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Just a few short years ago, the words “craft beer” didn’t mean much to anyone beyond true connoisseurs. Ordering a beer on tap meant choosing an option from only a handful of companies, regardless of where you went. That’s because brands as varied as Bud Light, Blue Moon, Rolling Rock, Miller Light, and Michelob Ultra are all owned by 2 companies: Anheuser-Busch or MillerCoors. 

Today, the worldwide beer market represents $522.3 million in 2020, and it’s expected to grow annually by 9.4% through 2023. The biggest beer consumers? Unsurprisingly, it’s Americans— projected to purchase $101.8 million’s worth of beer in 2020. 

These same names—particularly Anheuser-Busch InBev, which owns Budweiser, Stella Artois, Corona, and Modelo, among others—represent 60% of the beer market today. While revenue for AB InBev declined due to COVID-19 this year (-17.7% in Q2), they’re still posting healthy profit margins.

These big brands controlled almost 90% of the global market back in 2012. Yet in the face of stiff competition from Goliath-sized companies with even larger marketing and advertising budgets, small breweries are thriving in 2020. 

How have these small businesses taken back market share? 

The craft brewing explosion.

Today, ordering a beer at a bar (remember bars?) presents you with any number of options, influenced by your geography and the philosophy of the bartenders and staff. You’re just as likely to find names like Dogfish Head, Allagash, Harpoon, Odell, Bell’s, and Russian River on a beer and wine list as you are Budweiser.

The rise in craft beer drove this change, defined by the Brewers Association as small operations (6 million barrels of beer or fewer annually) and independently owned (less than 25% of the brewery is owned by a member of the beverage industry that’s not a brewer.)

 “At the end of the day, the craft beer movement was driven by consumer demand,” Bart Watson of the Brewers Association told The Atlantic in 2017. “We’ve seen 3 main markers in the rise of craft beer—fuller flavor, greater variety, and more intense support for local businesses.” 

But taste isn’t the only reason small breweries continue to grow. From 2008 to 2016, the number of breweries in the US sextupled, with their workforce nearly doubling—even during a time when beer consumption itself declined. But the best indicator of success? 76% of microbreweries opened since 1980 have stayed in business—a rate unheard of in the restaurant industry, which sees 59% of restaurants failing within 3 years.

And the industry’s still growing. 1,000 new breweries opened in 2019, bringing the total active number in the US to nearly 7,500. Here are 3 ways the best craft breweries have become successful:

1. Embracing the entrepreneurial spirit.

Running a small business takes belief in yourself and your product, and craft breweries are no exception. Like any entrepreneurial endeavor, opening a brewery takes guts—and a willingness to make the leap into the unknown. “The biggest lesson I’ve learned is to trust my instincts,” Alix Peabody, founder of female-centric Bev, told Forbes. “It’s so important to surround yourself with experience, but at the end of the day, the vision is yours, and the choices are yours.”

COVID-19 has thrown a wrench in new operations, just one of many challenges facing small businesses today. “The COVID-19 pandemic has been a huge challenge for us as we worked toward our launch,” Caitlin Braam, the founder of Yonder Cider and The Source, told Forbes. “As a person who loves a good timeline and keeping to it, it’s been a challenge to hit our goals and marks due to something that is completely out of our control. It’s been a serious lesson in patience and being flexible.”

2. A customer-centric approach to taste.

Craft beer isn’t just something to order on a menu—it’s part of an experience, with tasting rooms, restaurants, and hop-on-hop-off tours becoming destinations for locals and travelers alike. At many breweries, customers can taste new small batches, offer feedback, and participate in the process. 

 “Businesses that incorporate their consumers into the R&D process will find that’s a wonderful way to build loyalty because they take pride in being part of the decision,” said Sam Calagione, founder of popular craft brewery Dogfish Head. They trial every new batch within their Delaware brewpub before rolling it out nationally. 

Just as important, brewery owners seek out flavors and styles that they can’t find in the market. “I wanted to create this product for moms like me,” Amy Wahlberg, founder of PRESS Premium Hard Seltzer, told Forbes. “Taking inspiration from my favorite pre-kids cocktail of choice, a vodka press, I turned my kitchen into a mixology lab. The hard seltzer category didn’t exist when I first began pitching PRESS to distributors and retailers.”

3. Small breweries supporting each other.

Small breweries are partially successful because of their tight-knit community. “The craft brewing renaissance is part of the hippie dream of the ’70s, so I think there is some built-in idealism,” Caglione told CNBC. Whether it’s creating new custom flavors, cosponsoring community events, or partnering for more behind-the-scenes business collaboration—like banding together to switch operations to hand sanitizer at the beginning of the COVID-19 crisis—breweries take care of each other.

Breweries like Boston Beer Co., owner of the popular Samuel Adams range of beers in Boston, offer loans to other small businesses. “We’ve provided startup loans to over 30 craft brewers,” Jim Koch, Boston Beer Co.’s founder, told CNBC. “This is counterintuitive to most people. Why would you help your competition? Craft brewers help craft brewers because we believe…there is still so much room for craft beer to grow.”

“By and large,” says Calagione, “we all help each other and share ideas, do events, or make actual beers that are collaborative. It’s about the love of beer, not money.”

Passion for your product is only 1 ingredient for building a successful business like the top craft beer breweries in the country. Taking risks, listening to customers, and collaborating with other, similar companies is their recipe for success.

You’ve reported your annual revenue, time in business, and credit score. You’ve provided bank statements, and you made it official by clicking “Submit” at the end of the Lendio application. If you’re anything like us, you may be refreshing your screen and wondering, “What comes next?”

We value transparency and giving business owners the power that comes from financial literacy, so we’re going to outline the steps to the best of our ability. “To the best of your ability,” you ask. “What does that mean?” Well, part of what makes our marketplace so special is that it relies on some pretty complicated tech to match you with the best options from our network of premium lenders. Because the experience is customized for each borrower, we can’t give a one-size-fits-all answer, but we can give you a general sense of what usually happens. So, where were we?

