Business Start Up Frequently Asked Questions – The Allday Consulting Group, LLC

Business Start-Up Frequently Asked Questions

Starting and managing a business takes motivation and talent. It also takes research and planning. Although initial mistakes are not always fatal, it takes extra skill, discipline, and hard work to regain momentum. Take time beforehand to explore and evaluate your business and personal goals, then use this information to build a comprehensive and thoughtful business plan that will help you reach these goals.

Planning to Start a New Business:

Do I have what it takes to own and manage a small business?

You will be your own most important employee, so an objective appraisal of your strengths and weaknesses is essential. Some questions to ask yourself are:

Am I a self-starter?
How well do I get along with a variety of different personalities?
How good am I at making decisions?
Do I have the physical and emotional stamina to run a business?
How well do I plan and organize?
Are my attitudes and drive strong enough to maintain motivation?
How will the business affect my family?

Try the Quiz for Small Business Success

What type of business should I start?

Usually, the best business for you is the one in which you are most skilled and interested. As you review your options, you may wish to consult local experts and business consultants about the growth potential of various businesses in your area. Matching your background with the local market will increase your chance of success.

What is a business plan and do I need one?

A business is like a road map for your business. It identifies your goals and the purpose of the business. Its basic components include a current and pro forma balance sheet, an income statement and a cash flow analysis. Doing a business plan helps you allocate resources properly, handle unforeseen complications, and make the right decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any successful business. A well-written business plan will also, tell your sales personnel, suppliers, and others about your operations and goals.

Why do I need to understand my business in detail?

It may seem silly to ask yourself, “What business am I really in?” but some owner-managers have gone broke because they never answered that question. One watch store owner realized that most of his time was spent repairing watches while most of his money was spent selling them. He finally decided he was in the repair business and discontinued the sales operations. His profits improved dramatically.

What legal aspects do I need to consider?

All businesses are required to have occupational licenses, Zoning laws and other regulations vary from business to business and from state to state. You will need to consult with your attorney or CPA for advice specific to your enterprise and area. You also must decide about your form of organization, whether should you be a corporation, limited liability company, partnership, or sole proprietorship, and tax status (e.g., should you opt for a Subchapter S status?).

What do I need to succeed in a business?

There are several elements of success in small business. Some are

Marketing & sales.
Accounting & financial management.
Sound management skills.
Industry experience.
Technical support.
Planning ability.

Few people start a business with all of these bases covered. Honestly assess your own experience and skills; then look for partners or key employees to compensate for your deficiencies.

Would a partner(s) make it easier to be successful?

A business partner does not guarantee success. If you require additional management skills or start-up capital, engaging a partner may be your best decision. Personality and character, as well as the ability to give technical or financial assistance, determine the ultimate success of a partnership.

Initial Filling Requirements:

What do I do when I’m ready?

You have done your homework; you have a complete business plan; you know where you want to operate; you know how much cash you will need; and you have specific information on employee, vendor, and market possibilities. You now may want someone to look over your plans objectively. Contact the business department at a local college for another opinion. A Small Business Consultant at the Allday Consulting Group can also review your work and help with the fine-tuning. Then, when you have made the final decision to go ahead, it is time to call a CPA and get going. Good luck!

How do I incorporate my business?

Once the decision to incorporate your business has been made, the legal process begins with the preparation of a certificate of incorporation or articles of organization. Whereas in the past this was prepared by three or more legally qualified individuals—today, only a single incorporator is needed.

The state is likely to have a standard form for incorporating a small business. The three typical pieces of information requested are corporate name, purpose, and corporate life span. The corporate name is usually required to be a business name unique from any other name already incorporated within the state. In addition, the name must not be deceptive or misleading. The state charter office can tell you whether the name you want is available. The purpose of the business must be stated. It is a good practice to use a “specific object” clause that spells out the specific purpose for which the corporation is being formed. While most corporations are formed for an indefinite period, it is possible to set up a specific limited life. Often the reason for creating a corporation is because the life span of the business is unlimited.

Incorporation documents will require: the names and addresses of incorporators; the location of the registered corporate office in the state.

