What Not To Do When Starting A Business: 2 Tips For Financial Health
Is there anything like the excitement of new beginnings?
And no beginning is quite as thrilling as deciding to become your own boss and start a business.
Yet, nothing blunts the thrill of starting a business like capital drying up faster than anticipated. Early financial planning goes a long way in turning the initial thrill of starting your own venture into the excitement of long-term business success.
Here are 2 practices to avoid to start your business’s financial health off on the right foot:
1) Not putting thought into your business structure
There are advantages and disadvantages to the various business structures. Researching the different options available to you is the only way to ensure you’re setting up the right framework for your company.
For example, you may choose to file as a sole proprietor. Sole proprietors make up 70% of U.S. businesses and are the easiest business structure to form. Yet as a sole proprietor there is no legal distinction between your personal entity and your business’s. This means that you personally are liable for any losses or debt on the business.
You may instead choose to form a Limited Liability Corporation (LLC), Cooperative, Corporation, Partnership or and S Corporation.
Additionally your business structure can affect the amount you will be taxed, so it’s worth it to put thought into this decision.
2) Gauging the profitability of an industry, without looking into specifics
If you’ve seen Frozen (and, let’s be honest, who hasn’t?) I’m sure you remember Kristoff, who had the misfortune of being an ice salesman in a city totally covered in snow. While you may have had a hearty laugh at Kristoff’s expense, his professional experience might not be as rare as you’d think.
To avoid making Kristoff’s mistakes, check out the competition. If you’re opening up a brick and mortar store that means checking out the demand in your region. If you’re starting an e-commerce business you should research the volume of demand for your niche.
Time spent reviewing demand will (literally) pay off, as you ensure that you’re entering a market that has the potential for great profits.
Maintaining excitement, keeping perspective
It takes a lot of effort and a bit of luck to manage a growing business. Set yourself up for success from the start by investing the time to review the different structures and merits of the market you want to enter.