Step 1: Our Smart Application Matches You With Loans

After submitting an application, most borrowers will be matched with loan offers from our network of curated business lenders. Our tech analyzes your application and compares it against the 10+ loan products offered by the 75+ lenders in our network. In other words, our little internet robots do some pretty heavy administrative lifting to find you the loan offers you need as quickly as possible. 

In some cases, your application may not be a current fit for one of our lenders. If that happens, we’ll set you up with tools that can help you achieve the financing you need now and help you make your business more appealing to lenders down the road. Our mission is to fuel the American Dream, so you’ll never hear us say, “Tough luck.” 

Step 2: Funding Managers Provide Personal Attention and Expert Advice

“Every journey is a little different,” explains Kris Glaittli, Lendio’s Senior Director of Marketplace & RMT. For that reason, borrowers are then paired with funding managers, who are dedicated loan experts. After you’ve received your loan matches, you’ll probably receive a call from your funding manager. They’ll help you complete anything that’s missing from your application, and they’ll ask you some questions about your business. 

This information will help your funding manager better understand your financing needs so they can point you in the direction of the best financing option for you. “We really do try and match the borrower’s needs so it creates a unique experience,” Kris says. This call also allows your funding manager to address any potential red flags in your application. If you switched bank accounts a few months back or have any lawsuits, the funding manager will try to address it and make the case to the lender on your behalf. 

Step 3: Varies Based on the Lender

Once your funding manager has assessed your needs and helped you complete your application, the next steps vary from lender to lender. The order may change depending on the lender, but you can expect the following to (generally) happen:

• Your loan application will be submitted to the lenders
• The loan will go through the underwriting process
• You receive the loan offer from the lender
• You may have a phone call with the lender, called the merchant interview (if this happens, it’s usually right before funding)

Step 4: Receive a Decision

Finally, you’ll receive a decision from your lender. If you’re approved, you may receive funds in as little as 24 hours, depending on the loan type. If you’re denied, no sweat. You can still apply to other lenders without creating a new application. That’s the beauty of a marketplace.

Every entrepreneur knows the importance of pitching to clients. If you want to grow what you do, you’ve got to show what you do. But knowing the significance of something and putting it into practice are 2 separate things—so every company, from fledgling upstarts to global brands, needs to practice the art of the pitch. When you get complacent and sloppy, the results can be disastrous.

The perfect example of a company “sleeping on the pitch” came in 2013, when Nike prepared to make NBA star Stephen Curry an offer to serve as a brand ambassador. You’ve likely heard of Nike, considering they accounted for over 90% of the basketball sneaker market at that time.

Yes, Nike is one of the most dominant brands the world has ever seen. But that didn’t prevent them from making one of the most boneheaded pitches in history. To set the stage, Curry really liked working with Nike. He was a long-standing partner and had many positive things to say about the company.

"I was with them for years," recalled Curry in an ESPN report. "It's kind of a weird process being pitched by the company you're already with. There were some familiar faces in there."

Numerous Nike officials greeted Curry and his father, former NBA player Dell Curry, as they entered the meeting room to discuss the upcoming deal. Once seated, however, Curry was treated to what ESPN described as “something hastily thrown together by a hungover college student.”

The trouble started when one of the Nike officials mispronounced Curry’s first name. Note to those who make pitches: Do NOT refer to people by the wrong name. This rule is particularly relevant when the person you’re pitching is a current business partner.

The proverbial straw that broke the camel’s back came when the Nike officials reached a slide in the PowerPoint deck that didn’t use Curry’s name at all. Instead, it featured the name of NBA star Kevin Durant, indicating that this pitch had been copied and pasted from an earlier pitch to Durant.

Shocked and disgusted by Nike’s clumsiness and disrespect, Curry signed with rival brand Under Armour. Nike was then left to consider how they’d bungled what should’ve been a slam dunk of a pitch.

Crafting the Perfect Pitch

“When you're growing and developing a business, you'll likely spend a lot of time presenting pitches to potential corporate partners,” says Forbes. “However, every business is different, and every pitch should be too. Depending on the company you’re pitching, you’ll want to adapt and tweak your presentation to ensure you're sending a message that resonates with that particular business leader. It may take effort and research, but it will pay off in the long run when you land partnership after partnership.”

Let’s look at some other ways you can take a regular PowerPoint pitch deck and turn it into a business-catching machine.

1. Ask plenty of questions in advance: You need to be a sponge during the time leading up to a pitch, soaking up every possible piece of information that could make your presentation better. This is best done through direct questions to the client. Learn everything about their business model, core values, and leadership style. Most importantly, identify the problems they’re currently facing.
2. Offer solutions: When you understand the strengths and weaknesses of a client, you’re uniquely able to offer solutions to their problems. This is how you showcase your value and get them to take the action you desire.
3. Be personable: Friendliness goes a long way in your pitches. You don’t have to be cheesy, but look for ways to show the human side of your business. This might mean you include photos of your team in the pitch. Better yet, include childhood photos. As long as this “personable” content is relevant, it will help to break the ice with its warmth.
4. Outline a killer strategy: It’s easy to write a great line for a pitch. What’s harder: developing a convincing strategy that encapsulates your entire presentation. Show them how solid your strategy is by including specifics such as tactics, timeframes, and results tracking.
5. Be prepared for remote presentations: Times have changed—you won’t be making many in-person pitches in the near future. So take this time to master your chosen video conferencing software, whether it’s Teams, Zoom, or something else entirely. Rehearsals are crucial for identifying potential technical difficulties and finding remedies to apply in real time.
6. Make your final impact statement truly shine: A great intro really sets the tone for a successful pitch—but don’t neglect the factor of recency bias. Once you’ve concluded your pitch, the last 3 things you said are going to be among the 3 most memorable elements to the client. Thus, you need to make sure your value and strengths come through crystal-clear in your pitch’s closing moments.

