Checklist: Starting Your Own Business

I always thought I wanted to own my own business.  In 2003, I made the decision to make a job change and began the path of opening my own business. Now celebrating my 20th year in business, Lifetime Financial Planning Solutions, LLC,  I am glad I took that step.

Starting your own business venture can be a little scary, and takes dedication, courage, and hard work. To be successful, it is wise to surround yourself with a good team, including an attorney and CPA. Often a startup business wants to cut costs by not engaging professional legal or accounting advice; they don’t see the added value and try to get started by doing things themselves online. Depending on the business owner’s background and experience, not getting advice from professionals early on can wind up being costly.

Crunch the Numbers and Make a Plan

When starting a business, having a business plan is an important first step.  That can sound intimidating,  but it doesn’t need to be.  The business plan doesn’t have to be a fancy plan in a big binder or cost you thousands of dollars. It is necessary, though, to put the pen to paper, crunch the numbers, and see what is going to be required to make this business profitable. Just because you like cooking doesn’t mean you can run a successful restaurant.

Start with a budget and financial projection. It helps quantify the expectation of revenues that a business wants to achieve for a future period, and the financial direction of where management wants to take the company.

Figuring Small Business Expenses

What are the projected costs for:

  • Rent or mortgage
  • Utilities
  • Insurance
  • Inventory
  • Supplies
  • Advertising
  • Payroll and related payroll taxes
  • Bank or merchant card fees
  • Software
  • Dues
  • Cost of any necessary licensing
  • Furniture, fixtures, and equipment
  • Additional expenses specific to your business
  • Loan payments (if you’re borrowing to start the business)

How to Figure Small Business Income

Look the income you will need to make to cover the expenses listed above and answer these questions:

  • How much do you realistically think you can sell in the first year and the next three to five years?
  • What is the average selling price of the item or service you are providing?
  • How many of those can you sell each day/week/month?
  • How many customers does it require to make those sales?
  • How many hours will you need to work to make that happen?
  • How much time and money can you devote to this business?

Figuring Small Business Profit

Subtract the expenses and debt payments from the potential income. This is your profit, the amount you can pay yourself and/or reinvest back into the business.  Expand this out for the next three to five years. It may take a year or two for the business to become profitable. Do you have other financial resources to support the business and yourself until the business becomes profitable?

Small Business Marketing

It’s important to look at the competitive landscape and think about how you’ll market the business when you’re up and running:

  • What other businesses in the area (or online) provide a similar product?
  • What makes your business unique?
  • Why should customers pick you?
  • How will you advertise?
  • How will you drive customers to your business?

Small Business Legal and Tax Steps

In addition to finances, there are legal and tax steps to take:

  • Confirm the name you want to use for the business is available for your use
  • Register your business with the state
  • Get a federal Tax Identification Number (EIN)
  • If needed, get a Vendor’s License from the state
  • Set up your business bank account, credit card and financing, if needed

These steps are important and doing them in the correct order (shown above) can save you time and hassle.

When to Ask for Professional Help

Deciding to structure the business as a Sole Proprietor, Partnership, LLC, C or S Corporation all have tax and legal ramifications. Choosing the best software for your accounting or other needs, hiring employees and getting registered with various tax agencies, can all be overwhelming. Mistakes can be costly.

Utilizing the expertise of an attorney and CPA can make all these decisions easier and start you on the right track.  You focus on areas within your expertise and the professionals provide guidance on legal and financial aspects where you may not be as knowledgeable.

Small Business is the Backbone of Our Economy

The Small Business and Entrepreneurship Council states that 99% of US businesses are small businesses with 500 or fewer employees and 89% are small businesses with less than 20 employees.

The Bureau of Labor Statistics shows that more than 20% of small enterprises fail in the very first year, and nearly 50% of small startups fail within the first five years.  I show these statistics not to scare someone from starting a business, but to show the importance of getting good financial and legal advice when starting out. This will improve the chances of having a successful business.

Being an entrepreneur is not for everyone, but surrounding yourself with a good team to provide advice will start you on the right track and help you to build a solid foundation for your business.  If you don’t currently work with a CPA or attorney, ask trusted friends, other business owners, or your financial advisors or bank for their recommendations. You want to find someone you will be comfortable working with who has experience and expertise working with start-up or small businesses.

Support the small businesses in our community. When you shop small, you are supporting people who have invested in their passion and our community and believe in the business or service they are providing.

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Profile photo of Penny Wasem, CPA, CFP, PFS, owner of Lifetime Financial Planning Solutions in Lancaster, Ohio.

By Penny Wasem, CPA, CFP, PFS

Penny L. Wasem is the owner of Lifetime Financial Planning Solutions, LLC. A summa cum laude graduate of Ohio University, Penny earned a Bachelor of Business Administration with focus in accounting and mathematics. She serves on the board of The Fairfield Medical Center Foundation, is a member of the Investment Committee of The Fairfield County Foundation and has been active on many non-profit boards in the community. Penny lives in Lancaster with her husband Eric Hubbard and is parent to Clark and Olivia Hubbard.