One out of every three business start-ups don’t survive beyond the first two years. One key to success is laying a good foundation for your startup at the beginning. Below are some questions you’ll need an answer to. As you read, keep in mind that Pine and Company is happy to help each step of the way. We get excited about startups being successful. Don’t hesitate to reach out for help.
Does your startup have a business plan?
A good business plan sets the framework for a new business. Writing one serves a few purposes, not the least of which is making you sit down to think through things you may have overlooked in your planning thus far. It’s not a step you should skip in your eagerness to get the ball rolling. If you need a little motivation to write a business plan, remember that investors and banks will ask for it before they will give seed money to your startup.
What business structure is best for your startup?
The business structure you choose determines how you will calculate taxes for the business moving forward. That’s not all it establishes, but from an accounting and liability perspective, it’s a big deal. It’s best to consult with a professional before you decide based on a Google search alone.
There are five types of business taxes. What you pay depends on your business structure and may include some or all of the following:
- Income Tax
- Estimated Taxes
- Self-Employment Tax
- Employment Taxes
- Excise Tax
How much startup capital do you need?
Investors and lenders will also want to know how much money you need to get started. They want to know that you have thought about it and have a plan for how you will spend it. Essentially, this is a startup budget that includes purchases, leases, licenses, and fees as well as basic costs for office supplies (phone, computer, and internet) and marketing (website, direct mail).
How much can you borrow for a startup?
The amount of money you are eligible to borrow for your business startup depends on a number of factors: your individual credit score, your business plan, and what collateral you can provide. Often times SBA loans go to established businesses rather than startups because they can prove revenue and use the business as collateral. Startups don’t have that kind of history, so lenders have to consider other factors and may or may not be willing to take the risk.
Which accounting software will you use?
It’s probably not the romantic part of entrepreneurship you dreamed of, but accounting is a reality of starting a business. Fortunately, there are some great tools available to help you. All you have to do is decide which tool will suit your needs best. Pine and Company can help you decide and train you to use the software so your startup starts off on the right foot.
What’s your cash flow projection?
Cash flow is the money coming into and going out from the company. To calculate a cash flow projection, it’s best to go month by month for your first year. Keep in mind that customers may not pay their invoices immediately, so don’t bank on having their money in the same month you provide the service/product, especially if you’re a B2B company. It’s a financial forecast and an estimate, but it helps you plan for some unforeseen circumstances.
How will your startup manage billing and collections?
What happens when a customer refuses to pay, skips out on payment, or writes a bad check? You can’t stay in business if you don’t get paid. You need a plan for how you manage billing routinely as well as when things don’t run as smoothly as you would like. Sending invoices is essential to getting paid, and getting paid is essential to staying in business.
Are you compliant with all the national employment laws?
There are a host of employment laws on the books. You need to be sure you’re compliant with all those that apply to you. National employment laws include (but are not limited to):
- Hiring practices
- Workplace safety
- Industry-specific laws
What’s your FEIN?
A Federal Employer Identification Number is like a Social Security Number for your business. To apply for one (and every business should), the business must be based in the United States and the applicant (an individual, not an entity) must have a valid tax ID number (SSN, ITIN, or EIN). You will need this number to file your taxes and for employee’s W-2s.
What insurance requirements will your startup have?
Depending on the type of business you want to start, you may need any number of the following types of insurance in place as soon as possible.
- Professional liability insurance
- Property insurance
- Workers’ compensation insurance
- Home-based businesses (extra home insurance)
- Product liability insurance
- Vehicle insurance
- Business interruption insurance