Is it possible to be pitch-perfect? No. There will always be aspects of a presentation that could’ve gone better. But when you put effort into crafting a pitch that clearly articulates how well you understand the client and wish to make life better for them, you’ll see undeniable results.

As if there already weren’t enough sales-related challenges facing America’s small businesses during the COVID-19 pandemic, another potential crisis is looming on the back end of their operations. Supply chains are failing for a multitude of reasons, but the result is often the same: the strain pushes already fragile small businesses to the brink of failure.

How vulnerable is your business to supply chain disruption? That depends on factors such as your industry, size, and business model. But if you’ve followed the recent trend of streamlining your inventory, you may face an extremely bumpy road ahead. Maintaining a lean inventory is an efficient way to run your business, but it also reduces the margin for error when deliveries stop arriving.

“Small businesses that have been weakened by years of extended payment terms now have to deal with the challenges of the coronavirus pandemic,” explains a supply chain analysis from the Harvard Business Review. “In addition to the precipitous falloff in demand and mandated shutdowns caused by the pandemic, outstanding invoices are not being paid. Their situation is precarious.”

While none of us know exactly how this pandemic is going to play out, it’s obvious that more difficulties are on the horizon. Even if a vaccine were miraculously released to the global population tomorrow, there would still be a transitional period as businesses struggle to get back on solid ground and reconfigure their processes.

So what can you do when your supply deliveries are late due to delivery issues or operational problems with your supplier? Here are a few ideas:

1. Keep Your Supplier Relationships Strong 

It’s important to stay in contact with your suppliers and let them know you value the relationship. When you’re a loyal partner rather than a faceless contact, you have a better chance of becoming a priority when things become difficult for the supplier.

2. Watch for Issues Proactively 

It’s always easier to anticipate solutions to a challenge than to come up with answers in the heat of the moment. Make supply chain forecasting a priority so that you can prepare better for what lies ahead.

3. Communicate With Your Business Partners and Customers 

Many business owners put their heads down and suffer in silence when their supply chains fail them. By bringing your partners and customers into the conversation, you stand a better chance of maintaining relationships and avoiding damage to your reputation. Remember, perception is reality. Let them know the realities you’re facing—this way, they won’t form inaccurate perceptions regarding your business.

4. Utilize Inventory Management Software 

5. Learn How to Track Shipments and Report Delays 

If you’ve stayed in contact with your suppliers, you’ll be able to ascertain quickly when a delay is out of their hands. In these cases, it’s important for you to file a report with the carrier immediately so you can get the issue on their radar. Basically, the squeaky wheels are the only ones that get oiled when strain exists throughout the delivery service’s operations—so squeak as loudly as possible.

Even in the best of times, supply chain complications will arise—and the events of 2020 have only exasperated this fact. But if you anticipate and navigate supply chain disruptions, you’ll be better able to manage inventory and fulfill your orders. It’s a delicate balance, and there will be continual need for rebalancing—but this approach will help you to keep your operation moving in a positive direction.

Have you heard of the podcast directory Odeo? Or the transportation data company Traf-O-Data? What about the Detroit Automobile Company? All of these businesses were founded by first-time entrepreneurs, and all of them failed quickly or were adapted into something completely different much later. Odeo was bought out by cofounder Evan Williams, who used the organization to start Twitter. Traf-O-Data was founded by high school students Bill Gates and Paul Allen to improve car-counting for traffic engineers. They took the hardware engineering experience from this company and started Microsoft. Henry Ford founded (and closed) the Detroit Automobile Company before he had success with his namesake corporation.

Starting a business is hard, and starting your first business is the hardest. You need every advantage to find success on your first outing. In this guide, we’ll look at the best practices that first-time business owners use—and the common mistakes they wish they’d avoided.

Basic business planning.

1. Do market research.

Market research is any background information that can “help you identify new business opportunities, avoid failure, secure funding (due to a more robust business plan), make informed business decisions, and ultimately deliver a more satisfying customer experience,” according to our guide on do-it-yourself market research for small businesses.

This research can help you make educated guesses to answer some basic questions: is there an unmet demand in the marketplace? Would consumers pay for your goods or services to fill that demand? And would it be profitable?

Market research sounds complicated and expensive—but it doesn’t have to be. There are 4 primary forms: interviews, surveys, focus groups, and customer observation. Additionally, you can use reliable sources of secondary data, like government databases and trade publications. With fewer than a dozen forms of input, you can get a clear picture of the existing market.

2. Create a business plan.

A business plan is a blueprint for your entire operation. Writing a solid business plan is one of the most important steps in starting your business—it’ll not only be the guiding document for logistics, it’s also essential to gaining loans and investments. All that importance can make a business plan intimidating, especially if you’ve never written one before.

We’ve made an easy, step-by-step guide to creating a business plan that will take you from answering a few simple questions to structuring your formal document. Be sure to read the whole thing, but the sections of your final business plan will be: 

1. Executive Summary
2. Business Overview (what physical resources you currently have)
3. Market Analysis/Industry Analysis 
4. Competitive Analysis (what demand you’re filling)
5. Sales and Marketing Plan
6. Operations and Management Plan (human resources)
7. Financial Plan (capital)

3. Have specific goals.

First-time business owners often fall into the trap of vague goals—or worse, having no goals at all. If your goal is “to make money,” you’ll need to be a lot more specific. How far are you from profitability? Will you close that profitability gap by increasing sales to current customers, growing your business, or utilizing some other strategy? 

