In recognition of Small Business Month, Whitaker-Myers Wealth Managers is partnering with our CPA and fellow small business owner, Kage Rush, to discuss the thought process and steps needed to open and continue to operate a successful small business or side hustle. This article will be the first of three on organizing a small business and the early steps.
Starting a small business can be an exciting opportunity. Still, it can also present new risks and challenges for entrepreneurs who may not know what all is entailed with running a small business. Many people have ideas they think will work for a small business but don’t always have a business plan to execute the vision. Regarding your business venture, there are several factors to consider when starting a small business.
Questions to ask yourself
We list a couple of questions below to consider when you are starting a small business:
- Is there a market in your area for the service/project you are creating?
- If the market for your product is not for local clients, what is the hurdle needed for the service/product to be easily accessible to the markets you want to service?
- How competitive is the market for your service/product?
- If there is similar competition for your service/product, then your margin for error can be tight, or revenue could be harder to generate because of competitive pricing.
- How much money or capital is needed to start the business before it becomes sustainable on its own?
- If the business is not profitable for several years, the owner(s) must be willing to fund it until it is sustainable.
- Do you want to be the business's sole owner, or do you want to bring on partners to share the company's burden?
- What is your goal/purpose for creating the business?
- Will you need to hire employees at the start of the business?
- How much time are you willing to commit to the business?
- What are the risks associated with starting the business?
- If risk is associated with your business, you may want to consider putting the business in a Limited Liability Company (LLC). We recommend contacting qualified attorneys for this to ensure the proper setup of the LLC.
- Will this business become your full-time job and source of wages/income?
Creating a Business Plan
Answering these questions helps entrepreneurs create business plans to help meet their objectives. The business plan enables you to set goals for the business, track progress towards those goals, and give you a vision of what the business will look like once you have created your business plan. The definition of a business plan is “a document that sets out a business’s future objectives and strategies for achieving them.” The critical part of that definition is the word “document,” meaning you want to have a written plan that can be referenced and checked to hold yourself accountable.
Goals for a business plan should be specific, obtainable in a reasonable period, and measurable.
- A bad example of a goal for a business plan is to say, “My goal is to become the greatest tax preparer on the planet!”. While some of my clients may feel that way, there is no easy way for me to measure success on that goal.
- A better example of a goal for a business plan is to say, “I want to add 75 new clients for the tax year 2023.” The purpose is clearly defined. We have a time period to reach that goal and can measure the success of that goal by how many new clients we gain between now and April 15th, 2024.
Setting up your game plan
Once a goal is established, the next step is creating a game plan for reaching that goal and creating checkpoints.
- Using the example goal from above, if my goal is to add 75 new clients by April 15th, 2024, I need to add 18 clients a quarter, or 6 clients a month between now and April 2024, to succeed.
Our goal checkpoints can now be measured to see if our goal is progressing to completion, whether we are behind on the goal, or if we are exceeding those expectations. Monitoring these checkpoints for your goals is essential because it holds you accountable to your business plan and helps you take a step back and take a macro view of your business.
I hope this article helped provide insight into the thought process behind starting a small business. Our next article (Part II) will cover the type of business entities to choose from to form your small business, the tax implications and reporting associated with that choice, and how to determine what setup best suits your needs.
If you are interested in starting your own small business and have accounting questions or need accounting services, please get in touch with your financial advisor or visit our tax website to schedule an appointment.
Author: Kage Rush