How to Become a Young Entrepreneur
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Do you want to start a business as a young entrepreneur, but have more enthusiasm than experience? Don’t worry—being excited about a big idea is a great place to start.
Things look different when you’re starting a business under age 18, but that doesn’t mean it can’t be done. Read on for a list of questions to consider before becoming your own boss.
If you don’t have an idea for your business—just the idea that you’d like to start a business—start by thinking through your strengths and interests. If you’ve already got a great idea, this advice still holds. Choosing a first-time business that builds on your skills and interests makes your work enjoyable and keeps you motivated when things get hard.
Think through the time you have available for a business. You’re likely a full-time student, and that’s your No.1 priority. A business model that can run on a flexible schedule and be ramped up as you have more time is ideal.
Your business could be a physical or digital good or service. Digital or virtual services typically have lower startup costs (or the initial costs to get going), while physical goods often require more money and management. For instance, if you manufacture a product—say a cool phone case—you’ll likely pay to create, store, and ship your items.
Next, think about who your ideal customer is. Will you sell to them one-time, or is your product or service something they will repurchase multiple times?
How will you reach your customers? Social media and online platforms like Etsy, Shopify, or SquareSpace make it easier to expose your business to a potentially huge audience at a lower cost to you. Some of these marketing efforts will cost little more than your time; others will have fees, as well as one-time and ongoing costs you’ll want to research before you dive in.
You’ve gotta spend money to make money, or so the saying goes. While there are ways to start a small business with little to no money, you may have an easier time starting with at least some money for things like supplies, small business website design and hosting, or advertising.
So, how will you get money to start your business? Unfortunately, minors under age 18 cannot apply for a Small Business Administration (SBA) loan. You also cannot sign binding contracts on your behalf, so getting other first-time business loans would require a trusted adult to cosign for you. Maxing out credit cards to start a business is never a good idea.
That means the best way to start a business as a young entrepreneur is by bootstrapping it—this means you use your own money and resources to get the business off the ground. It could be money from your savings account, from a part-time job, or even money made from selling items you already own. Set a goal for how much you’ll need for your business and make a plan to save up that much.
Ways to Fund Your Business
- Save up money from allowance, chores, or a part-time job.
- Sell items you own but no longer need (be sure to get permission from your guardians).
- Make money through odd jobs like yard work, car washing, or pet sitting.
- Offer skills for hire, like tutoring services for younger kids in a subject you excel at. Or capitalize on your hobbies and interests, like offering graphic design services, dance lessons, and the like.
- Ask an adult for seed money. Is there an adult in your life who believes in your idea and has the means to loan or give you money to start up your business? Be ready with a plan of how you’ll use the money, and how you play to repay them, if that’s the route you go.
- Search for first-time business owner grants and competitions. You may qualify for special programs aimed at teen entrepreneurs, like business plan competitions that offer money to those who win top place.
- Talk with someone at your local bank or credit union to see if they have any resources specifically for new entrepreneurs.
- Consider crowdfunding platforms, like Kickstarter or GoFundMe, to pitch your idea to a larger audience. Make sure you’re aware of the platform fees before starting a campaign; for instance, Kickstarter takes a 5% fee of the total collected, plus payment processing fees between 3-5%. GoFundMe is free to start, but deducts a transaction fee of 2.9% + $0.30 per donation.
In addition to the money you’ll need just to start the business, there are ongoing costs to keep in mind. For instance, if you’re selling crafty items through an online platform like Etsy, you’ll need to pay a portion of all sales to the platform in order to use it. You’ll also be on the hook for payment processing fees.
Think through all the costs that might come up and make a plan for paying for them. Try our Earning Extra Income coach to get an idea of the costs involved. Don’t forget that you’ll need to file and pay taxes if you make over a certain amount, even as a minor. Be prepared to hire an accountant to help you with filing business taxes for an LLC for the first time. You’ll likely need to pay those taxes each quarter.
It’s a good idea to open a separate business account to keep track of what you make and spend on your business. Visit a local banking institution to set up an account.
Payment Options
The payment options available to teen entrepreneurs depend on a few factors, such as age and parental involvement. Here's a breakdown of some possibilities:
- Cash: This is the simplest option but is best for in-person sales, like at local events or markets.
- Cash Apps: Apps like Venmo are used for digital money transfers between phones. Careful, though: the fine print might require users to be over 18.
- Third-Party Services: If you’re selling online, services like PayPal allow student accounts linked to a guardian’s account. You’ll need an adult to help set this up.
- In-person Debit/Credit Card Readers: Try a company like Square for mobile point-of-sale systems that let you take debit or credit cards with your smartphone. You’ll likely need an adult to set up a merchant account. Make sure you understand the fees with any debit or credit card payment system. For instance, Square’s standard processing fee is 2.6% + $0.10, and more for cards that are manually entered and not swiped, tapped, or inserted into the reader.
Make sure you’re aware of your state’s legal requirements to start a business. Most states don’t expressly prohibit kids under age 18 from owning a business, but some states do have restrictions on minors forming limited liability corporations or LLCs, a popular business structure for starting a small business. These states include Colorado, Illinois, Minnesota, and Oregon.
Even if you don’t reside in one of those states, you’ll likely need an adult on board to sign legally binding contracts. So it’s important to have someone who can help you deal with any legal and financial issues that come up.
Maybe you’re hoping to avoid a business license altogether. It’s best to do things legally to avoid issues; check with your local government entities to make sure you have the right business licenses and structures in place.
A few more considerations when starting a business:
- Write a business plan: Think through your idea from start to finish, making sure to cover all of the categories mentioned in this article. Include ideas for how you’ll manage the business as it grows.
- Find a mentor: Whether it’s a small business expert at your local banking institution, a business teacher at a nearby high school, or someone from a local youth group, it’s helpful to have a responsible adult you can bounce ideas off and turn to for help working through issues.
- Keep a growth mindset: You won’t do everything perfectly from the beginning, and will likely make potentially expensive mistakes. It’s okay. What matters is that you learn from your mistakes and continue to grow.
Being a young successful entrepreneur takes more than a viral video and a lucky break. But there’s no reason you can’t get a business off the ground if you’re willing to put in the work, be open to ideas from those around you, and make smart decisions.
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