Thinking about starting a small business?Every year thousands of new businesses are started by optimistic individuals with the entrepreneurial spirit. Unfortunately, the failure rate for new ventures is extremely high.
If you're planning to be among those starting a new business this year, follow these steps to increase your chances of being among those that succeed.
Step One- Have a written plan that includes a statement of your business objectives and your strategy for achieving them. Too many businesses are started with a good idea and a very vague notion of how to turn the idea into a successful business. A really neat place to get business plan ideas is Bplans.com You can perform different financial analyses for your business through their "business plan tools" section as well as find real life plans that are similar to your business through the "tools" "business plan wizard"
Your written plan should include such specifics as what your products or services will be, how you will market them, what your geographic market area will be, how you will distribute your product, what the competition is, what your expenses for getting started will be, and a realistic projection for one or more years of income and expenses. Again see the tools section mentioned above.
Step Two- To keep from making avoidable mistakes, check with competent advisors to assist you - a lawyer, banker, accountant, insurance agent, marketing expert, and other professionals that you feel would be important to your business. We can recommend people in those areas
Use professional advisors to give you objective advice and to provide strength in areas where you need it. Engage advisors who can spot problems before they become serious, act as a sounding board for your ideas, and give personal attention to your business in the early years when you need it most.
Step Three- With the assistance of your lawyer and accountant, choose the best form under which your business should operate - sole proprietor, partnership, regular corporation, or S corporation. This is sometimes a moving target, as it may be best and more cost effective to begin as a sole proprietor, and evolve into one of the more sophisticated forms later.
Step Four- Most new businesses will require a source of financing. Your accountant can assist you in deciding whether the financing should come from lenders or additional owners of the business. We have an affiliate that specializes in "alternative financing" when traditional bank financing is unavailable.
Step Five- Location , pretty self explanatory in light of your business's characteristics.
Step Six- Obtain the necessary permits and licenses for your business. In addition, any regulations that your business must meet should be reviewed at the start of your business, not discovered when the business is underway. Really important.
Step Seven- Have your insurance agent determine that you are adequately insured without being over-insured. If you can afford the first $1,000-$2,000 on a casualty loss, don't carry first-dollar coverage.
Step Eight- If you are going to have employees in your business, you'll be responsible for withholding and paying payroll taxes. Apply for the necessary federal and state identification numbers. Workmen's compensation (maybe) and unemployment insurance are also required. Other taxes about which you should get information before you begin include sales taxes, property taxes, excise taxes, and business income tax (in certain instances).
Step Nine- An extremely important step is setting up a record keeping system that will enable you to keep track of how the business is doing. Work with your accountant to design a system suited to the size and nature of your business, aiming for one that will give you information you can understand and use in the management of your business. (See our LEDGERPLUS Tab)
Step Ten- Sketch out a plan for how you intend to manage the business. Decide how much you will do in the business and how much you will turn over to someone else.
Plan to work very, very hard. While people start businesses in the hopes of not being tied down to a job, business owners often find themselves working longer and harder than their employees. If you're looking for a shorter, easier work day, you might not find it in self-employment.
NOTE: The purpose of this article is to provide general information on tax, financial and business matters. It suggests general tax planning ideas that may be appropriate in certain situations. The information and opinions are generalizations and may not apply to all taxpayers.