Skip to Main Content

The Basics of Starting a Business

Getting to do what you love, on your own terms, while making your own income and setting your own hours . . . yeah, the idea of starting a business sounds amazing! But how do you even start a business?

Once all the nitty-gritty details enter your brain, your dream of starting a business can quickly start feeling like a nightmare. It’s okay, take a deep breath. People start successful businesses all the time. And you’re going to be next—we can just feel it!

We don’t want the unknown to keep you from living your dreams, so we’re going to teach you how to start a business with these six key steps. And these rules apply to any business, whether you want to start small or come out with a bang right off the bat.

The 6 Key Steps to Starting a Business 

1. Determine Your Why 
2. Work Out the Details 
3. Make It Official 
4. Pay Your Taxes 
5. Put Yourself Out There 
6. Look for Inspiration 

1. Determine Your Why

Before you put your business out there for the world to see, the first question you need to answer is: Why am I doing this? Think of your why as the engine that will keep your small business trucking along on days when it gets hard. And trust us, it will get hard. Data from the Bureau of Labor Statistics shows that about 50% of small businesses fail by their fifth year.1 But do you know what that also means? That 50% of small businesses are still successful by their fifth year!

Don't lead your business alone. Apply for an Advisory Group.

We guarantee that the owners of those successful businesses have strong reasons why they do what they do. In her book Business Boutique, business coach Christy Wright talks about her mom, who owns a cake shop. Christy writes, “Now, in her mid-sixties, she’s still making cakes. When she has a stressful day and vents to me about being bogged down with orders, sometimes I ask, ‘Mom, why do you still do it?’”

Christy says her mom always replies, “Because it matters to the families who have gotten their cakes from me for over thirty years. It matters to that bride who will never forget her wedding day and the cake I made. I’m not just making cakes. I’m a part of some of the most special, important, and remembered moments in someone’s life. That’s why I still do it.”

Bottom line: The stronger your why, the better chance you have of being in the better half of that small-business success statistic. Running your own business is a roller coaster ride, so you’d better love what you’re doing (and truly believe in it) if you’re going to survive the ups and downs. If you’re just in it for the money, you won’t make a lot of money—and you won’t be in business long, either.

2. Work Out the Details 

Once you have your why, it’s a good idea to plan out the specifics on the front end, like how you’ll actually do business. Start by answering these questions:

  • What product or service will you offer? Remember to stay in your lane. Sure, the opportunities are endless, but not every opportunity is a good one. Successful business leaders are willing to let good opportunities pass them by if they aren’t the right opportunities for their specific businesses.
  • What schedule will you work? In theory, your schedule can look any way you want. There’s no “right” schedule, and you don’t have to stick to a regular ol’ 9-to-5 day. But you also need to be realistic about what hours are going to be best for business. For example, if you’re wanting to open up a bagel shop, you’re probably not going to be very successful if you choose to sleep until noon and open up shop in the evenings. But if you’re selling jewelry in an online Etsy shop, then by all means, hit the snooze button!
  • What will your budget be? You need to know what your business income and outgo will be, even when you first start out. Chances are high that your business isn’t going to take off right out of the gate (although, who knows, it could!), but the last thing you want is to go into debt for this business. Plus, knowing your budget will also help you figure out . . .
  • How much will you charge? Setting the right price point is critical to your profitability, marketing ability and overall success in business. You need to find that sweet-spot price that’s reasonable for your customers while still being profitable for you.
  • What will your policies be? You need policies for shipping, returns, cancelations and other situations that will come up. It’s a good idea to set these policies before you even flip the open sign. That way, you won’t be taken advantage of later.

3. Make It Official 

Don’t keep flirting around with your business idea, afraid to make a commitment. It’s time to slap an official label on it. And in this world, that label comes in the form of a business license. Look, a business license isn’t even that big of a commitment—it costs around $15, depending on where you live (talk about a cheap date!). So, don’t drag your feet on getting a business license. Get. It. Now.

Another thing you’ll want to do right away is open a separate checking account for the business. Unlike with a spouse, it’s smart to have separate accounts for your personal expenses and your business expenses. But a business checking account can be listed under your name and Social Security number. For example, the account could be named: John Doe, DBA (Doing Business As) John Doe Plumbing. Place all of the money you make from the business into that account. And pay all of your business-related expenses from there too.

