Strategies For A Successful Startup
If you’re about to embark on establishing a new business, you are no doubt aware of the risks. A recent Bloomberg study revealed that a remarkable 80 percent of startups fail within their first year and a half. In order to ensure that you are one of the two in ten that succeed, you need to arm yourself with all of the essential tools, and though you may think that means location, product, service, and branding, the things that really make a difference are financial fundamentals.
By taking the time to have a strategy and a plan, you set yourself on a course that will more easily lend itself to success.
With that in mind, these are the five strategies that will make a real difference in your chances of having your startup succeed:
- Ask for Professional Help
No matter how much research you’ve done or how wonderful your product or service is, there is no way to overstate the importance of consulting with professionals who have expertise in the fundamentals.
Lawyers, financial advisors and tax advisors are people who have seen businesses fail and who have seen them succeed, and they know what it takes to avoid the pitfalls and make sure that everything is being done correctly.
A tax advisor does far more than help you to prepare your taxes and advise you on how to minimize the amount that you owe the IRS. They will also help you understand what your obligations and requirements are regarding payroll taxes and withholding, business licenses and sales tax.
They will explain the different structures and organizations that are available to you as you form your business and make sure that you understand the advantages and disadvantages of each. The will make sure that you know all of the ramifications of the way you maintain your records, the requirements regarding employee compensation, how to invest or seek outside capital, and how to accurately quantify whether your business is succeeding or not.
- Determine What your Business Structure Will Be
Though you may be thinking in terms of retail, wholesale, business-to-business or consumer-to-business, there is an even more important question that needs to be answered, and that is what your business’ legal structure will be and how it will be recognized by the IRS. The options from which you can choose are generally sole proprietor, limited liability corporation, S-corporation and C-corporation.
Though many small businesses opt for sole proprietorship, there are risks involved with doing so, as a sole proprietorship puts the owner’s personal assets at risk. Each of the other options available has situations for which they are most suitable.
A limited liability corporation is often what is chosen by sole proprietors that want to protect themselves against liability, while S-corporations are also popular for small to mid-sized business owners that want to continue filing the business’ income on their personal income tax return. C-corporations are generally larger businesses that operate at higher levels of revenue and investment.
By addressing the issue of structure you ensure that your personal assets are protected and provide yourself with a roadmap for how to go about reporting your business operations to the IRS. This step may seem complex, but can actually end up saving time and money in the long run.
- Make Sure that You Keep Accurate Records of Revenue and Expenses
A remarkable number of business failures can be directly attributed to the business’ owners filing to establish and stick to a system of accounting. It is essential that you are able to accurately and quickly identify where money is being made, where it is being spent, and where it is owed and by whom.
Depending upon the size and scope of your business, you may be able to manage these tasks using something as simple as a spreadsheet, but as you grow you are likely to find great benefit in using QuickBooks or one of the other accounting software packages that provide you with more complex applications.
As your business grows, a tax and accounting professional will be able to review your system and offer improvements or services to help with forecasting, with reporting, and with assessing revenue, profit and growth.
- Make Sure You Know Where You Are Headed
One of the most important things that you need to determine when you are starting out is how you are going to gauge your business’ growth and define its success. If you establish a profitability forecast with the help of a tax advisor, you will establish a benchmark by which you can determine where improvements need to be made or losses need to be cut.
A tax professional will help you to establish a realistic expectation for what you can accomplish and hope for in your first year and what revenue level you should use to define profitability.
This is one of the most important steps in any business’ success, and is one that should not be taken lightly. Take the time to do some market research and discuss your goals with any others who are involved in establishing your organization and who are committed to its success. The more clearly you identify benchmarks, the more easily you will be able to gauge how you are doing and when improvements need to be made.
- Take the Time to Do It Right
We’ve all heard the old saying about any job worth doing is worth doing well. Though you may be focused on your product and acquiring clients, it is essential that you also pay attention to the nuts and bolts of the operation in order to make sure that everything that you’re accomplishing on the front end is being carefully managed and monitored on the back end. Put processes in place for recording revenue, sending out bills, knowing where you’re spending your money and how many hours your employees are working.
There are plenty of tools available to help you with these tasks, and you should be using them from the outset of your business and get into the habit of updating information every single day.
Having the fundamentals in place and making sure that your business starts off on the right foot may not be the most exciting part of your entrepreneurship, but it can make a real difference in your level of confidence, and your business’ chances of profitability and growth.
For assistance in setting up a new business call us at 480-725-9917 for a consultation.