When setting goals, make them SMART: Specific, Measurable, Attainable, Relevant, and Timely. Specific and Measurable go together—for example, increasing new clients by 25%. An un-specific goal, in contrast, would be to “increase new clients.” An unmeasurable goal would be to “make a better product.” (Better in what sense?)

Attainable goals can be determined through research. Look at the metrics you want to change, and assess how they’ve performed at your organization and at similar organizations under similar circumstances. 

Relevant and Timely goals are directly related to your organizational mission and deadlines. While setting up an Instagram account might be relevant for a fashion line, it makes less sense for a notary public. Furthermore, that fashion line’s new Instagram account will be more effective if it has clear deadlines—for example, hitting 50,000 followers before debuting the spring collection.

4. Don’t try to be all things to all clients.

A first-time business owner is hungry for customers or clients—and that drive is good. But too much hunger can make you do irrational things, like trying to perform every function for all customers. When a small business owner creates an overly broad selection of products or services in an attempt to appeal to everyone, it creates 2 problems: a marketing problem and an operations problem.

From a perception and marketing perspective, an overly broad focus means no one knows what you actually do. Marketer Jim Joseph describes this problem in Entrepreneur: “We become so vague that no one knows what we are offering and our potential customers turn to other, more specific options.”

Operationally, offering too many products and services means you will not excel at any of them. 

An example of a small business with an overly broad business offering is the local restaurant with a menu the size of a phone book. If pancakes, tacos, lasagna, lobster, and peach cobbler are all available, customers might suspect that none of them are going to be very good. And those restaurants have a funny habit of getting new owners every few months.

5. Have an elevator pitch.

As a small business owner, you’re always on the clock. One of your top priorities is attracting customers and investors. (Although don’t assume that you will get investors—more on that below.) That means you must always have your elevator pitch ready to go.

An “elevator pitch” is a summary of your business plan that could attract someone in a matter of seconds. The name comes from the idea of being in an elevator with someone and having only as long to pitch them as it takes to get to their floor. 

“From a chance encounter with an investor to a curious customer, always be ready to pitch your business,” writes Scott Gerber at Entrepreneur. “State your mission, service, and goals in a clear and concise manner.”

6. Avoid distractions (like other new ventures).

Some small business owners start their first venture with dreams of becoming a serial entrepreneur. But starting a new company before the first one is fully established is a mistake—and a common one.

Jason DeMers made this mistake and learned a lesson the hard way. The founder and CEO of the marketing company AudienceBoom thought he could split his time leading a new startup—only to see that one fail and AudienceBoom falter.

“I learned that a successful venture requires 100% attention, focus, and effort,” he told The Hartford. “Secondary ventures need a full-time manager or else they’ll just distract you and derail your existing efforts if you aren’t careful.”

Legal and financial concerns.

7. Don’t depend on investments.

With the popularity of Shark Tank, every entrepreneur thinks they can score offers for their brilliant idea. The image of the angel investor or venture capitalist looms large in TV and movies, with sharp-suited millionaires always ready to fight each other over a good idea.

But in reality, investor money is hard to come by, especially if you’ve never started a business before. “It’s almost impossible to get investment for your very first startup,” writes entrepreneur and investor Tim Berry.

You should plan for the scenario that your business receives no outside investment. Create a business plan that would work with only your savings and conservative estimates of potential revenue. Bootstrapping, or operating your startup without investors, has advantages too. “That dream you had of building your own business ends when you take on outside startup investors,” writes Berry, explaining that investors become your partners—or even your bosses.

When looking for other forms of funding besides investment, consider business loans, lines of credit, and equipment financing. Lendio can connect small businesses with lenders through one quick, simple application.

8. Keep overhead low.

First-time business owners can sometimes take the mantra “you have to spend money to make money” too seriously. A better mindset might be Jeff Bezos’ famous principle: “it’s always Day 1.” The Amazon founder and CEO wants his organization to run as lean and responsive as a startup on its first day, no matter how big it gets.

When beginning your first business, do everything you can to keep overhead low. Lower operating costs will relieve some of the pressure for you to generate revenue immediately.

One of the most common forms of unnecessary overhead for new small businesses is physical space. If you work remotely, does your business need a physical space? Even food businesses can begin as delivery services provided out of a home or an existing food business, if they’ll rent you time in their kitchen.

9. Choose the right business structure.

There are several common legal setups for small businesses in the US. Typical structures for a first-time business owner are a sole proprietorship or a limited liability company (LLC).

• A sole proprietorship is the most basic and least complicated legal form of a small business. It means a person is conducting business as an individual, and the business will be taxed accordingly. Under this form, a person is personally liable for the business.
• An LLC provides some of the protection of incorporation by separating the liability of the individual person and the business. In addition, the owner can still avoid being taxed as a corporation. LLCs are more administratively complex and must separate personal and business finances.

Personal care

10. Have a support network.

Almost every small business owner attributes their success to a community of supporters. And we don’t mean financial and business support (although that’s important too)—we’re talking emotional and mental support.

A mentor or team of mentors can be an invaluable resource for a first-time small business owner. Preferably, they have gone through the startup process themselves, so they can empathize with your situation and offer insight based on experience.

“The people in your support network can also act as your sounding board if you have new ideas about ways to run your business,” writes Alex Silady at SmartAsset. “If your marketing campaign for your new business fails to capture the attention of the people who are close to you, it probably won’t interest total strangers or potential customers either.”

Develop and maintain your support network the same way you’d develop and maintain any professional relationship. Network your connections to find mentors and approach them about offering informal guidance. Once you find mentors, communicate regularly and express gratitude outside of normal business contact. They shouldn’t only hear from you when you need something.

11. Delegate responsibilities

Entrepreneurs can be control freaks. When you’re starting a small business, it seems to make financial and organizational sense to do everything yourself. Payroll and benefits for staff are huge expenditures. However, overextending yourself and trying to do work outside your expertise will quickly cost you money.

