What to Start Your Own Business?
First, do your Homework.
Enthusiastic entrepreneurs are often so excited to launch their new venture they forget some of the important preliminary work that will up their odds of success.
The ABC’s of An Entrepreneur’s Homework
A- Assess Your Competition
Accept the fact that you will have fierce competition and that it is good. Come to appreciate your competitors since they will help you grow to be a stronger business. No company worth owning is in a non-competitive field.
Study Competitors In Your Industry and Develop a Competitive Edge
• What are their strengths?
• How can you capitalize on their weaknesses
• What customer groups are they ignoring that you can sell to?
• Are there variations of their products or services you can develop that will be more attractive to buyers
B – Business Structure Entity Decision
What type of organization, for legal and tax purposes, will you set up for your new venture? Should you operate as a sole proprietorship DBA Doing Business as, corporation or LLC Limited Liability Company. Ask yourself the following questions and hire a professional attorney and accountant tax adviser to assist you in this crucial first step.
Determination of the Right Business Structure for your Startup
• Are you going to have employees? How many? Entry level or Management?
• What types of “risks” will your firm be exposed to? Product Liability? Bodily Injury?
• How are you going to protect yourself personally and your family from lawsuits?
• Any partners or owners non-US Citizens?
• How are you financing your business with commercial loans, VC Venture Capital, SBA business loans or other alternative lenders like Kabbage?
• How will you minimize the tax burden on the business owners?
• Do you want to sell your business, or take it public, in the future?
• How will the business function if something should happen to you or another owner?
• Do you want to keep the business within your family as an inheritance of your estate?
C- Cash Flow and Contingency
These cash flow essentials will keep your new business continuing to run during economic cycles. No business can keep its doors open without cash, especially fast growing startups. Inadequate cash is amongst the top reasons businesses fail. Save your company the same fate by pre-planning for adequate flow.
Cash Flow Musts for New Small Business
- Use Cash Basis accounting which gives you a clear view of the revenues you are spending and receiving in real time.
- Bill first for all orders and ask your customers for either prepayment or payment upon delivery. Only accept credit cards for payments to avoid delay in time for paper checks to clear – not to mention the possibility of bounced checks written on insufficient funds. Entice buyers to pay upfront with discounts and bonuses.
- Budget cash flow weekly, study your cash flow statement and react proactively. Don’t wait until you get into a cash crunch to take action. The time for activities is weeks before you need the money. Your statement should cover at least 60 days. Include all your inflow and outflow of monies projections. Carefully review and adjust any calculations to get your firm’s true cash position.
- Plan for contingencies have a backup plan, for all types of issues that could shut your doors such as negative cash flow, lawsuits, death or illness of owners, trademark infringement and others.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.