Starting a business can be as costly and daunting as it is exhilarating and lucrative. While it’s true that “the best laid plans of mice and men often go awry,” it’s equally true that prudence ranks supreme among the virtues.
Whether your idea sprouted from a lifelong trade or a nicely-timed niche, your success in 5, 10, or 20 years depends on how well you plan ahead. Step one in that planning should be start-up costs.
An analogy: When buying a new car, your interest rate and monthly payment will depend largely on the size of your down payment. You’ll not only pay off the loan quicker and pay less in interest over the life of the loan, but this prudent planning also makes late payments, repossession, and downgraded credit scores less likely. By planning ahead and budgeting honestly, you’ve not only landed the best possible financial terms available, but you’ve protected yourself against disaster.
Starting a small business is no different.
You can never guarantee success, but there are simple steps to take to protect against failure.
1.Perfect Your Business Plan: it’s step #1 to starting a business, and yet it’s often seen as the most painstaking–which is why it’s often not given the time and attention it deserves. A business plan is more than an investment justification. Banks will use it to evaluate potential profitability and thus loan specifications (if applicable), but partners should use it as their rule book. Small business start-ups with inexperienced but self-motivated owners often struggle with what’s referred to as “scope-creep”: the all-to-common occurrence of operating beyond the stated mission of the company. A written record of your plan curbs this inclination to branch off into uncharted territories. If you take the time to perfect it, anticipating specific expenses, conservative sales, and strict allocation of that revenue, you’ll be a step ahead of most start-ups and a step closer to long-term success. If you find yourself needing to adjust your strategy a few months down the line because the economy or industry you’re operating in has changed, then your business plan wasn’t very well planned out. Come up with strategies for any anticipated events that could occur, stick to the script for at least a year, and re-evaluate (as a team) on your one-year anniversary.
2.Honest Budgeting: Rosy optimism is healthy in business as in life, but cold hard reason is necessary in the early stages of planning to launch your business idea. You want the facts, economic reports, industry analytics, research into costs of goods, anticipated product demand, and more. As a business operator, you’ll need to know and plan for the current and future costs of:
insurance & licensure
interest on loans
software & technology
There’s no golden number for a start-up. Too much depends on location, industry, and the type of business you’re planning. But one this is certain: with a strong economy and a 17-year-high in consumer confidence, now is a great time to start planning.
At Foster Financial CPA, we’ll help get you where you want to be. We offer unlimited business consultation, bank account reconciliation, income statements, balance sheets, general ledger management and auditing, and more. Contact us today to discuss how we can help get your business off and running.