ESTABLISHING YOUR SMALL BUSINESS
What do we need in order to establish the right small business?
• Vision : Number one, we need a vision. A vision of what we intend to do and who we intend to sell it to. A vision has to be YOURS. You can’t live someone else’s dream. You need your vision to wake you and move you each day. It is your clear vision that will keep you going when times get rough, when business gets slow and others become doubtful
• Money : You will need money. Hopefully, your OWN money. If you have none, then you need to carefully reconsider your timing to start your business. Someone else’s money costs you. Someone else’s money creates not only debt, but an unintentional partnership.
• Time : You will need time. Time during the day (and many nights) to devote to you business, develop your vision and see that things get done. Very few things that are worthwhile happen overnight. Small businesses DEMAND lots of YOUR time.
• Support : Your family, friends and others who support you and your vision are crucial to effectively running and building a successful small business. I can not emphasize this enough. Discuss these things with those around you BEFORE you step out. It will save a lot of heartache and hurt feelings later when your business demands your attention.
• Supply/Demand : You must meet an un-met need. I can not stress this enough. There MUST BE consumers of your product or service that are currently having un-met needs in order for your business to thrive. This is a key to establishing a successful business.
• Partnership agreement : Did I just say that out loud?? You will, if you have partners, need a partnership agreement. Go to my website www.LaniaCPA.com . It will avoid problems down the road. While everyone is happy, you do what I carefully outline on my website. It will, I guarantee, make a difference in your life. (yes, your life!) I can tell you horror stories all night about this issue.
• Payroll system : Probably the #1 cause of failure in an otherwise successful small business is the abuse of payroll, payroll taxes, sales tax and other compliance issues. Beware of the traps suggested by friends. Pay your employees, withhold the proper taxes, make the deposit and sleep well at night. If you were charged five thousand dollars for this seminar, this one point would make it worth your investment.
ITEMS TO CONSIDER AND DISCUSS
Where do you get your VISION?
Who or what inspires you to venture out and start a small business?
Is it simply because you are tired of working for others?
Is it your desire to control your own life and schedule?
Was it something that YOU needed and previously wasn’t available “out there”?
Where do you get the capital to start your business?
From your personal savings? Invest in yourself.
From your IRA or 401k?
From your parents or your spouse?
From the bank? (your new partner)
From someone who wants to fund your vision with you as an investor?
From someone who wants to partner with you because they see something in you?
How much capital (money) will you need?
Probably enough to get you by until the business generates profits
You will need, at a minimum:
• Rent/lease payments on your business address
• Start-up funds for utility deposits, furniture, fixtures, equipment, supplies
• Investment in good professionals. i.e. attorney, banker, CPA, insurance agent
• Payroll for yourself for at least six months
• Let’s not forget a decent vehicle? An appropriate wardrobe?
• An advertising budget, and don’t be pennywise and long term shortsighted
• Household expenses while you’re “unemployed”
• Occupational licenses, chamber dues, trade association member fees
If you borrow the money, then you will need to service the debt too
If you have partners, you will need to meet their financial demands also
Hours in the day?
How much time your business will demand from you will depend on which business you start, your existing experience in that field, who you will get to help you, and how soon you need to generate a profit. If you are starting your business because you suddenly find yourself unemployed, then you will probably need to spend in excess of one and a half times the amount of time you spend on your previous job. If, however, this is a “side business” and you have all the time in the world to build it up, then you can set your own hours based on your VISION.
Supply and Demand
Obviously, the best business to create would be one that the community needs. Envision a product or service that is both currently unavailable and highly needed. There are people walking around wishing that your product or service was somehow available to them. They have an un-met need and would pay anyone to deliver it. That is the business that YOU want to create.
Having said that, and realizing that most consumer needs are being met by someone else right now, what can you offer that will separate you from those products and services offered now by others? You need to make that decision for yourself. How will you and your business meet needs that are currently underserved?
Best way that I know of, and I’ve been doing this for a long time, is to sit down with whomever you’ve chosen to enter this business with. While everyone is happy and excited about your vision and the future of your successful business, you need to stop and do the following with your intended partner.
Each of you, INDIVIDUALLY, separately write down what it is that you EXPECT from this business and each other. What you expect to put into it. What you expect to get out of it. What you expect your partner to put into it. What you expect your partner to get out of it.
Do you expect to work 80 hours a week and your partner thinks that this is a part-time venture? Do you expect to delay a salary until the business is profitable, but your partner expects a full salary from day 1? Do you expect your spouse to “help out” in the business, but your partner’s spouse is unavailable to do the same? Or, worse yet, your new partner doesn’t particularly like your spouse and doesn’t want him or her around? Work out these things today, before you open the doors.
Now you’ve both separately listed your expected contributions and demands on this new business. Now, you both (or, all three…etc) sit down and share what you’ve written. Compare notes. Compare expectations. Compare what each is willing to put in and expects to get out of the partnership. Hash out differences now.
Now my friend, you can visit an attorney to get the partnership agreement drafted. Making sure that it’s legal and it’s enforceable. This will substantially cut down on the attorney’s time and YOUR bill for his services.
The government has no problem shutting your business down. The government has no problem taking money owed to them from YOUR bank account. So, you will need to comply with all the laws governing your business. All of the time.
This means that you can’t pay someone “under the table”
This means that you will have to deposit all business income.
This means that the money that you withhold from your employee’s paycheck HAS TO make it to the bank and deposited for federal income taxes withheld. Not doing so is considered stealing, and the government takes this personally.
This means that sales tax charged to your customers, and collected by you FOR the State of Florida, actually is paid to the State. Every single penny. All of the time.
This means that business expenses are actually for business purposes. (ask your tax professional, they know all the allowed deductions) That personal expenses are clearly marked and charged to your personal account. Your tax professional will gladly help you understand the difference. He/she is the there to guide you.
This means that EVERYONE who is an employee is classified as an employee. Independent contractors should be… well, independent and NOT controlled by you or your business. This too is an area and something where your tax professional will gladly assist you.
Doing things the right way, and planning correctly, will almost ensure that your new business gets started the right way and is headed in the right direction. It is, in the long run, better to do things the right way than what seems like the easy way.
Joseph S Lania CPA
CPA BROWARD CPA COOPER CITY CPA PEMBROKE PINES CPA BROWARD COUNTY CPA QUICKBOOKS CPA ESTATES PARTNERSHIP TRUST CONDO SMALL BUSINESS CPA