Months 1-2: Set up the foundation
Choose a structure, register, get an EIN, open a business bank account, line up insurance and licenses, and set up bookkeeping before the first sale.
Do the dull work first, because fixing it later costs more.
- Pick a legal structure with an accountant or attorney. Compare in what is an LLC and what a business entity is.
- Register your name, get your EIN and check state and local licenses.
- Open a business bank account and keep personal spending out.
- Buy basic insurance. See types of business insurance.
- Set up bookkeeping. Startup bookkeeping shows how.
Write a one-page plan: who you serve, what you sell, what you charge, how you will find customers and how much cash you need to last six months.
Months 3-4: Win your first customers
Focus on direct outreach, a simple offer and fast delivery. Learn from every early customer and fix problems immediately.
Early revenue matters less than early learning. Talk to as many potential customers as you can. Offer a clear, simple package at a fair price. Deliver quickly and ask for feedback and referrals.
Track every lead: where it came from, what they asked, whether they bought and why or why not. By month four, patterns will show which message and channel work. Read tips for creating a customer base and ways to find new customers for ideas.
Resist the urge to spend heavily on branding, a fancy office or advertising before you have proof that people will pay. A professional basic website, accurate online listings and a good phone presence are enough.
Months 5-6: Price for profit and watch cash
Calculate your true cost per sale, adjust prices, and build a 13-week cash forecast. Profit on paper does not pay bills; cash does.
By now you have real cost data. Compute what each sale costs you in materials, labor, fees and overhead, then set prices to leave a margin. Raise prices for new customers if margins are thin.
Build a rolling cash forecast listing expected receipts and payments each week. Watch your receivables. Invoice promptly, collect deposits where normal and follow up on late payers. See cash flow analysis and cash flow vs. profit.
Set aside money for taxes in a separate savings account each time you are paid. Ask your accountant how much and when estimated payments are due.
Months 7-9: Systemize and consider your first hires
Write down repeatable processes, track key numbers, and hire only when the work is steady and the cost is covered by revenue or time saved.
If every task lives in your head, you cannot grow or take a day off. Write short checklists for the jobs you repeat: quoting, onboarding a customer, ordering supplies, invoicing.
Before hiring, compare the true cost, including payroll taxes, tools and training, with what the person will produce. Consider part-time help, contractors or an outsourced bookkeeper first. Learn the classification rules to avoid trouble; see the 1099 lifestyle. When you do hire, treat people well from day one. Our guide to treating employees well will help you keep them.
Review your numbers monthly: sales, gross margin, expenses, cash and receivables.
Months 10-12: Review, plan taxes and plan growth
Look back at what worked, prepare for tax season, and decide where to invest next year. Growth decisions should rest on proven numbers.
At month ten, sit down with your books and your accountant.
- Which products, services and customers made the most profit?
- Which marketing produced customers at a reasonable cost?
- Where did cash get tight, and why?
- What deductions and estimated payments should you plan for? See tax write-offs for the self-employed.
Then set goals for year two. Cut what did not work, double down on what did, and decide what you need to invest in, whether equipment, inventory, people or marketing. Keep your records tidy; funders and landlords will ask for them.
When outside funding fits in your first year
Most funders want at least six months of operating history. Before that, bootstrapping, personal savings and startup-specific options are more realistic.
Many first-year owners wonder when to borrow. A useful rule: borrow for a defined investment with a clear return, not to cover recurring losses.
In this illustrative example, a bakery that has operated for eight months spends $15,000 on a second oven and expects $1,200 more monthly profit. That pays back in about 12 to 13 months before financing costs. That is a case where funding could make sense.
ROI Funder considers businesses with 6+ months in operation, $20,000+ in monthly revenue and 500+ FICO. We do not place startup loans for businesses under 6 months. If you are earlier than that, read how to get startup funding and bootstrapping. Once you qualify, compare working capital and a line of credit. Applying takes a few minutes and uses a soft credit pull.
Frequently asked questions
What should I do first when starting a business?
Choose a legal structure, register, get an EIN, open a business bank account and set up bookkeeping and insurance before your first sale.
How much cash do I need for the first year?
It depends on your costs and how fast sales grow. Many advisors suggest enough to cover several months of fixed expenses.
When can a new business qualify for funding?
Most funders want some operating history. ROI Funder considers businesses with 6+ months in operation, $20,000+ monthly revenue and 500+ FICO.
What is the most common reason new businesses struggle?
Running short of cash is among the most common problems, often from underpricing, slow collections or spending ahead of sales.