The above requirements cover incorporating as either a “C Corporation” or Sub-Chapter S Corporation.” However, the sub-chapter S Corporation has several additional incorporation requirements such as: it must be an independent group not affiliated with any other; it may have only a single class of stock; no more than 75 stockholders and it may have only individuals or estates as stockholders; and it must be a domestic corporation. Before signing any legally binding documents, consult with your attorney for legal advice.

Where do I get a business license?

All businesses, at a minimum, must obtain a business license from the county (parish) office in which the business resides. We can assist you with obtaining your business license. Contact our office at 1-800-259-4213 for more information.

Hiring Employees:

How can I find qualified employees?

Choose your employees carefully. Decide beforehand what you want them to do. Be specific. You may need flexible employees who can shift from task to task as required. Interview and screen applicants with care. Remember, good questions lead to good answers-the more you learn about each applicant’s experience and skills, the better prepared you are to make your decision.

How do I set wage levels?

Wage levels are calculated using position importance and skill required as criteria. Consult your trade association and accountant to learn the most current practices, cost ratios, and profit margins in your business field. While there is a minimum wage set by federal law for most jobs, the actual wage paid is entirely between you and your prospective employee.

What other financial responsibilities do I have for employees?

You must withhold federal and state income taxes, contribute to unemployment and workers’ compensation systems, and match Social Security holdings. You may also wish to inquire about key employee life or disability insurance. Because laws on these matters vary from state to state, you probably should consult local information sources. Visit the businesslaw.gov home page to locate state business laws.

Should I hire family members to work for me?

Frequently, family members of the owner “help out in the business.” For some small business owners, it is a rewarding experience; for others, it can cause irreparable damage. Carefully consider their loyalty and respect for you as the owner-manager. Can you keep your family and business decisions separate?

Operation and Administration:

Do I need a computer?

Small business today faces growing inventory requirements, increased customer expectations, rising costs, and intense competition. Computers can provide information that leads to better returns on investment. At the same time, they help you cope with the many other pressures of your business. Computers are not cure-alls, however, and considerable care should be given to:

deciding if you need one, and
selecting the best system (or personal computer) for your business.

What about telecommunications?

All small businesses share some common functions: sales, purchasing, financing, operations, and administration. Depending on your individual business, telecommunications can support your objectives in any or all of these areas. In its basic form, the telephone (the terminal) and the network (local or long distance) make up the basic components of telecommunications. It is an effective tool that can easily change with seasonality and growth. How you use telecommunications can affect how efficiently and profitably your company grows in the future.

What should I know about accounting and bookkeeping?

The importance of keeping adequate records cannot be stressed too much. Without records, you cannot see how well your business is doing and where it is going. At a minimum, records are needed to substantiate:

Your tax returns under Federal and State laws, including income tax and Social Security laws;
A request for credit from vendors or a loan from a bank;
The value of your business, should you ever wish to sell it.

But most importantly, you need them to manage your business successfully and to increase your profits.

How do I set up the right record-keeping system for my business?

The kind of records and how many you need depend on your type of business. An accountant can provide you with many options. When deciding on what is and is not necessary, keep in mind the following questions:

How will this record be used?
How important is this information likely to be?
Is the information available elsewhere in an equally accessible form?

What financial statements will I need?

You should prepare and understand three basic financial statements:

The Balance Sheet, reports assets, liabilities, and equity.
The Income Statement (profit-and-loss), is a report of your earnings and expenses over a given period of time.
The Cash Flow Statement is a report showing your cash balances and the sources and uses of cash for a given period of time.

Can I operate a business from my home?

Yes. In fact, experts estimate that as many as 20 percent of new small business enterprises are operated out of the owner’s home.

How do I find out about suppliers/manufacturers/ distributors?

Most suppliers want new accounts. A prime source for finding suppliers is the Thomas Register, which lists manufacturers by categories and geographic area. Most libraries have a directory of manufacturers listed by state. If you know the product line manufacturers, a letter or phone call to the companies will get you the local distributor-wholesaler. In some lines, trade shows are good sources of getting suppliers and looking over competing products.

