Chicago has it all: A Great Lake, sports teams, fantastic food, arts, and architectural gems. Will your business become the next iconic Chicago story? Whatever your idea is, if you don’t take it from daydream to reality, the world may never know – but this overview on how to start a business in Chicago can help.
There are key steps that every Chicago-based small business must take before launching. These include analyzing the viability and potential for your product or service, identifying your target market, creating a business plan and financial projections, choosing a business structure and registering it, securing necessary permits, licenses, and insurance, developing a launch plan, and, if needed, securing a small business loan.
What Chicago resources are available to you?
While just about everyone has a business idea at some point, the difference between those who see it through and those who give up is often the support you get along the way.
The first rule of successful small business ownership is to ask for help. Throughout the Chicago area, free expert resources are available to you at every stage in your journey, as well as to connect you to other valuable services.
Here are several key resources:
- Neighborhood Business Development Centers: Created by the Chicago Department of Business Affairs and Consumer Protection, there are about 70 neighborhood centers staffed with experts who provide guidance on business-development steps and resources.
- Small Business Development Centers (SBDCs): These are organized by the U.S. Small Business Administration (SBA). SBDCs provide one-on-one counseling and advisement at every stage, from thinking about an idea to bringing it to fruition. Use the SBDC finder to locate the branch closest to you.
- SCORE: SCORE is another small business advisory organization with dozens of volunteers nationwide, including the Chicago area. They have expertise in a wide range of industries, and their business-mentoring program is available at no cost. They also host online webinars and in-person seminars to help you get the information and resources you need.
It’s important to know that you aren’t limited to any one of these. In fact, it’s a great idea to contact all of them, as they can each provide insight that will save you time and money, build your fundamentals, and connect you with other resources, such as low-cost legal guidance and small business lenders.
Six key steps on how to start a business in Chicago
Now that you know where to get help, use this guide to prepare yourself for the steps needed to launch.
Step 1: Analyze the viability of your product or service
Although this important first step may sound complicated, it’s simple, but essential – you want to ensure that before you invest your time and money into a business, there is truly a market for your product or service.
- If your business will have an in-person location, research your intended location, the customer demographics, and existing competition. Also, know what sets your business apart from others in the area.
For example, if you want to open a pizzeria but the area already has a dozen, you may decide to locate elsewhere. However, if yours is a different style, higher quality, or would be the first all-vegan pizzeria, then it’s worth exploring your preferred location further. - If your business is based in the Chicago area but will be mostly or entirely online, then spend time researching online competitors, clarifying your target market, and nailing your products or services.
It’s also a good idea to research whether your products or services can be priced competitively and profitably.
Step 2: Draft a business plan and financial projections
A business plan doesn’t have to be long and complicated. Instead, you should aim for a brief plan (3-5 pages). In it, you’ll cover:
- Your mission (what you do).
- Your vision (why you do it).
- What you offer and how it’s different, better, or brand-new to the market.
- Who your target customer is and how you’ll reach them.
- How your business will ultimately make a profit.
Along with your plan, you’ll need three-year financial projections. Since your business is new, you won’t have actual revenue and expense information, but you should research your potential expenses and income.
This step is important for you because it helps you determine whether or not you can have a viable and profitable business. It also demonstrates to potential lenders that you’ve done your homework and understand your business and the competitive environment.
SBDC, SCORE, and NBDC representatives can assist during this step, and you’ll definitely benefit from having them review it when you finish.
Step 3: Choose a business structure and get it registered
Common types of small business structures are sole proprietorships, Limited Liability Companies (LLCs), S-Corps, and C-Corps. Your local small business resources can guide you in narrowing down the type of structure that may work best at this point in your business and can connect you with free or low-cost legal and accounting consultants.
While you can do this on your own, it’s always a good idea to speak with an attorney and an accountant before taking this step. This is because there are legal implications once you register a business, like tax impacts and obligations. It’s essential that you understand what you’re signing up for before you commit.
Also, while the types of entities are consistent across the country from a taxation standpoint, nuances from state to state may impact how you choose your structure.
