partnership (not if you’re a sole proprietor)
- File Employment, Excise, or Alcohol, Tobacco and Firearms tax returns
- If you withhold taxes on income, other than wages, “paid to a non-resident alien”
- Have a Keogh plan
- Or are involved with specific types of organizations such as plan administrators and non-profit organizations.
Most service-based businesses won’t fall into these categories at first unless you plan on having employees right away.
If you do, you need to file for a Federal Business Tax ID. You can do so here:
Business Bank Account
With your tax ID number complete, you can now open up a business bank account.
It’s important to keep your business money separate from everything else. Your business bank account prevents mistakes and hassle, but also makes it easier for your accountant come tax time. Here’s how to choose the best bank account for your new business.
Business License and Permits
There are two different types of licenses and permits: state and federal.
Not all businesses require a federal license or permit. Click here for the list of businesses that require a federal permit.
Your state may require you to have a state license or permit to operate your business. The U.S. Small Business Administration has a great tool that you can use to find out what type of license or permit you to need to operate in your state.
Without a business license, you will not be legally allowed to operate your business, so definitely don’t skip this step.
A seller’s permit also is necessary if you plan on selling products. The government requires you to track your sales of products to report any sales tax that you may have generated.
To get a seller’s permit, go to your local Board of Equalization office. They too will have applications for you fill out.
Once you have these licenses, permits, and numbers in place, you will be on your way to starting your business, being your own boss, and building a recession-proof career.
Business insurance is a very important piece of the puzzle when you’re opening your business.
Your business insurance needs will vary depending on what type of business you’re opening, whether you will have a storefront that you’re responsible for, and whether you plan on having employees.
- If you will have a storefront, you should be covered by property and liability insurance
- If you will be working as a chiropractor or in a field where you will be administering care to a client or patient, liability insurance is likely a good idea
- If you will be hiring employees, Worker’s Compensation Insurance is important.
Chat with an insurance agent to find out what will work best for your business. There are a lot of different insurance providers out there, so take some time to compare their different rates and policies that work best for you.
Business taxes depend on your state because each state has its own tax regulations.
In most states, you need to register your business for taxes, and this is separate from the Federal Business Tax ID or the Employer Identification Number, which is federal.You can find a link to each state’s tax laws to find out more about your obligations as a new small business owner for Unemployment Insurance Tax, Worker’s Compensation Insurance tax, and other state-specific taxes here: Determine Your State Tax Obligations
4. Marketing Your Business with Little to No Money
Now that you have created your business and you are now open, it’s time to think about growing your business. You need to get the word out and let people know you are here!
To do this, think about marketing and promotions. Now, this doesn’t have to cost a lot of money.
To start out, create social media accounts to engage and interact with your new clientele. Consider adding a “book now” button to your social channels as well. (We offer built-in “book now” buttons as a feature!). It doesn’t hurt to ask for reviews either, and most clients will be eager to help a new business. You can even offer them incentives, like a 10% discount for tagging you on Instagram.
Also, advertise in online marketplaces, such as those with your online scheduling software. In addition to appointment booking, Schedulicity offers The Marketplace, a platform that helps connect salons, studios, and other businesses to local customers. It’s not a bad idea to set up and optimize a Yelp listing either.
For more in-depth information, check out our marketing guides for salons and fitness.
5. Land Your First Client
Once you’ve started driving interest, the best way to build momentum when you’re just starting out is still (and probably always will be!) word of mouth. This is especially true for service-based businesses like hair salons, spas, and fitness studios.
Offer service packages, bundles and discounts or a loyalty program to encourage clients to come back. With many online booking platforms, you can also set up recurring appointments (and text reminders!) so a new client turns into a loyal client in no time. Here’s an explainer on customer lifetime value, and why it’s essential.
Once you’ve booked your first repeat customers, you’re off and running. The key to a successful business plan (and starting a successful business) is continuing to iterate. Review your progress every week and month, then consider ways to improve. And don’t be afraid to update your business plan as your goals and priorities change—that, my friends, is called progress.