Here’s some really simple math to explain why you should do this: Income minus expenses equals profit. If you’re putting your income into this account and you’re taking your expenses out of here, then the remaining balance is your profit.

But most importantly—seriously, we can’t stress this enough—don’t go into debt to start this business. It won’t end well! Follow the tips we’ve been giving you, pay cash as you go, and start building your business slowly. And while we’re on the subject of money . . .

4. Pay Your Taxes 

Okay, we know tax talk can make some people get glossy-eyed, but understanding your tax requirements as a small-business owner is super important, so don’t skip over it.

Just like employees, all businesses need to file annual tax returns. And as a small-business owner, you’re responsible for paying income taxes (at your own personal income tax rate) and the self-employment tax (a 15.3% tax that covers your share of Medicare and Social Security taxes).2

Here’s where it gets a little tricky: Legally—if you expect to owe $1,000 or more in taxes in a year—you’re supposed to file and pay your taxes throughout the year. These are called quarterly taxes (or estimated taxes). That’s why we recommend you set aside 25–30% of your income from each paycheck—so you’re not blindsided by a huge tax bill when it’s time to pay up. Oh, and if you’re late on a payment, you’ll be hit with penalties each month that could go as high as 25% of your unpaid taxes.3

So, for example, if you bring home $2,000 in net profit from your business (after expenses), you should set aside $500 to $600 of that money in a savings account created specifically to pay your taxes. That should take care of most—if not all—of your tax bill!

Another thing to note: If your small business is going to have any employees, you’re going to be responsible for payroll taxes (aka employment taxes) on your employees’ wages.

As a general rule of thumb, be smart about what you’re doing with your money—and don’t try to outsmart Uncle Sam. Everything you do now can (and probably will) affect you later. To avoid any slip ups, get yourself a tax professional—one with the heart of a teacher—that you can trust.

5. Put Yourself Out There 

This is the moment you’ve worked and waited for! You’ve laid a solid foundation by knowing your why, making your business official, and working out the logistics. Now it’s time to scream about your business from the mountaintops through a little thing called marketing.

Think about the brand you want to build. What do you want your business to look and feel like? What words do your ideal customers use? Everything from the colors on your website to the font on your business cards should reflect a consistent brand experience for your customers.

With that in mind, it’s time to set up a website or a (free!) social media account for your business. This is where you get to start the conversation with your potential customers, tell your story, and share what you have to offer. More often than not, customers buy into people more than they buy into products. People buy from people they know, like and trust—so this is your opportunity to establish those connections.

6. Look for Inspiration

Hey, it’s hard to start a business, and it’s hard to keep it up and running while you’re in the trenches. We hear you! That’s why it’s so important to stay motivated and eager to learn. We feature some of the best motivators and educators in the business on The EntreLeadership Podcast, which is completely free—just hit that subscribe button to start listening to that sweet, sweet business wisdom!

And for you ladies who are serious about starting a business—join the movement of women in the trenches of small-business ownership at Christy Wright’s Business Boutique Conference! It’s going to be full of inspiration and actionable advice from incredible business experts—like Dave Ramsey and Jasmine Star—who are going to teach you how to survive and thrive as an entrepreneur. Can’t make it to Nashville? No worries—you can snag a livestream ticket and watch from wherever you are!

For the complete plan on how to start or grow a business and make money doing what you love, pick up a copy of Business Boutique.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Related Articles

Money Guidance Podcasts

Your Go-To Podcasts for Life, Money and Relationships

6 Minute Read | Personal Growth

Have a long commute? Like to listen to podcasts when you run? Great—check out the Ramsey Network! When it comes to life, money, careers or relationships, we’ve got your playlist.

Ramsey Solutions  Ramsey Solutions

What Are Quarterly Taxes?

What Are Quarterly Taxes?

7 Minute Read | Taxes

There’s a lot to enjoy about being self-employed. You pick your hours, your business clients and basically everything else! But it also means you might have to pay quarterly takes to the IRS.

Ramsey Solutions  Ramsey Solutions

Olivia, a small business owner sits with her freshly decorated sugar cookies.

Small-Business Taxes 101

6 Minute Read | Taxes

You know who likes paying taxes? Nobody. But we have to do it, so it's good to know what the small business tax rates are for 2020—if for no other reason than to keep the IRS off your back.

Ramsey Solutions  Ramsey Solutions