Welcome to Strategic Tax Accountant’s first blog to clear away your financial fog!
This week, we’re breaking down our biggest recommendations when it comes to starting a business, as well as common mistakes to avoid.
These days, people of all ages are starting their own businesses. You may have heard of children as young as four who are inspired to realize ideas out of their dreams and into reality.
ANYONE has the ability to bring their dreams to fruition – they just need ambition, organization, and follow-through to make it a reality!
Your #1 “DO”
Dive into all of the research available to you about your desired industry.
You must aim to be an expert in your field if you plan on being successful in your new business venture. Moreover, you want to fully understand the current market, the tax and insurance requirements involved, and how to properly network (among peers, partners, and prospective clients) in order to build your brand.
You can heed the advice of family, friends, and influencers, but always do your own research!
Our firm has commonly observed businesses who have overlooked registration requirements or compulsory fillings due to disorganization or a simple lack of knowledge.
They may have well-developed their:
But not done a thorough study of the:
Patterns of their clients and closest competitors
Market/demand of their products and services as a whole
These are equally crucial aspects of building a strong foundation so that your business is profitable.
A second “DO”
Start living by this mantra: “If you fail to plan, you plan to fail.”
Drawing up a business model – a blueprint for your new company – is an essential step, along with writing out your goals. You’re probably aware that a surefire way to accomplish your goals is to first be specific about them.
Write out your:
Goals for Investors
Include dates and amounts.
You want to also list your company’s values and mission statement. Developing these aspects will establish your business’s identity, and serve as a measurement guide for tracking its growth and sustainability.
A business can certainly “get by” with keeping loose receipts and using their POS/register to track its revenue (but, they’re almost always missing expenses).
However, if asked, they’re often totally unaware of their overhead or profit margins at a given moment. Even if they “see a lot” of money flowing, the money going out is often just as much, if not more. How do you know if you’re in the RED (net negative) or the BLACK (net positive) if you don’t keep track?
To maintain optimal financial health, it’s highly advised that every business implement bookkeeping and accounting standards to track profit, expenses, and make constant adjustments for the sake of growth, profitability, and incredibly beneficial tax incentives. It is best to complete these steps well before becoming an actively occupied owner-operator, with little to no available planning time. Furthermore, when implemented in the onset, a connection between your “why” and your “how” will come into clearer view, helping you carry out your day-to-days along with new challenges.
We can’t let you go without listing a few mistakes to avoid like the plague.
You want to refrain from “having blinders” on the present. Even with careful planning, business owners will often encounter unexpected obstacles on their new business journeys. Even those who see great success can be detoured by not “expecting the unexpected” and preparing for future hiccups.
Aside from the business’ operating expenses, there is:
Annual Income Tax
Various State Taxes
Which you must set part of your revenue aside for.
You also need to be able to observe what profit remains and reinvest a percentage of that back into your business as equity, pay yourself (instead of freely “dipping” into the well), and save for unanticipated bills or new assets. There may be insurances related to certain activities, industries, and services which you must procure in order to be financially protected against lawsuits.
As you grow, you have to plan for mistakes before they happen, so you can recover gracefully. You don’t have to “get ready” if you always “stay ready” – an ounce of prevention is worth two pounds of the cure!
Another point to avoid when starting your own business is overextending yourself.
Being an owner-operator when first starting out is not for the faint of heart – you need to maintain both the internal and external. Never stop building your confidence and competency up. For the areas in which you struggle, support yourself with others who excel in those abilities.
Yes, you are your own boss – but you must be willing to work with others to update and enhance your “machine.”
You are the engine, and your team can make up the handles, wheels, and other parts that keep your machine operating smoothly and efficiently. You should be proactive in delegating tasks to your team or collaborating with your partners. A business coach, accountant, legal expert, or marketing professional can take your business from a hobby to an enterprise.
Connect with a mentor
For any of the areas in which you struggle to understand and implement your vision or goals.
There comes a point in every successful business where the owner must delegate responsibilities in order to keep up with growth. It’s very common for new businesses to fall behind on tax remittances, registration deadlines, and many other required activities due to being spread too thin.
Leave any ego at home when it comes to developing yourself and your business. Don’t get sucked into the hype: there’s plenty of work to do and always more to learn – as well as determination, discipline, ambition, leadership, and integrity gained along the way.
There are levels to this, and many of them involve fine print.