How to Get Your Business Started

So you’ve decided to take the leap into entrepreneurship. Now what? Here are a few things to consider as you’re setting up your business.

1) Business Plan

First, you’ll want to take your idea and plan for execution and turn it into a business model. Writing out a business plan is a good blueprint for where you plan to take your business and helps you identify opportunities and risk areas through a better understanding of your market. A business plan should at a minimum include: executive summary, mission, background, organization, go-to-market plan, market analysis, market potential, and strategies (e.g. financial forecasts).

2) Create your legal entity

Create a corporation, Limited Liability Company, Partnership or Sole Proprietorship. If sole proprietor or partnership and you choose to use a business name other than your personal legal name, you must file a Fictitious Business Name Certificate (DBA) with your local County Clerk’s Office to identify the owner(s). Corporations and Limited Liability Companies (LLC) must file Articles of Incorporation or Articles of Organization within a state and maintain all records, minutes, etc., as required by law. Many companies choose to do this in Delaware because its business law is one of the most flexible in the country. You also don’t have to pay taxes on your business in Delaware if you are not operating there.

As a sole proprietor or partnership, you’ll want to file a doing business as (DBA) or fictitious business name (FBN) with the county you are operating your business in. You can look up the County Clerk’s website and find out how to file the DBA/FBN.

3) Licenses, Permits (specific to your line of business)

If you are selling goods within a state, you’ll need to file for a state business license. If you are selling specific goods, like alcohol or firearms, you’ll need to obtain specific licenses. Depending on the state you are operating in, you may be required to obtain a business license within each county/city in which you are performing work. Check with your County Clerk. Look into special permits for your industry, e.g. construction or food and beverage.

4) Taxes and banking

You’ll want to be set up with the IRS, so be sure to look into forms needed. You can always call the IRS to be sure.

As a business you are required to have an Employer Identification Number (EIN) to use as a federal taxpayer identification number. You will need this number to open a business banking account, pay employees and for tax purposes.

5) Business address operations

You might be thinking you don’t need to worry about this because you are planning to work out of your home for the foreseeable future. However, there are zoning laws even in your neighborhood. Common zoning restrictions include: no deliveries, no inventory storage, sign restrictions and no customer parking to name a few. Please check with the jurisdiction in which you plan to operate a home based business for permit requirements and fees along with additional information.

6) Hiring employees

Consider what work your employees will be performing and get workers compensation if necessary. There are also incentive programs for hiring new employees in certain states. You can find out more about this through local resources (see below).

7) More resources

Finally, if you are looking to network or get free advice on the basics of starting out, you are in luck. Most places have local resources to encourage your business to grow and flourish. Leverage these! Some of them include the Small Business Development Center (SMDC), Small Business Administration (SBA), and Chamber of Commerce. They will also likely to provide you more resources from there. Also start to think of adjacent industries that you could benefit from working together, e.g. you’re start a landscaping business so perhaps you can reach out to your local Chamber of Commerce for contractors or interior designers to connect with.

This is an exciting time, so use the resources you have to help you get going!

What's Ahead: How to Prepare your Small Business for an Economic Slowdown

In early days of starting your business, you’ve considered many factors to the health and success of your endeavor, including the external economic climate. As the day to day operations and customer demands become more pressing, potential external threats to your business might not seem as important. However, it’s always important to consider the “what could go wrongs” so your business is set up to weather through any tough storms. Many economists predict we could see a slow down by end of 2019, which could impact everything from loans to consumer spending.

Also, studies show that forecasters are generally blindsided by recessions, precisely because they tend to be preceded by economic strength. When your business is doing well is precisely the time to start considering risks and threats that could impact your business. Having a strong risk mitigation strategy not only prepares you for economic downturns but also allows you to consider future impact should things continue to strengthen.

While each business and industry will have its own unique considerations, here are some general areas to consider to mitigate negative impact of economic slowdowns. If you are looking to better understand risk areas, mitigation strategies, and specific strategies for your business, reach out to Hawk Consulting for an initial consultation.