Where can I go for help?

You can consult with us, The Allday Consulting Group. We have small business consultants who are experts in business start-ups. Call us toll-free at 1-800-259-4213 to make an appointment with a Small Business Consultant.

How do I set up the right record-keeping system?

The kind of records and how many you need depend on your type of business. We can help provide you with many options. When deciding on what is and is not necessary, keep in mind the following questions:

How will this record be used?
How important is this information likely to be?
Is the information available elsewhere in an equally accessible form?

Can I get financial assistance from the government?

There are government programs that have been established for the sole purpose of helping small and emerging businesses.

Call us for an appointment and we will be glad to meet with you to discuss these programs, see if you qualify for and provide you with further direction on how to get the financial assistance.

Financing/Capitalization:

How much money do I need to get started?

Once you have taken care of your building and equipment needs you also must have enough money on hand to cover operating expenses for at least a year. These expenses include your salary as the owner and money to repay your loans. One of the leading causes of business failure is insufficient start-up capital. Consequently, you should work closely with your accountant to estimate your cash flow needs.

What are the alternatives in financing a business?

Committing your own funds is often the first financing step. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence for others to invest in your business. You may want to consider a partner for additional financing. Banks are an obvious source of funds. Other loan sources include commercial finance companies, venture capital firms, local development companies, and life insurance companies. Trade credit, selling stock, and equipment leasing offer alternatives to borrowing. Leasing, for example, can be an advantage because it does not tie up your cash.

What do I have to do to get a loan?

Initially, the lender will ask three questions:

How much do you need to borrow?
How will you use the loan?
How will you repay the loan?

When you apply for the loan, you must provide projected financial statements and a cohesive, clear business plan that supplies the name of the firm, location, production facilities, legal structure, and business goals. A clear description of your experience and management capabilities, as well as the expertise of other key personnel, will also be needed.

What kind of profits can I expect?

Not an easy question. However, there are standards of comparison called “industry ratios” which can help you estimate your profits. Return on Investment (ROI), for example, estimates the amount of profit gained on a given number of dollars invested in the business. These ratios are broken down by Standard Industrial Classification (SIC) code and size, so you can look up your type of business to see what the industry averages are. These figures are published by several groups and can be found at your library, and on the Internet.

Is it better to lease or buy the building and equipment?

This is a good question and needs to be considered carefully. Leasing does not tie up your cash; a disadvantage is that the item then has no resale or salvage value since you do not own it. Careful weighing of alternatives and a cost analysis will help you make the best decision.

Marketing Sales:

What does marketing involve?

There are four basic aspects of marketing, often called the “four P’s”:

Product: The items or services you sell.
Price: The amount you charge for your products or services.
Promote: The ways you inform your market as to who, what, and where you are.
Provide: The channels you use to take the product to the customer.

As you can imagine, marketing encompasses much more than just advertising or selling. For example, a major part of marketing involves knowing your customer’s needs and desires: What do they want? What can they afford? What do they think? Your understanding and application of the answers to such questions play a major role in the success or failure of your business.

What is my market potential?

The principles of determining market share and market potential are the same for all geographic areas. First, determine a customer profile (who they are) and the geographic size of the market (how many there are). This is the general market potential. Knowing the number and strength of your competitors, and then estimating the share of business you will take from them, will give you the market potential for your business.

What about advertising?

Your business growth will be influenced by how well you plan and execute an advertising program. Because it is one of the main creators of your business image, it must be well-planned and well-financed. Contact local advertising agencies or your local SBA office to assist you in devising an effective advertising strategy.

How do I set price levels?

The price of a service or item is based on three basic costs: Materials, Labor, and Overhead. After these costs are determined, a price is then selected that will be both profitable and competitive. Because pricing can be a complicated process, you may wish to seek help from an expert in this area.

Are some locations better than others?

Time and effort devoted to selecting where to locate your business can mean the difference between success and failure. The kind of business you are in, the potential market, the availability of employees, and the number of competitive establishments all determine where you should put your business.