Common Sense Steps for Starting a Successful Business
How do you take an idea and create a profitable business? Here are some points to consider while planning your business and as you begin operating.
- Lay the proper groundwork before launch. Have a plan so you know what to do. In fact, go beyond the business plan — do some research. Talk to people who are in the business you want to go into. Talk to people who might be your customers to get their views and opinions.
- Know your market. Learn your market inside and out — key suppliers and distributors, for instance. Understand the critical metrics of your market, whether it’s as simple as sales per square foot and inventory turnover or an esoteric measure in a highly specialized niche market.
- Create a foundation for a successful business by determining the best business structure. You need to consider options such as sole proprietorship, partnership, LLC or S corporation.
- Consider the software you use to keep track of accounts payable and accounts receivable and other financials. Different kinds of businesses require different kinds of software solutions.
- Keep on top of the financial rules. Almost every business is subject to some government oversight; in some sectors, regulations can be extensive. Make sure your accounting procedures provide the necessary info to comply with government regulations.
- Keep on top of your accounting. For example, make sure you are correctly classifying those who work for you (e.g., are they exempt, nonexempt or independent contractors?). Run regular financial reports so you know how you’re doing.
- Make sure you’re aware of your tax obligations. You need to pay business taxes — and may need to deal with sales taxes too. Keep track of who needs Form W-2 and Form 1099. There will be both state and federal responsibilities.
- Understand your future customers. How do they make purchasing decisions? What can you do to differentiate your offering from that of your competitors? How can you convince customers of the value of your offering? Ground your answers in reality through market testing.
- Establish cash reserves. Take steps to adequately capitalize the business and secure ready sources of capital for growth. A good cash-forecasting tool is critical so that you can plan for the sources and uses of cash on a rolling basis. To determine how much cash you’ll need, develop a cash flow statement that estimates your expenses and income.