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Checklist for Starting a New Business
- assess your strengths and weaknesses
- establish what problems you will like to solve
- assess your financial resources
- identify the financial risks
- determine the start-up costs
- do market research
- identify your customers
- identify your competitors
- develop a marketing plan
- select a lawyer
- choose a form of organization (proprietorship, partnership, or corporation, for example)
- create your business (register your name, incorporate the business, etc.)
- select an accountant
- prepare a business plan
- set up a business checking account
- get business cards
- obtain a business license or permit (if applicable)
- get a federal and state employer identification number (if applicable)
I have come across entrepreneurs who thought because they had the genius to come up with an idea they have the knowledge to run a business. After setting shop, they quickly find out that running a business and pursuing an idea are two different concepts. However, these concepts do not run in isolation of each other. A good concept can become a good business if entrepreneurs learn to keep an eye on the business. Keeping an eye on business can be broken into two success criteria’s namely: hard and soft measurements. Soft data are harder to define because they include factors that are difficult to quantify such as customer satisfaction, employee satisfaction, etc. These indicators can be derived through surveys and open honest discussions with employees and clients. Hard data are easier to quantify and include measurements like cost and revenue. There are three main areas of hard data a business owner should look at to determine their financial health namely:
1) Cost of operating the business: you should know total cost of running your business some of the questions to ask in this area are
- Am I spending too much on supplies?
- Can profit margin be increased by buying in bulk or paying on time? If your business is not taking advantage of opportunities presented to it then a plan should be devised to close the opportunity gap
- Are there any areas where I can cut expenses without compromising the integrity of the business?
2) Revenue: Some of the questions to ask are:
- Am I taking advantage of all revenue streams available to me?
- How can I integrate fresh ideas to increase revenue?
- Profit: In addition to revenue, profit should be considered. Profit is the difference between revenue and expenses. As a business owner it is important that all business lines are profitable
3) Cash flow: You also should keep a close eye on cash flow and make cash projections for adequate planning
There is no such thing as a stagnant business, a business that is not growing is a business that is dying. The extent which you choose to monitor these metrics corresponds to how big you will like to grow. Even business that want to remain same size have to have growth plans to make up for business lost.
So it is the end of the year and you have this big pile of cash sitting in your account. You fear that if you do not spend it you will have to pay huge taxes on this cash.
This problem is typical of most successful small businesses. The only way most business owners feel they can advert this tax is by making a huge purchase which by the way is not really necessary. So now this business owner has spent $20,000 to avoid an additional $5,000 in taxes. I call this penny wise and pound foolish for while he/ she has adverted $5,000 in taxes he is out of an extra $15,000. It is never a wise purchase to buy things you do not need to “save money”. So what happens next year, there is not enough money to cover inventory and now the business has to go into debt to cover expenses and this vicious cycle goes on year after year.
Be sure to hire a professional if you do not understand how to evaluate how your business is really doing.
“The future belongs to those who believe in the beauty of their dreams”
— Eleanor Roosevelt
When patterns are broken, new worlds emerge”
I watched a fly trapped between the screen and window. It just flew tirelessly around the available space trying to find a way out. Even though there was a clear open space on the bottom of the window, the fly will not fly lower to get out even though this is the way it got there in the first place. Poor fly, it really seemed confused.
Do you sometimes feel like that fly: trapped between the screen and the window. Always moving but never getting anywhere. Its almost like you are moving around in circles. If this feels like you, there is good news – there is a lot of space on the bottom if you are only willing to fly lower. Where there is a will, there is always a way and what we need most of the time is a change in perspective. There are lots of ways to get this change. For me it may be studying my Bible or reading a good book that changes my point of view. A new perspective helps me gain momentum to strive to achieve what I was created for.