4 tips to finally start your small business in the new year

Long dreamed of starting a business of your own? With the right action steps, 2025 could be the year that dream becomes a reality.

As you may have guessed, there is a lot that goes on between coming up with the initial spark of an idea and cutting the ribbon on opening day. Even if you already have the skills it takes to "create the product or service that you'll be selling," that skillset is "often very different from the skills you'll need to run a successful business," said Bankrate.

On the bright side, although "starting a business can be hard work," said Business News Daily, "if you break down the process of launching your new company into individual steps you can make it easier." Here are some of the first steps you will want to take in moving your small business from your noggin to real life.

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1. Nail down the specifics of your idea

If you are thinking about starting a business, "you likely already have an idea of what you want to sell online, or at least the market you want to enter," said Business News Daily. But to actually get your business off the ground, you are going to need to get more specific.

For one, it may be helpful to identify your motivation. "It is good to know why you are launching your business. In this process, it may be wise to differentiate between [whether] the business serves a personal why or a marketplace why," said Glenn Gutek, the CEO of Awake Consulting and Coaching, to Business News Daily.

Also consider "your expertise, plus how much time and money you're able to invest," said NerdWallet. And, of course, "you also want to be sure that your idea can actually make money."

2. Understand the competition

A big part of refining your business idea is making sure you have analyzed your competition. "How you go about analyzing the competition can depend on the nature of your business," said Investopedia.

For instance, "if you're a restaurant or store owner, you may simply be able to dine or shop at a competitor's place of business, ask customers what they like or don't like about it, and gain information that way," said Investopedia. On the other hand, "if you're in a field with more limited access to your competitors' inner workings, such as manufacturing, try to keep up with the news in relevant trade publications, speak with any customers you share in common and obtain and scrutinize whatever financial information a competitor makes publicly available."

In the process of getting to know your competition, you may end up building connections and even finding a mentor — both of which can be invaluable to a new business owner.

3. Assess your finances and funding options

"Starting any business has a price, so you need to determine how you will cover those costs," said Business News Daily. Calculate what exactly those costs will be, and figure out if you have the funds on hand to cover them or if you will need to borrow money.

A good starting point for these calculations is "doing a break-even analysis, where you'll calculate the minimum price for your goods and services in order to break even," said Bankrate. Additionally, "do a preemptive cash flow analysis to understand how much money will need to go out and come in to turn a profit."

Having these figures in mind will help you more realistically evaluate your funding options, which may include "crowdfunding, personal loans, business grants and more," said NerdWallet.

4. Draft a formal business plan

People who "write a formal business plan are 16% more likely to succeed," said Bankrate, citing an analysis by Harvard Business Review. Plus, the process of drawing up a business plan "can help you prepare for every aspect of your business" and give you a key document you will inevitably need "to present to potential investors and lenders," said NerdWallet.

You can think of your business plan as a way to "chart a course for your business, anticipate potential roadblocks and work out how to overcome them," added NerdWallet. In this document, you will want to "include detailed financial projections, budgets and thorough explanations of how you plan to spend investor dollars or loans."