How to set up your small business for success

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Mistake-Proof Your Business Idea

You’ve got a vision for starting your own small business, and you’re far from alone. Today in America, 32.5 million small businesses employ a number of workers that ranges from just 1 person to 500.


For the last 25 years, small businesses have been gaining steam. It’s clear that more Americans than ever want to quit working for others and become entrepreneurs. The number of such firms just keeps increasing, from 15.4 million in 1997 to 26.5 million in 2018 and on to today’s total.


While it’s an exciting trend and these numbers pack a wallop, you might also be wondering, “Ok, but what about the pandemic lockdown…inflation… supply chain … hiring shortages…?” It seems like there’s nothing but obstacles to launching a business right now—or if you have a business still in early stages, to keeping it alive.


There’s no question that challenges exist to starting and running your own small business. Why else would nearly one in five U.S. businesses fail within the first year? However, what you might not know is that small businesses showed undeniable strength in startup numbers even during the worst of the COVID-19 pandemic. And post-pandemic, many businesses are reaching for success with more determination than ever.


In this series, we will share insights, interviews, facts, figures, and tips for starting a small business that will help give you the best shot at success.


Related: 6 reasons small businesses fail

State of Small Business in 2022

If you assumed that the pandemic threw cold water on people’s initiative to start a new business, you’d be mistaken.


In 2021, Americans applied to start 5.4 million new businesses—more than 20% higher than any previous year on record and more than two-thirds higher than the annual average of 3.2 million applications per year in the five years prior to the start of the pandemic, according to a report issued in April 2022 by the White House.


People showed creativity and flexibility in what kind of business they launched in 2020 and 2021. According to the U.S. Chamber of Commerce, these are some of the most common types of startup businesses that popped up during the period when much of America was on lockdown:

  • Cleaning services
  • Delivery services
  • Drive-in movie theaters
  • Grocery stores and liquor and wine stores
  • Meal prep delivery services
  • Canned and jarred goods companies
  • Game makers and sellers
  • Fitness equipment companies
  • Landscaping and yard care companies
  • Tutoring businesses

Small Business: Regrouping and Moving Forward

While that list reveals a fascinating insight into what needs Americans had during the pandemic, a pressing question is: What about all the small businesses launched before the pandemic? The most popular types of business pre-COVID 19 were food service, health care, arts and entertainment, website design, auto repair, real estate, and pet services. (These categories are expected to spring back in popularity among brand-new startups.)


There’s no question that lockdowns dealt a tough blow to just about every small business, but economists say many are staging a comeback. The Small Business Administration (SBA) said in a 2022 report that small firms had recovered 67% of the net jobs lost in the first half of 2020. The SBA said in June 2022 that forthcoming data is expected to “show that small firms have already recovered all or nearly all of their job losses from the 2020 economic shock.”


In fact, many small businesses are busy pursuing new funding, including short-term small business loans for startups.

Most common small businesses

Portrait of a Small Business Owner

According to a SBA FAQ paper released in 2020, women own 41% of all small businesses. Other interesting statistics include:

  • In the same data group, 17.7% of employer firms were minority owned. Within that group, 5.6% were Hispanic-owned, 2.2% were Black owned, 9.7% were Asian-owned, 0.4% were owned by American Indians and Alaska Natives, and 0.1% were owned by Native Hawaiians and other Pacific Islanders.
  • In 2017, about one in six (17%) business owners with employees were immigrants. The industries with the greatest share of immigrant owners were Accommodation and Food Services (37%) and Retail Trade (23%).
  • Veterans owned 6.1% of U.S. employer firms.

Is It an Idea or an Opportunity?

People who’ve studied small business failure rates say that, unfortunately, some weaknesses are baked in from the beginning—it often goes back to the idea for the business.Being an entrepreneur holds great allure. For many of us, it’s irresistible.


But before you take the plunge, it’s important to make sure your vision for a business is precisely that: a business. Ken Colwell, author of the bestselling book Starting a Business: QuickStart Guide, writes that aspiring entrepreneurs must make sure their idea is an opportunity and one that can be executed.“


Opportunities are actionable, and they have the potential to provide value both to you and the customer,” Colwell writes. Instead of wracking your brain for an idea that will explode into overnight multi-million-dollar success, when coming up with a small business idea, try to focus on solutions to existing problems. Colwell says, “Simple solutions to common problems have a higher potential for success.”


