By: Pamela Martinez, JBS Corp.
That’s it; Its time! We’ve told you why a recession can be the best time to start your business and listed common mistakes small business owners make. Now that you’re serious about getting your side-hustle up and running, it’s due time we go over a few things you should do/know before starting your own business.
Establish a Clear Business Plan
A business plan is customarily used by an individual to demonstrate to potential investors (e.g., banks) what the business is, projected expenses, and how it will earn money. However, if you intend to fund your own start-up cost, you shouldn’t shy away from creating a business plan of your own. Business plans vary in complexity and are made at your own discretion. These plans can be as simple as thinking through some key questions:
- What does your customer look like? (Geographic location, age, general demographic)
- What product or service are you offering, and how is it different then what is currently in the market? (better price, better product, better service, more convenient, etc.)
- How much “margin” can your product/service produce? – after your product/service is paid for—i.e., your cost of the product/service is covered—how much profit is left?
Business plans are excellent tools for eliminating a great deal of the stress surrounding self-employment. Suppose you have reservations about creating a business plan or don’t know where to start on their web page. In that case, the U.S. Small Business Administration (SBA) provides business plan templates, examples, and formatting guides that are straightforward and easy to follow. Keep in mind that your business plan will function as the roadmap to your business’ success. It’s in yours and your business’s best interest to create a clear and precise plan.
Open a Sperate Bank Account
If your self-funding your startup business expenses, it’s tempting to use your personal bank account. However, we urge you not to do this. Managing your business expenses through your personal bank accounts is considered commingling of funds. It can cause an abundance of issues with the IRS, and the sloppy practice can result in the miscalculation of funds, over/underpayment of taxes, etc. This could cause you to spend business money on non-business-related matters and makes it difficult to keep your books up to date and accurate. The best approach is to keep your personal and business affair separate by opening up a bank account for your business when you begin organizing a business plan.
Understand Bookkeeping
Bookkeeping is essential to the success of your business, especially during its early stages. Whether you decided to take on the task yourself or employ someone else to do so, it’s essential to understand bookkeeping basics. It’s unfavorable to dive into a new business without proper bookkeeping knowledge or blindly let someone handle it. Bookkeeping is more than just keeping tabs on your bank statements; it includes balance sheets, profit/loss statements, and cash flow statements. These supply business owners, lenders, and potential investors with information regarding where the money is being spent and when it’s coming in.
Improper bookkeeping, or the lack thereof, can hinder the growth of your business. You can miss out on business-related tax deductions, lose valuable startup information, catch the IRS’s attention, and make future loans challenging to acquire. Keeping organized financial records benefits your business in the long run. Not only will you never break a sweat if audited by the IRS, but if/when the time comes, you’ll have all the documentation needed as guidance for the expansion of your business.
Legal
Whichever business venture you’re about to embark on, familiarize yourself with the legal obligations necessary for your business’s operation. This means ensuring that you have all required documents before your business is up and running, such as permits and license up to date. You also want to avoid trademark, patent, or copyright infringements; this can be done by a quick search of the Trademark Electronic Search System (TESS) provided by the U.S. Patent and Trademark Office. Lastly, it may be the time to create a corporate structure, and you will want to consult a legal or tax professional before diving into the wonderful world of LLCs, S-Corps, C-Corps, Partnerships, etc.
Fail and Adapt
Unfortunately, the odds of your business succeeding without a single mishap are slim—there’s no smooth sailing in entrepreneurship’s unforgiving seas. Expect failures and obstacles to occur, but don’t let them discourage you from succeeding. Embrace them and use them as opportunities to grow. Failure does not mean that your business as a whole has failed; it merely means that one approach or method of business did not work out as planned and needs to be modified. The only way your business will fail is if you allow it to. Avoid the common mistakes small business owners make, and your business will be up and running in no time
Find a mentor. Speak to an industry expert. Remember, no one is forced to do it alone, and learning from those who have done it successfully in the past is always the best way to ensure your success in the future. If you do not know of anyone to reach out to, you can always reach out to us at JBS!
