Entrepreneurs often have many ideas. Even if your idea is great, there is a large difference between having a great idea and a successful startup company. Turning your great idea into a successful company can sound like an intimidating task, but with some hard work, dedication, money, some sleepless nights, and even some failure before you succeed, it can be done.
The hard and bleak reality is that the majority of small business startups fail. In fact, 71% of businesses fail within 10 years. So, to avoid being like the average startup, you need to create a plan for success. Once you get your company started, you will need to work just as hard to keep it going each year. With that said, it’s helpful to have a guide and a set of instructions to follow that can help you get started.
Make a Business Plan
Having an idea is one thing, but having a legitimate plan is another. Starting a business without a plan is very risky, and having a blueprint for your business is essential for its success. Writing a business plan is the best way to test whether or not an idea for starting a business is feasible. Writing a business plan can save you a great deal of time and money if working through the business plan reveals that your business idea is untenable.
Having a plan will also ensure that you pay attention to both the broad operational and financial objectives of your new business and the details, such as budgeting and market planning. Spending the time to work through the process of writing a business plan will make for a smoother startup period and fewer unforeseen problems as your business becomes established.
Additionally, new businesses need both startup and operating capital to get off the ground and without a well-developed business plan, there is no chance of getting debt financing from established financial institutions such as banks or equity financing from angel investors.
Develop a Bookkeeping System
Having a well-developed bookkeeping system is the key to making sound business decisions. Bookkeeping is the basis of your accounting system, and it covers the day-to-day process of recording transactions, categorizing them, and reconciling bank statements. If you decide to do it on your own, you’ll definitely want to do some research on the best small business accounting software available on the market.
Outsourced bookkeeping services for small businesses can help your business prepare for tax time or review and clean up some problem areas. As a business owner, you are more efficient in making business decisions when you have access to your Profit and Loss and financial statements (AR’s and AP’s) in real-time. Outsourced bookkeeping services will also provide interactive financial statements as well as helpful visual reports so you can see your business’s financial health at a glance.
Secure Appropriate Funding
It’s rare for entrepreneurs to have all the capital they need to start a business at the exact moment a great idea strikes. More often than not, a startup needs a little bit of financial help before it can get off the ground. The cost of doing business is much higher than people initially think.
As a rule of thumb, you should only invest what you can afford to lose. Conduct an audit to determine your assets and your debts. Then commit to setting aside a reasonable portion of your savings to invest in your business, and make a plan for how to raise the rest. In order to secure the appropriate funding, you need to find out how much money you need to raise. To find this number, you need to research and predict realistic financials in your business plan.
You will need to use your financial plans including the balance sheet, sales forecast, profit and loss statement, and cash-flow statement to determine how much funding you need to raise in order to get started. It is important to remember that 82% of businesses fail due to cash flow problems.
Banks are less likely to give large amounts of money to new companies with no income or assets to default on. Only 22% of business loans go to small businesses. The vast majority of business loans are for large companies that are already established. So if you can’t get money from a bank, who do you get it from? Small businesses must find investors that could be friends, family, angel investors, or venture capitalists.
It’s imperative that your business plan has a proper executive summary. Investors are busy and may not take the time to read through your entire plan if the executive summary doesn’t give them a reason to move forward.
Set up a Payroll System
As a small business owner, chances are you’ll be a one-person show. However, when you do decide to hire additional employees, it is essential you have a system set up to pay them.
Outsourced payroll professionals can manage your time-consuming payroll processing and payroll tax filing, so you can focus on value-added and revenue-generating activities. Reduce in-house staffing needs and time spent on tedious tasks. Small business owners spend an average of eight hours a month performing payroll functions. That’s 12 full days a year that could be spent generating sales, prospecting new business opportunities, improving products or services, or servicing customers.
Calculate Gross Margins
Improving your gross margin is the very first step toward earning more income. Investopedia defines Gross Margin as:
A company’s total sales revenue minus its cost of goods sold (or cost of service delivery), divided by the total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations.
To do this, you first need to know how much it costs to produce your product. Gross margin is the total sales revenue that’s kept after you cover those costs. Gross margin is an excellent metric to understand if you are selling at the right price and/or your cost to produce x-amount of revenue is cheap or expensive.
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Business Accounting & Bookkeeping Services
Our certified professional advisors will make sure you have this information in the palm of your hand and kept up to date. Whether you need to prepare for tax time, a financial review or you just need to clean up some problem areas, Limitless Investment and Capital’s bookkeeping services is a smart and affordable way to get a handle on your books.