If you have so much workload that you can’t handle it or are even turning away paying gigs, it’s time to staff up. That’s a relatively easy call to make. 

Doing work outside your expertise is a less obvious, but just as costly mistake. Small business owners find themselves wearing many hats: marketer, accountant, IT support staff, etc. One misstep in these areas could cost you big bucks.

Adele Cehrs, founder and CEO of Epic PR Group, writes on Inc.com about trying to be her own legal counsel as a first-time business owner and writing up a contract for a new client. “Many hours and $35,000 worth of work later, I lost that client when he claimed bankruptcy, leaving me $35,000 in arrears,” she says. “After that, I spent the money to make my contracts foolproof— even from myself.”

If you’re not ready for a full-time staffer, use consultants. You’ll see the benefits of improved work product and reduced mistakes. 

12. Stay healthy

As a first-time business owner, you’re willing to sacrifice for success. Perhaps you have romantic notions of late nights and fast food fueling your rise. But neglecting your health can be a trap.

Being physically, mentally, and spiritually healthy should be its own reward. Need more motivation? It makes you a better businessperson too. “One study found that workers who eat a healthful diet are 25% more likely to be more productive than workers who don’t,” according to Mike Kappel at allBusiness, adding that according to the Centers for Disease Control and Prevention (CDC), “23.2% of adults over age 20 reported they had trouble concentrating because of sleep deprivation.”

Do your best to eat right, exercise for 30 minutes a day, and sleep 6–8 hours a night. If you’re consistently sacrificing these practices for your business, remember: you could be hurting yourself in the long run.

Promote mental health as well. Mindfulness practice is increasingly common for entrepreneurs. According to Stephanie Burns for Forbes, mindfulness has been found to be helpful in “reducing anxiety, heightening productivity, and contributing to a greater sense of presence,” all very business-friendly outcomes.

13. Don’t quit your day job.

Another common refrain from first-time business owners: “I wish I hadn’t quit my day job so soon.” Any venture has a chance of failing, especially your first. If you go all-in on a business when it’s just starting out, you may find yourself falling without a safety net just months later.

“But when you have the safety net of income from your job, you can treat entrepreneurship as a learning journey: Even if the venture fails, you’ve still gained valuable skills that can enhance your career,” says Dorie Clark in the Harvard Business Review. Clark also points out that income from your primary job can fund your side hustle. As we mentioned above, you don’t want to be dependent on investors for your first business, so self-funding is a good option.

Remember, success is subjective. Maybe your first business will be moderately successful and set you up for another venture, or maybe it will be a huge success that becomes your whole career. Maybe your business will end, but the lessons you learn will lead to something new. You won’t be alone: every successful business owner had to have a first.

More and more Americans are going into business for themselves as freelancers. In fact, research shows that 35% of workers now freelance. That means about 57 million US workers are either working freelance full-time or as a side gig. The top reasons cited for this choice include:

1. Achieving increased flexibility
2. Being your own boss
3. Working from anywhere
4. Choosing your own projects

“Freelancing is one of the fastest, most affordable, and easiest ways to get started working from home, especially if you offer services in a skill you already excel at,” explains a freelance report from The Balance Small Business. “In some ways, freelance sits in-between entrepreneurship and employment. In freelancing, you're self-employed, but the work is contracted by a business and can be steady and regular like in a job. One of the big benefits of freelancing is that you can usually charge more per hour in your freelance business than employers pay for the same work.”

It should be noted that there are also drawbacks to the freelance life. For starters, it requires you to constantly network and seek out clients. Jobs won’t just flow straight to your desk as they would in a corporate setting. The unpredictable workload can become a boom-and-bust cycle for many freelancers: one month you’ll be pulling all-nighters, while the next month could be nearly devoid of work.

Another drawback of freelance work: it can invade your personal life. You’ll need to be disciplined enough to establish a routine so that you get work done during certain hours and then step away when necessary.

Finding clients and commanding the right pay rates can also be challenging. For this reason, you should assemble a reliable collection of clients before you start running your freelance business as a full-time operation. This way, you can begin to learn the tricks of the trade and establish yourself as a trustworthy freelancer before the pressure really sets in.

This guide will walk you through the essential steps of launching a freelance business and finding success as your own boss. And it all starts with you making the bold decision to take the freelance route.

Determining if Freelancing Is Right for You

1. Are you self-motivated?
2. Can you stay on task, even when no one is watching?
3. Are you good at networking?
4. Are you confident enough to approach potential clients?
5. Are you in a financial situation where you can survive 1–2 months with no pay?
6. Do you enjoy learning about new industries and topics?
7. Are you a good researcher?
8. Are you organized?
9. Can you balance multiple jobs simultaneously?
10. Are you confident enough to send out invoices?
11. Are you tenacious enough to follow up on unpaid invoices?
12. Do you feel that you’re scrappy enough to compete for jobs?
13. Will you still be able to afford healthcare?

Laying the Groundwork

Connected to your professional portfolio should be your profile. This is where you feature many of the elements that would appear on a traditional resume. Highlight your experience, training, certifications, education, and personality. When a client is considering 2 candidates with similar backgrounds, the details in your profile can help move the needle to your side.

Next, you’ll need to decide how you want to connect with clients. Lots of freelancers sign up with freelancing platforms like Fiverr, Upwork, or SimplyHired. The chief advantage of a platform is that it can connect you with a vast array of jobs. Additionally, any good platform will have policies in place that protect you from getting jilted by a non-paying client.

The biggest issue with platforms, however: they take a cut of your earnings, which can range from 5% to 30%. Competition for jobs on these platforms can also affect your billable bottom line: sometimes, so many freelancers bid for work on a platform that the rates plummet to levels you aren’t willing to accept.

