Thinking of Starting a New Business? A Few Basics to Consider
Starting your own business is in no doubt an essential part of living your American Dream; however the way the business starts may have severe affect and determination on its success.
A Japanese proverb states “vision without action is a daydream. Action without vision is a nightmare.” This proverb is indeed true to those entrepreneurs who are geared to transform their vision to reality.
Daydreaming is an excellent time to think, research, and plan your business. While you are at this stage, there are many factors that you, as a visionary need to consider in preparation of your new business venture. In this article, I will be offering certain helpful points to assist you to generate more thoughts, ask yourself questions, and inspect grey areas beforehand.
The failure in most new business ventures is the failure to plan ahead of time. Researching and planning is crucial to the success of your business. While researching, you may want to research and consider the following few factors[i]:
1- Should I incorporate?
2- What type of corporation is good for me?
3- Do I know anything about the business?
4- Business Plan
5- Taxes
6- Do I have enough money to start my business?
7- Am I willing to spend the time?
8- Management
1- Should I incorporate?
Incorporating is always a good idea. The last thing you want to do is to expose your life saving and your family’s saving to liability. Incorporating your business minimizes your financial liabilities and legal exposure.
2- What is the right business structure for me?
In Georgia, types of corporations are: Limited Liability Company, Limited Liability Partnership, Professional Corporation and incorporation. Researching and selecting the right entity is very important as the type of entity determines your future liabilities. At this stage of the planning, consulting with a business lawyer to discuss which entity is right for you is invaluable.
3- Do I know anything about the business?
For many obvious reasons, you want to make sure that you are knowledgeable about the business you are starting. To name few, if you do not know the business, you are, more likely than not, destine to fail; the risk is enormous especially if the fund to open the business is your family’s saving; and if you do not show your knowledge in the business not only the market will break you but also you may lose any credibility you are trying to represent to the bank or a private investor.
4- Business Plan
Now you selected your entity and focused on what direction you want to move forward, it is time to put your idea on paper. No matter how good the idea is, if a banker cannot understand it, the idea maybe useless. The business plan does not only help you to in obtain funds for your business but it also shows how organized you are and in what direction you are taking your company. Your business plan is the road map of your business. The more time you spend preparing it, the clearer your steps and projections are. You need to show that you are organized, you have a plan and you are following your plan. You also want to stress on the fact that if you follow your plan, considering any and all unanticipated contingencies, your plan will still survive and achieve the projected goals and ultimately be profitable.
5- Taxes
The type of corporation you select, determine how you are taxed. It does not hurt at this time to consult with a Certified Public Accountant to discuss the tax consequences for each possible choice of corporation.
6- Do I have enough money to start my business?
If you start your new business in the negative, you will always be in the negative. In other words, you need to have the big portion of the investment readily available from your own money to invest. After all, when you go to a bank for a loan, the bank would want to see that you put enough of your own money at risk. The philosophy is, if you do not believe strong enough in your business, why should they! You need to have your own money at risk. Most banks are eager to lend money, but they want to see serious business plan, dedication, credibility and having what it takes to succeed.
7- Are you willing to put the time?
Owning a business is time consuming. Long hours, unstructured schedule, at times, financially and emotionally draining. However, if it is done right, your freedom is priceless and above all it is rewarding.
8- Management
You do not make money only by making it; you make money by saving it as well. As a business owner, your question should always be how this expenditure is going to improve my business, how much money is this expenditure going to make me money? Of course, you have to spend money to make money, but you have to be wise on how and when you spend your money. In short, you need to learn how to be a good manager to manage all of the resources efficiently.
The key to your success as a small business owner can be summarized in the following few words; planning, planning, and planning. Failure to properly and adequately plan, may turn your daydreams into a long and expensive nightmare.
[i] By no means are these factors exclusive in nature. There are many different factors that are as important to discuss but beyond the scope of this article.