Starting a cryptocurrency business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful cryptocurrency business.
Importantly, a critical step in starting a cryptocurrency business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Cryptocurrency Business:
- Choose the Name for Your Cryptocurrency Business
- Develop Your Cryptocurrency Business Plan
- Choose the Legal Structure for Your Cryptocurrency Business
- Secure Startup Funding for Your Cryptocurrency Business (If Needed)
- Secure a Location for Your Business
- Register Your Cryptocurrency Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Cryptocurrency Business
- Buy or Lease the Right Cryptocurrency Business Equipment
- Develop Your Cryptocurrency Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Cryptocurrency Business
- Open for Business
1. Choose the Name for Your Cryptocurrency Business
The first step to starting a cryptocurrency business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your cryptocurrency business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your cryptocurrency business.
2. Develop Your Cryptocurrency Business Plan
One of the most important steps in starting a crypto business is to develop your business plan. The process of creating your plan ensures that you fully understand your cryptocurrency market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your cryptocurrency business.
- Company Overview – this section tells the reader about the history of your cryptocurrency business and what type of cryptocurrency business you operate. For example, are you a crypto exchange, wallet, mining, or a merchant processor cryptocurrency business?
- Industry Analysis – here you will document key information about the cryptocurrency industry. Conduct market research and document how big the crypto industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your cryptocurrency business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your cryptocurrency business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Cryptocurrency Business
Next you need to choose a legal structure for your new digital currency business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the cryptocurrency business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a cryptocurrency business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a cryptocurrency business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a cryptocurrency business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your cryptocurrency business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Cryptocurrency Business (If Needed)
In developing your cryptocurrency business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a cryptocurrency business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a cryptocurrency business that they believe has high potential for growth.
5. Secure a Location for Your Business
If you are looking for a location for your cryptocurrency business, there are a few things you need to consider. You will need a space that is large enough to accommodate your operations, and you will also need to find a location that is conducive to business growth. Additionally, you will need to make sure that the area is safe and secure, and that you have the necessary infrastructure in place to support your business.
6. Register Your Cryptocurrency Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your cryptocurrency business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your cryptocurrency business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
In order to start a cryptocurrency business, you will need to obtain a Money Services Business (MSB) license from the Financial Crimes Enforcement Network (FinCEN). You will also need to register with the Securities and Exchange Commission (SEC) if your business involves the sale of securities. Finally, you may need to register with other state or federal agencies, depending on the specific nature of your business. For more information, consult an attorney or accountant familiar with the cryptocurrency trading platform.
10. Get Business Insurance for Your Cryptocurrency Business
The type of insurance you need to operate a cryptocurrency business will depend on the scope of the operation.
Some business insurance policies you should consider for your cryptocurrency business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Cryptocurrency Business Equipment
The equipment you will need to run your crypto exchange platform depends on the type of business you plan to operate. If you are running a mining business, you will need miners and mining software. If you are running a trading business, you will need a trading platform and a secure wallet. If you are running a consulting business, you may need to purchase a subscription to a blockchain explorer. In addition, you will need a computer and an internet connection.
12. Develop Your Cryptocurrency Business Marketing Materials
Marketing materials will be required to attract and retain customers to your cryptocurrency business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your cryptocurrency business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional cryptocurrency business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your cryptocurrency business.
13. Purchase and Setup the Software Needed to Run Your Cryptocurrency Business
You need to have blockchain technology to operate a cryptocurrency business. Blockchain is a digital ledger that records all the transactions made in a network. This blockchain is distributed across nodes (computers) in the network, so each node has a copy of the entire blockchain. Using blockchain makes it difficult for anyone to tamper with the data since they would need to change it on all the nodes in the network.
You’ll also need a digital wallet to store cryptocurrencies, an exchange platform to buy and sell currencies, and mining software to mine for new currency units.
14. Open for Business
You are now ready to open your cryptocurrency business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Cryptocurrency Business FAQs
It can be hard to start a cryptocurrency business because there are many regulatory hurdles that need to be cleared. However, there are many resources available to help you get started, and the potential rewards make it worth the effort.
If you're looking to start a cryptocurrency business, it's important that you have a clear crypto business idea. You'll also need to have some experience in the field, as well as some capital to invest in your business. Finally, make sure to do some research and stay up-to-date on the latest industry trends.
Cryptocurrency business can be difficult to start, but with the right planning and execution, you can be successful.
There is no definitive answer as to what type of cryptocurrency business is most profitable. Profitability of any cryptocurrency business depends on a variety of factors, including the specific niche you target, the level of competition in that niche, and overall market conditions. However, some crypto businesses may be more profitable than others, such as those that provide cryptocurrency mining services or exchanges.
In general, businesses that provide added value and unique services are more likely to succeed. For example, exchanges that offer a wide variety of cryptocurrencies and features or mining services with lower prices and faster turnaround times are likely to be more profitable than those that do not.
The cost of starting a digital currency business can vary depending on the size and scope of the business. Generally, it will cost at least several thousand dollars to get started. Costs include setting up a website, buying or renting server space, and purchasing the necessary software and hardware.
The ongoing expenses for a cryptocurrency business are typically:
- salary for employees
- rent or mortgage for business location
- cost of electricity to run the computers
- internet service
- hardware (computers, mining rigs, etc.)
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrency businesses make money by creating and selling digital money, by providing a cryptocurrency exchange where users can buy and sell cryptocurrencies, or by providing goods or services in exchange for cryptocurrencies. Some businesses also earn money by mining new cryptocurrencies or selling tokens in an initial coin offering.
Additionally, cryptocurrency businesses can generate revenue through fees charged for their services like crypto exchanges and crypto payments. For example, businesses may charge a transaction fee when users buy or sell cryptocurrencies on their exchange. Businesses may also charge a listing fee to list new cryptocurrencies on their exchange. Finally, cryptocurrency businesses can earn interest on the cryptocurrencies they hold in reserve.
Yes, owning a cryptocurrency business can be profitable for a variety of reasons. First, the popularity of cryptocurrency is on the rise, so there is a lot of potential for growth in this industry. Second, the barrier to entry is relatively low, which means it's possible to start a cryptocurrency business with relatively little capital. Finally, the potential for profits is high, as cryptocurrency businesses can generate a lot of revenue through transaction fees.
In the race to compete on innovation, cryptocurrency-related companies have come up with new crypto business ideas and new crypto coins that lack serious security or usability. This means a large number of the businesses in this industry are set up to fail from the start.
Here are three main reasons why cryptocurrency businesses fail:
- Lack of Security
Cryptocurrencies are digital and are therefore easy targets for hackers. A lack of security protocol can easily lead to coins being stolen, which can lead to bankruptcy.
- Lack of Usability
Cryptocurrencies are often difficult to use, which means the average person is not likely to use them. This leads to a lack of demand for the coins, which in turn leads to a decrease in their value.
- Poor Business Plan
Many cryptocurrency businesses do not have a solid business plan, which can lead to them going bankrupt. Without a well developed plan, businesses in this industry are likely to flounder and eventually fail.
These are just a few of the reasons cryptocurrency businesses may fail. By understanding the risks involved, you can be better prepared to start a successful crypto business.