Once you’ve selected your business structure, you need to register it. Depending on the entity type, this will be something you do in Cook County (for sole proprietors, general partnerships, or professional services corporations) or with the Illinois Secretary of State (to check business names and register for the other entity types).
Step 4: Secure necessary permits, licenses, tax registrations, and insurance
These steps may be the least exciting, but they’re also among the most important when you’re preparing to launch a business. The good news is that most can be completed quickly online or by phone.
- Federal Employee Identification Number (EIN) from the IRS: If you plan on having employees, you must have this. However, even if your business operates as a sole proprietorship with no employees, it’s still a good idea to protect your personal identification, such as your Social Security number, when you register with vendors, etc. There’s no cost to do this, and it typically only takes a few minutes.
- Sales-tax certificate for Chicago, Cook County, or the State of Illinois, if needed: Before you can legally collect sales tax, your business must be registered and receive a tax certificate.
- Licenses and permits: Every business in Chicago must get a license to operate before launching. In addition, if relevant, you must get any necessary licenses and permits for particular businesses, such as food-based businesses or salons.
- Labor-related compliance: When you hire employees, there are numerous legal, financial, insurance, and tax-related issues that you must become familiar with to ensure that your business complies. Here, contacting low-cost legal services will be invaluable and, once again, your local SBDC, SCORE, and NBDC can provide guidance and direct you to resources. If you plan on hiring staff, don’t skip these steps.
- Open a business bank account: Opening a separate business bank account is a critical step that many new businesses delay until it’s too late – and your business and personal finances are mixed up and messy. Many banks provide free or very low-cost checking accounts for new small businesses. To make it easier for you, start with your current bank since you already have a relationship there.
- Necessary business insurance: The types you’ll need vary from business to business but may include general liability, property, and employee-related insurance coverages. Try several different agencies (online or locally) and ask other small business owners for referrals – rates can vary significantly, and some may be better for new small businesses.
Each of these is very important – they form the basis of a real business that follows local, state, and federal laws and regulations. Start your business off right by taking care of these before your operations begin.
Step 5: Develop a launch plan
When you’ve made it to this step, the fun begins! Creating a launch plan can help your business get off the ground with as few hiccups – and as much excitement – as possible. Think of it as a checklist of the last steps you need to take to make your plan a reality.
Think of everything you’ll need to do to launch. Depending on your business, you may need to:
- Find a location and make plans for any equipment, furnishings, etc. that you’ll need.
- Secure a domain name and create a website, a Google Business Profile (for local businesses), and any related social media sites.
- Plan for all the inventory that you may need to order. Contact vendors to create relationships and understand what they need from you so that you can order when you’re ready.
- Hire employees or get in touch with a staffing agency. Get input from SCORE, SBDCs, and NBDCs to develop a basic employee manual and guidelines, too.
- Draft your marketing and publicity plans (while there are many areas in which software and AI programs can help, this is one that you can easily implement from the start).
- Subscribe to a bookkeeping software program and get it set up (an accountant or experienced bookkeeper can be helpful).
- Meet with potential lenders to secure the financing you need.
As you make your way through all the items on your checklist, you get closer and closer to launch day!
Step 6: Get a small business loan
Many entrepreneurs use savings and credit cards to launch their business, and while that can work at first, it also means that your personal finances can be quickly depleted.
You may assume that you simply can’t get financing for your small business – you’re too new, in an industry banks typically don’t finance, or you don’t think you have a strong enough credit history.
Fortunately, there are great options, even for new small businesses, including loans from Pursuit, a trusted small business lender that offers loans for Chicago-area small businesses that need financing.
Pursuit makes small business dreams a reality in Chicago and beyond
If you’re in Chicago, or anywhere else in Illinois, talk to Pursuit. Every day, we help new and existing small businesses get the financing needed to launch, grow, and thrive.
With loans from $10,000 to $500,000 in Illinois, including SBA 7(a) loans and our own SmartLoan, we have financing for working capital, equipment, inventory, and more.
And we offer business advisory services and insightful resources to help you succeed.
Take a look at all we have to offer, read our Success Stories, and apply today!
