How to Make It to the Sweet Sixteen.
Starting your own business is both exciting and nerve-racking. The prospect of working for yourself inspires dreams of flexible hours, limitless possibilities and great prosperity. The “great idea” or “must have service” entrepreneurs pursue and offer are the backbone of this great country and their efforts are encouraged and applauded by virtually every segment of our society. Unfortunately, the majority of new businesses do not survive very long. While their demise is sometimes due to forces outside of their control, in many cases, businesses fail simply because of a lack of planning and/or poor decision making.
Although the statistics vary depending upon the source, the Small Business Association (SBA) estimates that only 69% of new small businesses last 2 years; 51% last 5 years; 34% last 10 years; and only 26% last 15 years or more. Given these statistic, and being one myself, I believe the vast majority of entrepreneurs are optimists. We have to be in order to absolutely know that we will not be among the 74% looking for a new job within 15 years! If we were not so confident, then why would we waste our time and money? Optimism, pure and simple. It is what motivates entrepreneurs who, in turn, started the small businesses that now employ about one half of all private sector workers in the U.S.
It should go without saying that, before quitting your job to pursue “the dream”, one should have a business plan. Generally, a business plan will include the following: (i) Executive Summary; (ii) Business Description and Vision; (iii) Market Analysis; (iv) Product or Service Description; (iv) Organization’s Management Team; (v) Marketing/Sales Strategy; and (vi) Financial Projections. While business plans should be somewhat fluid, prospective lenders will want to see that you have done your homework in order to gain some level of confidence in you and your vision. Even if you are not seeking funding for your new business, it is important to develop a business plan to provide yourself with a roadmap to success. Without this reference point, it is easy to get distracted and lose sight of your goals and how to achieve them.
Generally, once the decision has been made to start a business, you will need to register your business with the State. While not an exhaustive list, the most common organizational forms for a start-up business today are: (i) limited liability company (LLC); (ii) partnership; or (iii) corporation. Each of these forms has its own unique advantages and disadvantages depending upon your situation. After registering with the State, the business will typically need to obtain a Federal Tax Identification Number (FEIN) from the IRS. This can be used for such things as: (i) opening a company bank account; (ii) hiring employees; (iii) applying for credit; (iv) entering into leases/contracts; and (v) filing company tax returns. Other licensing, registration and/or reporting requirement will vary depending upon the type of business.
Thereafter, the business will likely need to obtain various insurance policies covering: (i) general liability; (ii) worker’s compensation; (iii) malpractice (where applicable); (iv) health/dental; and (v) rental property. Office expenses will include (i) phone/fax/internet; (ii) rent and maintenance; (iii) office equipment/furniture; (iv) utilities; (v) subscriptions; (vi) office supplies; (vii) mobile phone(s); (viii) postage; (ix) advertisement/marketing; and (x) miscellaneous items. Phew!! For those of you still with me, I’ll leave the discussion of the various legal forms to another column!
In sum, starting your own business entails a lot more than desire and a good idea. It requires careful planning to achieve clear goals. Kelly Law, P.C., has the experience, knowledge and ability to help you prepare for this adventure and assist along the way. See you in Year 16!