Get Started

Getting Started

 

You may have been working on this business for years and just want to professionalize it, gotten laid off and want to control your own destiny, or have other reasons for starting a business now. Whatever the reasons congratulations on taking this step. It is going to be difficult, but with the knowledge and resources you can avoid becoming the wrong kind of statistic. I will explain what this has to do with Business Finance shortly.

 

Plan – Business Finance

 

I encourage everyone to write a business plan before starting, even if it is only a few pages long. Getting your concept on paper is a very helpful way of spotting key things. You might surprise yourself with how much you know about your industry or business skills you have picked up ove the years. This plan should be given to at least of few people you know and respect (or at least respect) for comments and feedback. It is better to get negative feedback before you start your business rather than let the market give you business crushing response.

 

As an example an entrepreneur was convinced that the Tucson marketplace was primed to embrace a yogurt and fruit treat that was popular in Veracruz, Mexico. I strongly recommend that he test market this product at sprots and civic events to ensure this was a marketable commodity. This was also a good way of bootstrapping the business by generating fans and revenue in advance of opening a storefront. There was an excellent precendent in Tucson with the succesful Eegees franchise which started by selling their frozen slush at the University of Arizona in carts before opening the first of many storefronts. Developing a business plan and test marketing in likely places would have saved the business owner a lot of money as the business failed in short order.

 

A business plan also needs to have solid financial projections to be most useful. It also is a requirement of any lender and should be a must for every equity investor interested in the business. Thinking through the elements of a profit and loss projection is critical to understanding the business you will be in. For instance, what are the elements of your revenues, how will they increase, will they plateau/ The cost side is even more important. What are the cost of sales, what are the other costs, what is the breakeven and how do you get paid? I had a client come to me recently with a lengthy business plan showing that a lot of thought and work had been put into the new venture already. There were three partners and they were planning to borrow $175,000 from lenders and investors to launch the business. There was no provision for any of them the be paid, which is a red flag for anyone expecting to take them seriously.

 

Regulatory – Business Finance

 

Funds will have to be set aside for business licenses (where applicable), and other fees. Many business owners like the tax advantages of a Limited Liability Company(LLC) or S-Corp or C-Corp. More on those topics in another section. As the business progresses ou will to prepay taxes quarterly or risk being penalized. There will have to be systems to collect and pay sales taxes. Some owners locate in a county in order to legitimately avoid some local taxes. Some owners form their businesses in Nevada, Delaware, or Wyoming to reduce their annual taxes. Wyoming is your best bet. Some affiliate marketers in states like California and Colorado are establishing or moving their legal entity to Wyoming to avoid the onerous taxes levied by those states on affiliate income. More information on this in a seperate section.

 

Professionalize – Business Finance

 

Depending on your business one should make every effort to professionalize their image. This might mean having a logo or web page professionally designed, vehicles outfitted with painted or magnetic signs, or professional looking invoices or stationary. Of course behaving professionally is a given. Understanding the lifetime value of a customer is critical, if you are not familiar with this concept it would be well worth you while to read the work of Jay Abraham. The best way to ensure your business looks and is professional is to model the key elements of the business on similar operations that are already succesful. of course you want to be careful to do this ethically, building for the long term.

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