Wednesday, November 26, 2014

Starting Your Business the Right Way

image This article was written by John Rau, SCORE Orange County Business Mentor

There are dozens of sites on the Web that have checklists that remind you of the many tasks you should perform before you open the doors to your business. The real importance of these checklists is to help you remember a lot of important steps that you might otherwise overlook. For example, the U.S. Small Business Administration (SBA) has provided a listing of the “10 Steps to Starting a Business” (see -business) which is summarized as follows:



Step 1 Write a business plan

Step 2 Get business assistance and training

Step 3 Choose a business location

Step 4 Finance your business

Step 5 Determine the legal structure of your business

Step 6 Register a business name such as “Doing Business As”

Step 7 Get a tax identification number

Step 8 Register for state and local taxes

Step 9 Obtain business licenses and permits

Step 10 Understand employer responsibilities

The above suggested steps by the SBA are only to “get you going”! Before opening your doors and capturing your first sale, there is the “last minute” type of checklist you need to examine to make sure you are “good-to-go”. In general, independent of the type of business you are planning, an illustrative listing (not necessarily all-inclusive) of the types of items you need to make sure you have considered is as follows:

1. Have you prepared a master plan and schedule that shows at least weekly for the next six months and monthly thereafter for the subsequent six months that shows all activities and tasks you need to perform to get your business going? Such activities would include staffing and hiring, marketing and advertising, and attendance at trade shows and industry-related events. You will need the schedule to track your activities and measure your performance. Consider your master plan and schedule an integral part of your time management system which is important when trying to get your new business venture started.

2. Do you have an agreement in place with your key family members where everybody agrees with what you are venturing into and everyone understands the risks and potential family stresses that might occur? You’ve got to have “buy in” so as to not jeopardize marital and other family relationships.

Referring to the SBA Step 4, do you have your business banking account opened and do you have a relationship (such as credit lines, loan agreements, etc. as applicable) with your banker to help you deal with any financial issues that may arise in the course of running your business? Keep in mind that most start-up businesses don’t generally show profits for at least 6-9 months and perhaps even longer. You should have a budget in place to account for this and your banker can provide guidance to you.

3. Have you made a list of all the key functions (such as human relations/personnel, advertising, financial operations, sales and marketing, employee training, etc.) that will need to be performed in the course of running your business and have you made assignments in the sense of who will be responsible for performing these functions? In the beginning, you may be the one that has this initial responsibility, but, as your business grows, you will need to delegate these functional responsibilities to others in your company.

4. Are your record keeping and accounting systems ready to go? Do you have an accountant who can help you with setting up your bookkeeping structure, tax planning strategy and payroll setup?

5. Referring to SBA Step 10, if you plan to hire employees, do you have a plan for preparation of an employee handbook that spells out all business rules and policies that are consistent with applicable labor laws and regulations?

6. Do you have legal service available to you if you need it? It would be prudent to have your attorney review all lease and rental agreements, as well as all other potential liability agreements and contracts, before you sign them.

7. Have you researched and do you understand all applicable laws and regulations that may pertain to the operation of your business? These would include at, a minimum, laws and regulations dealing with environmental issues (such as storage and use of hazardous materials) and workplace health and safety issues.

8. Have you identified all local, state and federal agencies that may have regulatory oversight regarding your business operations? You may have identified these agencies in your business plan (SBA Step 1), but once you commence business operation there may be reporting requirements and forms that you will need to fill out and submit on a periodic basis. Make sure you list these requirements in your master plan and schedule.

9. Have you given consideration to an Advisory Board to help guide you through the operation of your business? Having a “sounding board” of knowledgeable people to consult with as you go down the path of being an entrepreneur will help keep you on track and can give you guidance as to how to deal with important business issues as they arise. It could be a “lonely journey” without friends to talk to!

10. Have you met all of your business insurance requirements? If you are going to run a professional services company, you may need professional liability insurance. If you plan to manufacture and/or distribute products, you will probably need product liability insurance. If you hire employees, you will need Workers Compensation insurance. Depending on the size of your business in terms of number of employees, you may need to provide health insurance. You can expect to need business property insurance (fire and theft) and your landlord will want to be named as an additional insured. The point here is that you should have an insurance agent/advisor who can help you get all required coverage in place before you start your business. Remember, insurance costs need to be budgeted for in operating your business.

11. If you need office equipment (such as furniture, computers, copiers, telephones, etc.) and/or production equipment and related machinery and tools to operate your business, have you made all the necessary arrangements to make sure these essentials are in place when you open your doors?

12. Do you have sales and marketing brochures and literature completed along with scheduled advertising programs identified and ready to be implemented? Your marketing plan should have been presented in your business plan (SBA Step 1). Now is the time to implement it.

13. Have you done your “pricing homework”? If you are starting a services business, do you know what to charge for your services? If you are going to sell and/or distribute products, do you know what to charge for these products? Remember that pricing your products or services is one of the most important business decisions you will make. You must offer your products or services for a price your target market is willing to pay and one that produces a profit for your company; otherwise, you won’t be in business for long. You should have this information in place before you ever talk to a customer.

14. Could your business benefit from the use of social media such as Facebook, Twitter, etc.? If so, do you have a plan for doing so? If applicable, this should be an integral part of your marketing plan that you could probably start early in your start-up activities.

15. Do you plan to have a web site? If so, you will need to not only design it but also select your domain name. These are things you can do before you open your doors.

If your business involves manufacturing and/or distributing products, then there are some additional checklist type items that you need to consider such as:

1. Have you identified your vendors, suppliers and distributors that you will need and do you have agreements in place?

2. If you will need any special equipment and tooling to operate your business, have you placed orders and made arrangements to get these items delivered to you so as to not delay the start of business operations?

3. Do you have a system devised for tracking inventory and determining when to reorder?

4. Do you have quality control procedures and processes defined to be implemented when you start manufacturing and inspection operations? If you are going to be required to have ISO and/or UL type certification for your products, then investigating what is involved before opening your doors would be a prudent thing to do.

5. If you are either importing or exporting goods, do you know what is involved such as applicable U.S. Customs regulations and the use of Customs brokers if necessary? This is an example of the type of homework you could do before starting your business. There may be applications and registration type forms that you could get completed and submitted before opening your doors.

6. If you have any intellectual property such as patentable products, copyrights and trademarks that you would like to protect, than have you taken the necessary steps to do this? Registering copyrights and trademarks can be done in a relatively short period of time, but filing for utility patent protection can take 2-3 years before the patent is issued. Hence, why wait? Start this process as soon as possible.

Admittedly, all of the above checklist type items may not apply to your particular new business venture, but you should at least peruse them to make sure you haven’t forgotten anything. The key is to get as much of a running start as possible. Remember SCORE counselors can not only help you with the preparation of your business plan but also with the steps required to run a successful business.