I am starting a small business. What are the initial, basic steps I need to take to create a sound financial plan for my new company? I have no previous experience in this realm, so I am seeking nuts and bolts advice for the concrete actions I should take.
“Starting a new business can be over whelming, but you can break it down in steps,” said FPA member Dale Mullin, CPA, CFP®. One of the first things to do is put together a business plan that includes your target market (who is looking for your product or service), your competition (what do you offer that someone else isn’t already doing) and what will it take to make a profit (how much volume of business, how long to build that volume, start up costs, over head expenses, etc.). Often, people have an idea to go into business, but under estimates the upfront capital that will be needed until the business becomes profitable or over estimates the demand for what the business is offering. Try to get some honest feedback from potential customers to see if your idea is viable — are they willing to pay for your product or service and if so, how much.
“After you have the business plan in place, speak to an accountant to get an idea of the tax consequences of your business (income tax rates, self employment tax, sales tax, payroll tax, etc.) and the record keeping that you will need to maintain and the federal and state filings that will be your responsibility. The accountant can also give you background on how different business entities are taxed (sole proprietorship, corporation, S-corporation, etc.). The next conversation would be with an attorney to decide on the legal entity of your business to see if you should stay as a sole proprietor or consider incorporating or forming a limited liability company.”