According to Colwell, a great opportunity has these qualities:

  • Solves a problem for a customer
  • Exists in a space that isn’t too crowded
  • Can be executed in a strategic space where you will hold an advantage
  • Fills a critical customer need that may not be obvious to them
  • Is not obvious to people who don’t have your background, experience, or insight

Starting a Small Business:  The 10 Essential Steps

Ok, so say you’ve come up with your perfect opportunity, and you feel ready to launch. Now you’re truly ready for those tips for starting a small business.To mistake-proof your business idea, it’s crucial to follow best practices. A lot of people have a dream, but they may lack financial background and experience. To help, the SBA offers many mentorship programs, as do other organizations.Here, based on the agency’s years of experience, are the SBA 10 Steps to Success:

Conduct Market Research

Is your idea really a business?  You must gather information about potential customers and businesses already up and running in your area. Use that information to find a competitive advantage.

Write Your Business Plan

Your business plan is a roadmap for how to structure, run, and grow your new business. You’ll use it to convince people that working with you—or investing in your company—is a smart choice. (More on the ideal business plan later in this article.)

Fund Your business

Your business plan will help you figure out how much money you’ll need to start your business. If you don’t have that amount on hand, you’ll need to either raise or borrow the capital. You’ll want to explore small business loans for startups.

Pick Your Business Location

You’ve heard it before: Location, location, location. Whether you’re setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements, and revenue.

Choose a Business Structure

The legal structure you choose will impact your business registration requirements, your taxes, and your personal liability.

Choose Your Business Name

Don’t skimp on the effort put into this one. You’ll want a name that reflects your brand and captures your spirit. And make sure your business name isn’t already being used by someone else!

Register Your Business

Congrats, you’ve picked the perfect business name. Now it’s time to make it legal and protect your brand. If you’re doing business under a name different from your own, you’ll need to register with the federal government and maybe your state government as well.

Get Federal and State Tax IDs

You’ll use your employer identification number (EIN) for important steps to start and grow your business, like opening a bank account and paying taxes. It’s like a social security number for your business. Some states require you to get a tax ID as well.

Apply for Licenses and Permits

Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, and location.

Open a Business Bank Account

A small business checking account can help you handle legal, tax, and day-to-day issues. It should be easy to set one up if you have the right registrations and paperwork ready.

Nailing Your Business Plan

Those 10 steps may sound like a lot—but while each and every one is important, coming up with a business plan could be the most critical advice point on the list. Not having one, or failing to put enough work into thinking your business plan through, is a chief reason that a small business fails, says DeLisa Clift, a certified mentor with SCORE, the nation’s largest network of volunteer expert business mentors.


It’s not just that you’ll need a strong business plan to raise money. Your plan will serve as a road map, an outline, and a document that explains what your business is, what the goals of the enterprise are, and how exactly it will set about achieving those goals. It will definitely help keep you on track.


Here, in an outline shared with Lantern by SoFi, Clift gives her advised business plan:

Executive Summary

Describe why the business needs to exist. What problem does the business solve?


Describe the target customer or market segments.


Summarize the competition for your business.

Financial Forecast

Provide a brief overview of the financial targets. How much do you plan to sell in the next year? What are your long-term sales goals?


Needs (if applicable) for raising money for your business. Include a brief summary of what you are looking for.


Include a Marketing Plan that explains how you plan to get the word out about your product or service. And a Sales Plan that explains how you convert people who express interest in your product or service into paying customers.


  • Locations & Facilities: Describe your company’s physical location.
  • Technology: Describe any important software, hardware, or other information technology that you use now or plan to use later to operate your business.
  • Equipment & Tools: List any specialty equipment that you have or plan to acquire to do your work.
  • Milestones and Metrics:  List your key milestones and the dates that you hope to accomplish them by.

Company Overview

  • Management Team: List the members of the management team, including yourself. Describe each person’s skills and experience and what they will be doing for the company.
  • Advisors: Describe any mentors, investors, former professors, industry or subject-matter experts, knowledgeable friends or family members, small-business counselors, or others who can help you as a business owner.

Financial Plan:

  • Key Assumptions: Describe how you came up with the values in your financial forecast.
  • Revenue and Expenses by Month. Include a chart that shows your projected revenue and expenses.
  • Use of funds: Explain what you plan to do with that money.
  • Sources of funds: Describe your financing plans, and include if you plan to invest your own money.
  • Projected Profit & Loss statement
  • Projected Balance Sheet
  • Project Cash Flow Statement

This is an outline that will put you on the right path.


