So You Want To Start A Business
There are many new businesses that start up each year, but those that enjoy long-term success are a minority. What does it take for a new business to beat the odds and be successful in the long run? Many decisions are made in the course of forming a new business that are vital to the success of the new venture. Getting good legal and accounting advice is the very first step in conceiving a new business. Seeking solid legal and tax advice is the common foundation of every successful business.
A formal business plan is a common beginning point in starting a new entity. It can be as comprehensive as 100 pages long, or can be written on a single sheet of paper. The main point is to set goals for what you wish to accomplish, and a step by step process as to how you will achieve them. A business plan needs to consider the following:
- Amount of risk you are assuming
- Loss of household income until the business makes money
- Means of capitalization
- Operating capital
- Operations management
Most of all, a business plan has to make sense. If your business plan, using a step by step approach, doesn't make sense on paper, your business ideas will fail.
An important consideration every new business must address is working capital. Many new businesses fail because the owners lack the adequate cash to persevere until the business begins generating money. Start-ups usually require more cash than anticipated by even the most conservative financial projections. In fact, most new businesses are under-capitalized. A new business faces almost certain failure without sufficient money to begin operations. It must be able to weather unexpected business slowdowns, and carry receivable and inventory.
Many entrepreneurs cannot obtain bank loans to start their businesses. The initial capital often comes form personal savings, home-equity loans, and/or contributions from family or friends. Even when a bank loan is obtainable, the bank will certainly demand collateral and personal guarantees. The financial risk and personal exposure in obtaining start-up capital from bank loan underlines the seriousness of starting a business, and should be evaluated carefully. The less debt a start-up business incurs, the more likely the new business will succeed.