SOME PRACTICAL GUIDELINES
1. Do have a business viable objective.
One of the most important steps in starting or conducting a business is having a viable business objective.
The money objective alone will not make any business successful. The success will come when the entrepreneur has commitment to deliver the best products or services in the world at the right price with passion. Then, the money ($) will show up in great abundance.
2. Do assess the viability of your business.
One of the most important steps is assessing whether a prospective business will be able to satisfy the entrepreneur goals, specifically how the business will do financially. Normally the entrepreneur has a vague or incomplete understanding of all aspects of launching a business. This can lead to unrealistic expectation and failure.
The entrepreneur has to evaluate periodically, the assumptions for the business success. It is a light analysis of the d products or service proposed its potential market, and organization to carry out the business.
Some of the most common areas to cover are:
1. Business goals and objectives.
2. Exit strategies; like selling, transfer or closing the business
3. Product or service provided; Are they different in quality and price in the market?
4. Marketing and pricing strategies; how price compare to competition?
5. Material requirements and supplier relationship.
6. Distribution methods.
7. Labor requirements.
8. Facility and equipment needs and availability.
9. Industry influence.
10. Financial plans.
11. Competitive advantage; where is the business located and what is it’s the market share?
12. Business intelligence to assess strength and weaknesses.
3. Do have the best business entity and organization (board of directors) to implement and evaluate your viable business plan.
The entrepreneur can select among S corporation, C-corporation, LLC-association, partnership and sole propriertorship.
The better selections are corporation and LLC for:
1. Its magnificent shield against business risk avoiding personal liabilities for debts whether in contract or tort, except for negligence, gross negligence or contributory negligence.
4. Do develop a complete business plan for start-up and on going business; often called a strategic plan (10 pages approximately).
This plan contains a written statement that answers where the business is going to be in 12 months and in 60 months any time.
The plan will facilitate obtaining capital, communicate the business culture, assist in obtaining customers, suppliers and management, and provide a yardstick to measure actual results to react to market force on a timely basis.
The basic parts of business plan are: 1) Introduction; 2) Description of products/service; 3) Analysis of competition; 4) Markets strategy; 5) Operation plan and design;
6) Building and leasing requirements and 6) financial projection.
5. Do identify the financing alternatives available to your business and evaluate these alternatives.
The basic step is a) determine the amount of financing needed, b) identify the financing alternatives available and c) select the best way to approach the desire financing source.
Then prepare the financing proposal and finally negotiate the financing with the potential financing sources.
Normally funds are used for:
1. Start up cost
2. Working capital
3. Machinery and equipment
4. Purchase of real state
6. Does find the necessary financing.
You may have the necessary financing from private sources:
1. Personal, friends or relatives.
2. Short term financing from business relations such as :
Vendors, customer deposits, maintenance contract, line of credit, demand notes, account receivable advances, accounts receivable factoring, credit cards, inventory financing, construction loans, assets-based lending, etc.
3. Medium term financing obtained from machinery and equipment financing, leasing arrangement, term loans and governmental loan programs SBA loan for working capital can have 5-7 years term, machinery and equipment 7-10 years term and real state purchase or construction up to 25 years.
Also SBA con provide financing for refinancing certain existing debt, acquisition of franchise and acquisition of existing business.
Also, SBA has special financing programs such as: Low Documentation, CapLines, International Trade Loan , Export Working Capital, Solar Energy and Conservation loan, Microloan Demonstration , etc.
7. Does find the right shareholders for financing your business and obtaining the objective. The most important consideration is to bring a new shareholder with the commitment to the business objective and what additional expertise contribution will he bring, beside money, to offset the dilutions of the business’s owner’s original interest.
8. Do obtain your Employer identification number (EIN), Sales and Used tax Resale Certification, State, County and City occupational and other licenses after you incorporate your business.
9. Do select the location of your business no more than 10 miles from your principal customers from every point.
10 Does use bookkeeping and management reports
You must design the bookkeeping system, including internal control, establishing a system to keep and file all records. It is for your great advantage to use computerize system and design management report to control your plan for your profit objective
11 Do prepare financial statements least on a quarterly basis because the owners, banks, suppliers, credit-reporting firms, government need them.
With your accountant you have to consider several aspects: what accounting method to choose, tax or gaap, interim or annual, full disclosure or disclosure omitted
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