Are you really ready to start a small business? The allure of starting a small business is often great and compelling. The glamour, the freedom and the sheer challenge is a great draw to young and old. The thought of telling your boss to take this job and shove it is a day dream many employees relish.
Most small business owners begin their leap believing they will open a small business doing something they love and/or have developed an expertise. It sounds great. Follow your bliss, right? Well, almost. There is a lot more to running a business than following your bliss. Oftentimes, starting your own business begins with just you. This is where the term wearing many hats comes from. An owner of a business, in between following their bliss, must now deal with taxes, State Laws, Accounting, Human Resources, Production and Delivery of the goods or services.
The practical aspect of starting a new small business is often very different from the dream. That is not to say that it won't be as you visualized it but it does mean that you have to go into the endeavor with your eyes open, or you may become a statistic. The U.S. Bureau of Labor Statistics always has the numbers to sober up the day dream:
"The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after. It is not surprising that most of the new establishments disappeared within the first 2 years after their birth, and then only a smaller percentage disappeared in the subsequent 2 years. These survival rates do not vary much by industry."1
You may be ready to start a new business. If that is the case then here are some very basic steps to starting a small business that need to be addressed.
Select An Entity
Will you be a Sole Proprietor, LLC or Corporation? Each has its good points and drawbacks. An LLC or Corporation, however, affords you additional protection against Law Suits. There are also tax advantages with the LLC and Corporation that should be considered.
Employees
If you plan to have employees a Tax ID from the IRS is necessary. Irs.gov is a great resource for those starting a business. The IRS website has a business start up check list and has a plethora of information on new Business Start Ups.
Record Keeping
This is very important. If you are not versed in Bookkeeping and Accounting please spend the money, which you probably believe in error you don't have, to hire a bookkeeper. There are many accounting software packages on the market. QuickBooks is one of the most popular and accessible of accounting software packages and one of the easiest to use for a new small business.
Your volume of business will determine if you truly can keep up with the data entry involved in keeping your own books. If you cannot find a way to enter your receipts by the end of each week, then this is an indicator that you need a bookkeeper. Why? Being completely aware of your income and out go is imperative to the success of a new small business. Having the ability to pull a weekly report and access where the company is at any given time is an absolute necessity. Those reports will allow you to make decisions regarding labor, supply costs, etc., quickly. Waiting until the end of the month, or longer, to input your receipts might be the difference between continuing on the next month and closing your doors.
For example, if labor costs compared to sales have jumped during a particular month but sales have not tracked with that increase you could find your profits sailing out to sea. If you are pulling weekly reports you will notice immediately that your sales and your labor are not tracking and you can assess the situation and pull back on labor until you notice the need for an increased labor. The importance of this cannot be emphasized enough. If you have any type of creative mind, do not even attempt to handle the paperwork on your own. Creative-type personalities generally do not do well with paperwork details and bookkeeping. By the time you realize how behind you are can be too late. It is worth hiring a bookkeeper to enter your receipts weekly and to keep you abreast of your company's financial standing.
Taxes
Do not make the mistake many small business owners make and keep your employees with holding in the general business account. Consider having a separate checking account for your payroll. Get a savings account, and deposit your sales tax into that account. The taxman cometh, and he will get his pound of flesh. It is very easy to utilize those funds during the quarter or month and find yourself short when it comes time to pay your taxes. Save yourself this headache, and keep your taxes separate from your main operating account.
Business Plan
It would be great if every small business owner created a business plan. Most do not. A very simple business plan is better than no business plan. Contact the local Small Business Administration for assistance.
Marketing
Here again, a simple Marketing Plan is better than no Marketing plan. Learn about response marketing. Do not place any advertisements you cannot track. Keep your marketing plan simple. Do some research and find your niche market and hammer it.
There is a lot of satisfaction owning a small business. There is more satisfaction when you are profitable. Starting a new small business has many rewards and pitfalls. Make sure you are aware of both and your venture into owning a small business will be that of following your bliss rather than the agony of defeat.
1 Notes: Monthly Labor Review 2005
 | The success of your business depends on making sound decisions. Following good record keeping supports that goal, by providing you with an easily accessible reference tool for almost every aspect of your business. |
 | Small business owners have a lot on their plates, and they don't need to be rushing around their offices looking for a tax document. Owners need to commit to keeping impeccable records, and these business record keeping tips can help make the process easier. |
A sound financial life depends on good records. Therefore you must have a system in place for monitoring and managing your finances that is both comprehensive and easy to understand. What you use and how you use it is up to you. |
Financial record-keeping is a personal thing. Use whatever organizational tools work best for you. Use what you are most comfortable working with. As with other areas of personal finance, the simplest approach is often the best. |
Starting your home business does not have to be complicated. |