If you feel comfortable with the risks of a platform and feel that it’s the best option for your freelance business, take the time to research the available options. Make sure only to build profiles on platforms that have a high standard of quality and help you to meet your business goals.

The other option is to find clients on your own. This takes more effort, but it also offers the chance for a higher reward. Popular methods for finding clients include:

• Attending industry networking events
• Leveraging LinkedIn contacts
• Joining relevant Facebook groups
• Talking to family and friends
• Reaching out to previous employers
• Cold-calling businesses to share ideas

Finally, you’ll need to set your rates. At the onset of your freelance career, you may want to choose a discounted rate that allows you to connect with more clients and build your portfolio. But don’t fall into the trap of becoming a “bargain freelancer.” Your goal should be to increase your rate steadily to match the quality you’re bringing to the table.

If you’re not sure what you should be charging, talk to other freelancers to get an idea of standard rates. You could also check with a relevant professional organization, such as the Editorial Freelancers Association, to get a feel for the rate standards in your industry. Questions like these can also be addressed by a mentor—so take this opportunity to reach out to an experienced freelancer who can guide you through the early stages of your career. If you struggle to think of a possible mentor candidate, reach out to your local SCORE office and ask them for assistance.

Making It Official

First, you’ll want to set up a bank account for your freelance business. Many freelancers choose to do this at their current personal bank, as the process is much easier: your bank will already have your financial information and will draw upon your track record in order to approve your request quickly.

The other option is to find a new bank for your business account. Perhaps there’s a bank you think will align better with your business goals. Or there might be a bank offering a lucrative perk if you create an account with them.

You should also consider where you’ll base your business. Many freelancers work from home, but you might prefer a shared workspace or some other sort of office space. Consider the advantages and disadvantages of all your options before making a decision.

Next up is choosing a legal structure for your business. This isn’t a necessary step, as you probably have the option of reporting your freelance earnings as “miscellaneous income” on your tax returns. But freelance work has a tendency to complicate your taxes, making it harder to ensure you’ve reported everything accurately and made the best decisions for your deductions.

“Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company,” says a business structure analysis from Entrepreneur. “Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.”

If you want to set up your freelance business formally, you have several options. The 3 most popular are sole proprietor, limited liability company (LLC), or S corporation. Let’s take a closer look at these options, as well as a few others that will likely be available to you:

• Sole Proprietorship: With limited paperwork required and a tiny price tag, this is the structure of choice for most freelancers. Sole proprietorships allow you and your business to be the same entity. One key advantage of a sole proprietorship: it offers one of the lowest tax rates available to freelancers. Be aware, however, that this structure offers no liability protection. If your business suffers losses or a client sues you, you’ll be on the hook.

• LLC: This structure doesn’t cost much money to set up, depending on the state in which you register your business, and it provides some major benefits. You can operate an LLC as an individual or bring in additional partners if that fits your business goals. The reason many small business owners choose LLCs is for the liability protection they can provide. Creditors typically find it difficult to go after those who operate with this structure. Possible downsides: you’ll need to acquire an Employer Identification Number (EIN) before applying, and the renewal fees and other costs can add up to make it somewhat costly.

• S Corporation: This structure is ideal when you have multiple parties involved and want to share your business’s profits and losses. There is substantial paperwork involved with this structure, so you will need to allocate enough time to complete the application process carefully. Because the finances of an S-corp are intermingled between all individuals involved, it’s not uncommon for accounting errors to occur. In fact, the IRS often reviews these types of businesses more closely because of the likelihood of mistakes.

• Partnership: While the paperwork is light for this business structure, you should protect yourself by drafting a written agreement that can be signed by all parties involved. Lay out details such as who will share what responsibilities and how profits and losses will be distributed. This structure offers no liability protection—and it can actually present even more risk than a sole proprietorship because you might become partially responsible for liabilities brought on by one of your partners. For this reason, you should choose who you bring into your partnership very carefully.

• C Corporation: If you want ironclad protection from debts and losses incurred by your business, you should consider this structure. As far as the law is concerned, a corporation is completely separate from the individual (or partners) who form it. This is one of the most complex and time-consuming structures to choose for your freelance business. The paperwork can be intense, and you’ll need an EIN. Additionally, you will need to hold meetings, elect officers, and carry out other formal proceedings if there are partners involved.

Figuring Out Your Financing

You’ll have numerous options when it comes to raising money for your freelance business. Perhaps you’ll want to start by approaching family and friends for a loan. For more robust financing, you should consider one of the following small business loans:

• Business term loans
• Short term loans
• Business lines of credit
• Merchant cash advances
• Accounts receivable financing
• Business credit cards
• Startup loans
• SBA loans
• Equipment financing

Start by searching the federal grants listed on Grants.gov. Competition will be fierce, but some of these grants can provide a real boost if you qualify. There are also grants available in the private sector. Possible sources include the Halstead Grant, the Amber Grant, the Idea Cafe Grant, and the National Association for the Self-Employed (NASE).

Simplify Your Life With Digital Tools

Any time you can hand off a task to a digital tool, you’ll reclaim precious time in your day, empowering you in more ways than one.

“Is the saying ‘Time is money’ true?” asks a business report from the SBA. “If your business runs out of money, you always have the opportunity to get more. More money is ‘simply a sale away.’ ...Yes, poor time management can cost you and your business tremendous amounts of money. Realize, however, that the better you manage your time, the more money you can earn.”

There’s an ever-increasing list of digital tools that can help freelancers. Let’s look at a handful of the most popular choices:

• Slack: Helps you manage projects and communicate with partners and clients.
• Quip: Allows you to track business goals and your progress on projects.
• 17hats: Combines contracts, invoices, project management, and other tools into a convenient hub.
• Mailchimp: Simplifies your email efforts and helps you track results on the back end.
• Hootsuite: Makes it easier to use all your social media channels at the same time.
• Marketo: Empowers your marketing efforts by merging your digital, mobile, email, and social initiatives into one place.
• QuickBooks: Lets you create expense reports and then track them throughout the process.

