As an entrepreneur, when you have a great idea, it can be exciting to get a new business started right away. But to make sure the startup is set up for success, there are necessary steps entrepreneurs need to take. Proper planning up front by creating a business plan, building a great team and developing a financing strategy will help turn a great idea into a profitable business.
Create a Business Plan
The first step is to create your own business plan. The business plan could originally be for yourself to help you build out your strategy on paper. The business plan could also be for external investors or other business partners down the road. Deciding who you are making the business plan for is a key step.
The final business plan that you create should contain your business’s key goals and how you plan on achieving those goals. Key areas of your business plan should include:
- Business Description
- Company Analysis
- Industry Analysis
- Marketing Plan
- Plan for Operations
- Financial Plan
Your business plan should come together as a quality, professional document. This plan will likely be referenced by outside parties and is key in helping you achieve your goals. The plan can and should evolve as you are working your way through developing your business.
Build a Team of Advisors
The next important step is building a team that can help advise you. Having a CPA and an attorney that are the right fit for you and your business can go a long way. Make sure your business culture meshes with their culture and values and that you can trust them. Both your attorney and CPA will be there to answers your questions, so knowing that they have your best interests in mind and that you are able to count on their advice is important.
An attorney can help draft up agreements, copyrights, patents, or other legal documents that might be needed, and a CPA can help you choose the proper business entity type that will best suit your needs as well as helping with accounting and bookkeeping throughout operations. As your business grows and becomes more complex, so does the accounting as well as potential legal issues. Make sure your CPA and attorney are have your goals in mind.
Next Steps and Financing
Once you have your plan and your team in place, there are now decisions and steps to take that both your attorney and CPA can help with.
- Select your business entity. Whether you form your business as a Sole proprietor, S-Corp, C-Corp, LLC or Partnership, each entity type has different tax and legal factors, so choosing the one that best suits your business is important.
- Register your business with your state.
- Request and obtain Federal and State identification numbers.
- Open a separate business bank account.
- Choose an accounting and recordkeeping software.
- Depending on your industry, consider purchasing general liability insurance.
A final step before being able to operate your business is obtaining proper financing for the operations.
Equity financing means exchanging part of your ownership for cash. The positive of this option of financing is there are no interest payments that need to be made. This can be a very beneficial way to preserve cash when initially trying to get up and running. The downside is the loss of ownership which results in less earnings being distributed to yourself.
A debt financing structure means borrowing money that will be repaid with interest. The positive of this way of financing is there is no lost equity in your business as well as the interest and principal payments are consistent and can be planned for. The downside is the interest that is to be paid as every bit of cash can be important when starting a business.
Financing the business on your own is the most lucrative since there is no equity lost and no interest to be paid. However, many entrepreneurs will not be able to sustain the cash flow required to keep the business going, and will eventually require funding from debt or equity financing.
You have your plan, you have your team in place, and you have financed your business. You are now ready to begin operations and turn your dream idea into a reality. Throughout operations, continue to consult with your CPA and attorney as they can provide valuable advice every step of the way. Contact an Anders advisor to discuss your new business, or learn more about the Anders Startup Group.