Now it’s perfectly OK to feel overwhelmed the first time you read it. Instead of backing away, though, get enough support to go forward.


Clift says, “A sure way to mistake-proof any small business is to ask for help. After the business owner has tested their product/service in the market, create a strategy that incorporates a BAIL team. This means having a banker, accountant, insurance agent, and lawyer on your team. It will help the business create a business that is sustainable.”


There are plenty of free resources offering mentors and subject-matter experts who can help anyone that doesn’t have business training. As Clift points out, SCORE has over 10,000 mentors from diverse backgrounds and industries.


“Surround yourself with other business owners that can support you,” Clift says.


Learn More:

This article originally appeared on and was syndicated by

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How to automate your small business taxes


The taxability of a given product or service can vary from state to state, and in some cases, such as in Colorado, taxability can even vary from city to city. Location isn’t the only complication businesses face when calculating sales tax. Specific products and services can also have special or reduced rates and fees that need to be calculated at the point of sale

This is why mapping products and services to an appropriate tax category in any automated tax system are both very important and very powerful.

Sales tax is often complicated. Properly mapping products and services in your tax system will ensure that the correct taxability determination, accurate tax rate, and any applicable fees are being calculated for every sales transaction. (Curious how sales taxes affect your bottom line? Check out our sales tax calculator.)

The need for mapping products and services to tax categories is most apparent in these major areas:


In the US, four states provide general exemptions for clothing, three states provide an exemption as long as the clothing is under a certain dollar amount, and one state taxes luxury clothing at a higher rate. The definition of what qualifies as clothing (clothing accessories, work clothing, protective equipment, etc.) is not uniform from state to state, so an item may qualify for the clothing exemption in one state but not in another.

To further complicate the issue, in 2018 sixteen states had sales tax holidays that provided exemptions for certain articles of clothing for limited periods of time.

Looking at the states with clothing dollar amount thresholds, we see that Connecticut, Massachusetts, New York, and Rhode Island are all subject to different thresholds. The thresholds are $50, $175, $100, and $250, respectively.

These states not only differ in thresholds, but they may also differ in how purchases that are over each unique threshold are treated.


Massachusetts has a 6.25% sales tax rate for the entire state. For clothing, only the amount over the $175 threshold is subject to sales tax.

  • Sales Transaction A: $100 Blouse. No sales tax applies because blouse is under $175.
  • Sales Transaction B: $200 Blouse. Sales tax applies only to the portion over the threshold; $25. $200 – $175 = $25 * 6.25% = $1.56 Sales Tax

New York

New York has an 8.875% sales tax rate in NYC and other rates vary depending on the location of sale. For clothing, the entire amount is taxable if the item is over the $110 threshold.

  • Sales Transaction A: $100 Blouse. No sales tax applies because the blouse is under $110
  • Sales Transaction B: $200 Blouse. Sales tax applies to the entire item price; $200. $200 * 8.875% = $17.75 Sales Tax

If the taxability of clothing seems complex, it gets even more complicated as you look at more and more states. For example, one article of clothing that costs $1200 would be subject to different thresholds Massachusetts, New York, and Rhode Island, as well as taxable at a special rate in Connecticut, while being fully taxable in some states and exempt in others. Clothing rules can be more problematic than you think.

This shouldn’t make you worry. Properly mapping your clothing products to the correct clothing tax category in an automated sales tax system will ensure that the proper taxability determination, rate, and threshold rules are applied across all taxing jurisdictions.


In 2018, seventeen states had sales tax holidays that exempted certain categories from state sales tax for limited periods of time. These categories included items like: back to school supplies, energy star appliances, and hurricane preparedness items.

Sixteen of these sales tax holidays exempted clothing. As a small business owner, you have to keep in mind that the sales tax holiday exemptions have similar intricacies as the year-round exemptions, including the definition of what qualifies as clothing for each holiday and how the thresholds vary from state to state.

For example, Alabama, Arkansas, Connecticut, Iowa, Maryland, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee, Texas, and Virginia exempt clothing up to $100 during their sales tax holidays, while South Carolina has an unlimited exemption, Massachusetts exempts up to $2,500, and Ohio and Wisconsin exempt any clothing item under $75.