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Launching a brand-new business is an exciting experience. It's usually just you and a blossoming idea against the world. However, with so many unknowns, the beginning stages of a startup can be anxiety-filled and tricky.

Whether you like it or not, business success ultimately comes down to cash flow—is your business making more than it's spending? If the answer is yes, then you're on the right track. If the answer is no, then you need to start making some fixes.

In the early stages, you'll likely burn more cash than you're making—that's common. Nonetheless, you need to have a plan for how you're going to eventually turn a profit.

Running out of cash is the second biggest reason most startups fail. It's not that businesses don't get enough financing or sales—it's that they don't strategically and responsibly manage that capital.

Getting your financial ducks in a row is critical to the short-term and long-term survival of your business. The sooner you get your financial situation established, the better. Below, we'll cover the 10 critical financial steps you need to take to build a durable business foundation.

1. Establish Financial Goals

Everyone wants to build a multi-million dollar business, but you need to set realistic financial goals for how you're going to get there. Ask yourself a few questions to get your mind thinking of the possibilities—don’t worry, there are no right answers:

• Do you want to keep your business small forever, or would you like to eventually scale it to something bigger?
• Do you plan on owning this business for the long-term, or do you want to grow and then sell it for a quick buck?
• How much do you plan on paying yourself?
• How much revenue would you like your business to generate in the first year? What about the first 3 or 5 years?
• When would you like to start turning a profit?

You don't need to have answers to all these questions just yet, but keep them in the back of your mind as you build your business. Soon, you'll begin making important business decisions that may permanently steer your business in a specific direction—and it's essential you know where you're going.

2. Determine How You'll Fund Your Business

It takes money to make money, especially when you're just getting started. Initial investments in your business will require a significant sum of money. Real estate, renovations, website hosting, product molds, marketing material, software, payroll—operating a business isn't cheap.

To get your business off the ground, you'll likely need a healthy pile of cash. How you fund your business is just as important as what you spend your funds on. Here are a few financing sources for you to consider:

• Debt financing: Borrow money and repay it with interest. Maintain complete control of your business
• Venture capitalists: Trade equity for cash. Lose a portion of ownership of your business.
• Angels: Share ownership of your business with a wealthy individual in exchange for capital.
• Friends and family: Mixing personal and business life can get a bit thorny, but mom, dad, and your high school best buddy may be willing to lend you some cash without contracts and collateral.
• Crowdfunding: Harness the power of the internet to raise funds for your business in exchange for future products, rewards, acknowledgment, or good-Samaritan points. 
• Bootstrapping: Build your business from the ground up with only your personal savings and cash from initial sales.

Before you give away expensive equity or lock yourself into a 10-year loan, consider all your financing options. Take a look at our Top Financing Options for All Your Business Growth Needs guide for more details.

3. Separate Your Business and Personal Finances

While it might seem easier to just carry around one piece of plastic, it's not easier come tax time. Trying to remember which expenses were for your business and which were for your personal life can be a nightmare—especially 9–12 months later.

Right from the get-go, do everything you can to separate your business and personal finances:

1. Apply for an Employer Identification Number (EIN)
2. Set up your business entity type
3. Open a business bank account
4. Obtain a business credit card
5. Separate all your expenses

Separating your expenses doesn't just make tax season easier (though, that'd be reason enough)—it also can help you claim valuable tax deductions, shield your personal assets, and build your business credit.

The longer you wait, the harder it becomes to separate your finances. Set yourself up for success early to avoid major accounting headaches later.

4. Build an Emergency Fund

In the beginning, every dollar counts. Every sale, every saved expense, every penny-pinched—it all matters. However, it's never too early to start building your emergency fund.

Get into the habit of setting aside a portion of your weekly or monthly revenue toward a cash cushion. COVID-19 was a rude wakeup call for all businesses solely reliant on future cash flow—don't let an uncontrollable disaster destroy your business.

As a rule of thumb, try to save at least 3 months (or more) of liquid funds. These rainy-day funds could help you survive future calamities and unexpected expenses without having to wait around for government loan programs.

Another great way to build an emergency fund is to obtain a business line of credit. A business line of credit is a flexible form of financing that you can keep in your back pocket for downtimes—it's there when you need it, but you have no obligation to use it.

Whether you need to make immediate repairs to a vital piece of equipment, cover payroll during a slow month, or restock your inventory, a business line of credit can handle it all. The credit is revolving, so when you use it and repay the borrowed portion, you'll get immediate access to your full credit line again. Plus, you only pay interest on funds you use, not the full amount.

5. Get a Business Credit Card

You're going to start accruing expenses here and there even before opening day. Get a business credit card as soon as possible so that you can keep your personal and business expenses separate. 

Unlike other business loans, you don't need to wait to apply until you've been in business for 12 months or until you've sustained thousands of dollars in annual revenue. Lenders will look at your personal credit score, meaning you can qualify for a top-notch business credit card starting day one.

Business credit cards can give your new business a huge headstart:

• Use your card to pay for practically any business expense
• Start building your business credit score so that you can qualify for bigger loans down the road
• Enjoy a 0% introductory APR for the first 12 months with most cards
• Qualify for higher credit limits to pay for expensive equipment or other startup costs
• Earn points, rewards, cashback bonuses, and other great perks
• Automatically separate and track your expenses

6. Track and Monitor Your Expenses

You don't need to become an accounting wizard, but you need to learn a few bookkeeping basics. First, create an account on a free bookkeeping tool, like Lendio's software. Connect your bank accounts and credit cards, and voilà—Lendio's software will automatically begin importing, tracking, and categorizing all your income and expenses.

