How to start a small business: A step-by-step guide

The choice of starting a small business is the first step toward being your boss. The most thrilling and gratifying experience you can have in starting a small business is that it lets you grow significantly, thereby, understanding the pecks and disadvantages of the business. 

But, the big question is: where does one even start? Every prosperous enterprise was built from the ground up. Regardless of how impatient you are to launch a product, investing the effort to lay a strong foundation today will boost the likelihood that your company will endure over the long haul. This article offers all there is to know about launching a small business in Nigeria.

What is a small business?

According to Section 394 of the Companies and Allied Matters Act 2020, a small business is a private limited liability company, which has net assets of not more than 60 million Naira, an annual turnover of not more than 120 million Naira, no foreigner or government in its membership and where all the directors hold at least 51% of the equity of the company.

How to start a small business

Step 1: Research the market for your idea.

Because it informs you about the degree of demand for your goods or services and the level of rivalry already present, market research may help you reduce risk. Additionally, it offers demographic details about your target audience, such as their means of subsistence and place of residence. 

When it comes to research, you often have two choices: examine the available sources or carry out your investigation. Utilizing data that has already been acquired might save you time and money, but it may not be up-to-date or pertinent to your target market. Starting from scratch allows you to interact directly with customers through focus groups, one-on-one interviews, and surveys.

Step 2: Write a business strategy

Your objectives and the strategy you intend to use to accomplish them are described in your business plan. Many investors may want to see your strategy if you require money for startup expenditures so they can judge your likelihood of being profitable. You may recruit partners and staff with the aid of business ideas.

You may either use a conventional strategy or a lean one when writing a business plan. Traditional plans are detailed and frequently necessary to secure a company loan. On the other hand, lean plans are condensed and may include more charts than written text. They are frequently perfect for straightforward, quick-starting company strategies.

Step 3: Obtain business financing

One of the challenges that occasionally prevents people from finally pursuing their goals is start-up fees.

The good news is that there are still several alternatives to finance your business even if you don’t have much cash on hand, such as Bootstrapping, capital investments for startups, loans for small businesses and crowdfunding

Step 4: Select your company structure

For the foreseeable future, your choice of company structure—sole proprietor, corporation, or something in between—will often have legal and tax repercussions.

Because of it, this choice is crucial. Sole proprietorships, partnerships, limited liability companies, cooperatives, corporations, and S Corporations are some of the more common business forms.

Step 5: Select a company name

It’s time to choose how the public will recognize your company once you’ve decided on its structure. Your company name should: consider your principles and brand, communicate the services and/or goods you offer, effortlessly serve as a logo and be memorable on social media and other marketing channels and make sure your intended business name isn’t currently in use. 

Step 6: File registration paperwork 

Even while it may not always be essential, registering your small business with the government may provide you with perks such as personal liability insurance and legal and tax advantages.

Step 7: Request a tax ID

You may wish to apply for a tax identification number (TIN) from the FIRS once your firm has been registered. This number is required to submit your federal taxes, recruit staff, and occasionally create a business bank account. On the FIRS website, you may request a TIN.

Additionally, some states have their tax identification numbers that you might require to pay state income tax and unemployment insurance. 

Also, note that small companies are exempted from paying certain taxes under the Nigerian Finance Act 2023

Step 8: Open a bank account for your small business.

What kind of account best suits your present needs and long-term objectives? You’ll need somewhere to put all those hard-earned cash, but where should you put them? Since you’re just starting, you could require:

a. a straightforward checking account with no or minimal monthly costs;

b. a bank with suitable hours of operation and locations; and

c. You can manage your finances on the go with the aid of mobile applications and online banking.

Step 9: Acquire any required licenses or permissions.

Check your licenses, permits, and insurance coverage before you start doing business to ensure that you are operating lawfully. At this point, being shut down by a government organization is the last thing you want to happen.

Step 10: Select your payroll and accounting software

Before you make your first sale or hire your first employee, you’ll probably need a system for keeping track of your funds and paying your employees. With the use of spreadsheets, an accountant may be hired, or you can work with a payroll service provider.

A manual method of payroll may be cost-effective for small businesses or solitary operators. However, it takes a lot of effort and carries the greatest risk because errors might result in fines.

Step 11: Establish a presence online

A useful and appealing website may be a key component of your marketing plan because the majority of clients utilize the internet to seek products and services. 

Step 12: Select an insurance plan for your retirement and health

Because they might assist you recruit staff, you might wish to assess your health insurance and retirement plan alternatives as soon as you can.

Even if you don’t have workers now or in the future, you should still think about perks for yourself as a business owner.

Conclusion

Starting a business can be an exhilarating and rewarding journey, but it requires careful planning and execution. This step-by-step guide provides a framework to help you navigate the initial stages of entrepreneurship. From conducting market research and creating a business plan to securing funding, choosing a business structure, and establishing your online presence, each step is crucial to building a solid foundation for your business.

Remember to comply with legal requirements, obtain necessary licenses and permits, and consider essential aspects like accounting, payroll, and insurance. By following these steps and continuously adapting and learning, you can increase your chances of success as you embark on your entrepreneurial path.