Your automated tax solution will automatically account for these sales tax holiday rules, as long as your products are set up correctly. In other words, in order for an exemption to properly calculate during a sales tax holiday, the item being sold must be properly mapped to the appropriate tax category.


The majority of US states impose special rules on food. Most states exempt food for home consumption from sales tax entirely. Arkansas, Illinois, Missouri, Tennessee, Utah, and Virginia have special reduced rates for food for home consumption. Arizona and Louisiana exempt food at the state level but tax it at the general rate at the local level (some exemptions/reduced rates apply).

While individual states are ultimately responsible for defining the exact scope of special sales tax rules related to food and beverages, food for home consumption is generally accepted to include staple grocery items and foods which are not prepared prior to purchase and are not meant to be consumed on-premises. Candy and soft drinks can be included or excluded in this definition, depending on the state.

Many states, including Member States of the Streamlined Sales Tax Agreement, exclude prepared food, dietary supplements, and alcoholic beverages from the definition of eligible food for home consumption.

Example: A liter of soda is fully taxable in Minnesota and Illinois, while fully exempt in Massachusetts.

Example 2: A loaf of bread is exempt in Minnesota, taxable at a reduced rate in Illinois, and exempt in Massachusetts.

Again, properly mapping food items to the correct tax category will ensure that the proper taxability decision and reduced or full rates are applied across all jurisdictions.


While most states provide an exemption for food for home consumption, food intended to be consumed on-site in places such as in a sit-down restaurant or when ordering take-out is generally taxable. Some states tax this type of food at the general rate, while others have special rates, called a Meals Tax.

Many local jurisdictions also impose a meals tax, even in states that have no other local taxes, such as Massachusetts or in states with no state sales tax, such as New Hampshire.

In an automated sales tax system, these rules will seamlessly be applied to your transactions once you have mapped all of your products and services accurately.


Medical products is another area where states enact special tax rules. Many states provide a sales tax exemption for prescription drugs. The definition of what qualifies as a prescription drug, just like clothing and food, can differ from state to state.

For example, some states such as Missouri, exclude over-the-counter prescription drugs from their exemption. Other states such as Texas, exempt all drugs, regardless if they are or are not given under a prescription.

Why mapping is important in this area is because some states have a very broad definition of what qualifies as a “drug.” States are also increasingly providing exemptions for other medical items, such as feminine hygiene products.

Properly mapping a medical product to the most specific tax category in your automated tax system will ensure that the proper taxability determination is being applied across all jurisdictions and that your customers are getting all of the exemptions that the states have to offer.


Products that are not exempt in any jurisdiction and are not covered by any sales tax holidays may still need to be mapped in your automated tax system to ensure not only a comprehensive collection of all relevant taxes but also of all applicable fees.

States may impose fees on items such as lead-acid batteries, tires, electronic items, bottled water, soda or alcohol containers, and E-911 charges.

Mapping to the proper tax category for these types of items will ensure that the proper taxability, as well as any applicable fees, are calculated by your automated system.


The treatment of software and related services differ significantly from state to state. Prewritten software provided in tangible format is taxable in every jurisdiction with a sales tax. The treatment of software transmitted electronically, on the other hand, varies from state to state and can vary for a variety of reasons, including whether the software is custom, prewritten, transferred with tangible personal property, or comes with upgrade, updates, or technical support services.

The treatment of Software as a Service (SaaS) and other software related services also varies widely from state to state.

Similar to clothing, food, and medical items, not only does the sales tax treatment differ for SaaS, but the definition of what qualifies as SaaS and other software related services differs by state. This is another reason why it is critical to pick the most specific tax category that matches the products your business sells.

Software-related services may also be subject to special rates, such as the 1% Connecticut rate for computer and data processing services, or in Texas, where data processing services are only taxable at 80% of the base.

Automated Tax systems provide a significant number of software and software services tax categories where the underlying taxability is maintained across all jurisdictions and helps your business ensure the proper calculation of rates and taxability.


Given the many variables and complexities around sales tax product and services categorizations, the solution is probably not DIY. When set up properly using a comprehensive software, you can take all of your compliance issues and turn them into an automated process that seamlessly and effortlessly calculates the right tax, at the right rate, for every transaction.

This article originally appeared on the Quickbooks Resource Center and was syndicated by


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