Data like this might not seem important now, but it'll be critical when you're applying for loans, forecasting your cash flow, and building your business plan. Plus, it'll make tax season a breeze.

Meticulous monitoring of your finances will also ensure no money slips through the cracks. Lendio's software can help you create, send, and automate your invoices, so you never forget about a delinquent customer. Plus, you'll always know where your money is going, so you'll never be surprised at your end-of-the-month numbers.

7. Strategically Set Your Prices

Pricing your products right is a Goldilocks conundrum. Too high, and you'll practically be marketing for your competitors. Too low, and you'll come off as a cheap brand. You'll need to find the sweet spot to outprice your competitors, maximize ROI, and maintain your brand integrity.

Setting your prices is hard on day one. Further down the road, you'll have more historical data, reliable break-even points, and research to help dictate your prices. In the beginning, however, you'll have to rely on forecasts, estimates, market trends, and (admittedly) a bit of guesswork.

To get baseline prices, you'll need to do some homework:

• Know your costs: Get down in the weeds with exactly how much it costs to source, produce, store, market, and deliver your products and services. Once you determine your costs, you'll know the absolute bottom limit to your pricing.
• Know your financial goals: Look back at the financial goals you established in Step 1. What price point do you need to set to make those goals a reality? 
• Know your competition: Analyze the market and see how your competitors are pricing complementary and substitute products and services. In this day and age, regardless of where your customer is, they can whip out their smartphone and get instant price comparisons—and research says they do it all the time.
• Know your market: How important is price to your customer demographic? For example, if you're selling breakfast cereal, some customers will fuss if your price is 15 cents more than a competitor. On the other hand, if you're selling Ford F-150s, your customer might not think twice that your truck costs $5,000 more than a leading competitor.

Once you've done your research, price your goods with confidence. Continually reevaluate your price point—it's never set in stone. Over time, you may build up operating efficiencies that dramatically decrease your costs, or your competitors may get caught up in a pricing war. Keep an eye on your sales, and don't be afraid to experiment with pricing changes.

8. Invest in Professional Services

When money is tight, you might be tempted to try and do everything on your own: bookkeeping, marketing, sales, recruiting, designing, and the list goes on. However, your most valuable asset is your time.

First, track how you spend your time. Record everything you do: answering emails, fly-by chit chats, scheduling, meetings, screening candidates, etc. Now, attach a dollar value to each of these activities—how much would you need to pay someone to do any of these tasks for you? Next, determine how much your time is worth—attach a dollar figure to it. 

If the value of an activity is less than your time is worth, outsource the task. Hand over the minutiae and start spending your time doing what nobody else can do for you—growing your business.

The most successful small business owners know when to do and when to delegate. Penny-pinching here and there could save you a buck or two, but you might be leaking more cash than you're saving. Consider which tasks you could easily hire a professional to do:

• Bookkeeping
• Web development
• Content marketing
• Copywriting
• Data entry
• Social media
• Customer service
• IT support

You can offload a lot of time-consuming activities to a freelancer or digital assistant. While learning new skills is valuable, it's not always the best use of your time as a small business owner to learn the ins and outs of WordPress or how to troubleshoot Mac issues. Start building a team (whether that's freelancers, employees, or other professional services) early on—you'll always have more than enough to do.

9. Remember to Pay Yourself

Don't forget that you're a business expense, too. Some entrepreneurs pour their heart, spirit, and bank accounts into their businesses at the expense of their families and livelihoods. 

You don't need to take home a big fat salary every month, but pay yourself enough to live comfortably (at least). Eliminating personal financial stress from your life will help you focus on your business and make more objective business decisions.

How you pay yourself will depend on your established business type. Owners of LLCs, partnerships, and sole proprietorships are viewed as self-employed, so they're paid through something called an owner's draw. If your business is a corporation (like a C-corps or S-corps), then you'll pay yourself through a set salary.

As the owner, it's easy to neglect yourself. Plan for this expense in advance so that you leave sufficient budget for your pay. Start a good habit from day one of always making yourself a priority—this practice will go a long way in the future business decisions (big and small) that you make.

10. Plan for Taxes

Your first tax season is right around the corner. Unfortunately, many small business owners forget to calculate their tax burdens when they're budgeting startup and operating costs. The reality is that your potential tax obligations could make the difference between profitability and financial loss.

As a full-time employee, your taxes are automatically deducted from your paycheck—no planning, no budgeting, no hassle. However, as a small business owner, you must take the initiative to calculate, set aside, and pay your taxes. 

The best way to avoid any future tax surprises is to pay quarterly taxes on your income. Doing this will give you a clearer picture of your month-to-month financial situation—plus, it'll make tax season much less of a headache.

Lendio makes it easy to prepare your company's taxes with a nifty feature called Lendio Tax Assist. Lendio Tax Assist is a free tool that helps you organize and estimate your taxes so you know how much money you'll owe in advance.

Sometimes taxes can be tricky, and that's why accountants are paid the big bucks. Still, they're almost always worth the cost. Consider hiring an accountant, especially for your first tax season. They'll save you time and money, as well as maintain your relationship with the IRS.

Let's Get Down to Business

Now that you've taken care of the essential financial steps, you're ready to start growing your business. Yes, these steps can be time-intensive, but they're well worth the initial investment—they'll pay dividends in time and money in the long run. With a solid financial foundation, you'll avoid many of the mistakes that kill new businesses. 

Remember, business success is rarely the result of spontaneity (especially for entrepreneurs). You need a plan—let us help. 

If you need capital to get your business off the ground, our personal funding managers can help make it happen. Just start your no-fee, no-obligation 15-minute application to see what small business loans you qualify for. Then, a funding manager will help walk you through your options so that you don't walk away with any ol' loan—you skip and hop away with the very best loan.

It takes a little cash to make big things happen. Get the capital your small business needs to start off on the right foot.