  1. Client Pool

    It’s important that you have diversity in revenue streams, which means you aren’t reliant on majority of your income from a few companies. If you mostly work with small companies, ensure you are working in a few industries so that if one can no longer afford your services, you still have a pool of clients. This is also a good time to work on building relationships with those in adjacent industries for referral business.

  2. Vendor Options

    Similar to diversity in clientele, being reliant on one vendor for your main product or service offering can be extremely problematic. You should always have a backup plan should your vendor stop delivering quality work or worse, experience financial troubles of their own. If this isn’t thought through in advance, you are at the mercy of the vendor, which can impact pricing, availability, and quality. Also, see if you can extend payment terms with your suppliers should you need more time to pay without penalty.

  3. Revenue Sources

    It’s also a good time to consider other ways you could bring in revenue outside of your primary product/services, such as advertising on your website. Do not neglect current revenue streams and ensure you have a pulse on your current clients and how you can add additional value to that relationship. This is also a good opportunity to understand your customer’s credit risk and know which customers cost more than they are worth and evaluate if makes sense to continue the relationship.

  4. Cost Reduction / Budget Restraint

    Knowing which areas you could sacrifice spending and still operate efficiently will be vital during a downturn. Consider outsourcing certain non-essential functions and maintaining low inventory levels to keep costs down. Making sure management has buy-in and understands repercussions prior to having to make these decisions to allow your company to operate lean and scale back as needed.

  5. Cash Reserve

    The same advice that individuals should save for a rainy day can be applied to businesses. Make sure all your money isn’t tied up in high-risk investments or financing, as much as possible. According to the McKinsey Institute, companies that were able to survive the last recession could finance internally through “high cash balances and a low dividend payout.” Have at least six months of reserves on hand to keep company operations afloat.

While this is just a brief overview of areas to be aware of, generating a full risk mitigation strategy will help your team prioritize focus and have your company more prepared for the potential of a weakening economy.

Startup Life: The Benefits of a Top-Bottom Risk Assessment

When starting out a company, entrepreneurs have enough on their plates without focusing on financial and business best practices. However, conducting an audit of the financial processes and overall risk assessment early on will ultimately save time and money, identify areas of inefficiencies, and allow the company to scale by avoiding some common growing pains plus being able to navigate uncertainties through robust risk mitigation plans in place.

Risk Assessment

Early recognition and mitigation of risk are critical factors for success, especially for startups, since there isn’t much room to recover from failure. In addition, by anticipating and getting ahead of potential areas of concern, the company becomes more adaptive and agile, minimizing the impact of adverse events to the business.

A top-down risk assessment doesn’t need to intimidating, and the value ultimately outweighs the upfront time / cost commitment. In addition, identifying and managing risks inherent to your company’s industry and competitive landscape can often mean the difference between failure and success. Planning for the “what could go wrongs” will bring clarity in future business strategy decisions. No one knows the business better than those managing its day to day. A proper risk assessment will look at the financial health of the company and also better understand the current and planned future state operations. With this in mind, along with industry analysis, Hawk Consulting provides feedback on low/medium/high risk areas in the business, identifies potential fraud scenarios, and gives recommendations on business and finance controls to implement to minimize high risk areas.

Preliminary Audit of Financial Processes

In addition to a top-down risk assessment, taking an audit and inventory of your company’s financial processes can help identify gaps or areas for improvement. This preliminary assessment involves understanding your financial cycle processes, e.g. cash collection, vendor/supplier setup and pay out, budgeting, payroll, accounting systems, etc. Along with the controls identified in the risk assessment, Hawk Consulting will identify major financial accounts that lack a strong process flow or have potential fraud risk and assist with developing controls to prevent stagnation or collapse to your business. In addition, startups generally have basic processes in place and a preliminary audit shouldn’t break the bank to start establishing best practices.

I’m not planning to IPO (any time soon at least)…Do I really need an audit? The audit should complement the risk assessment and not be thought of as the traditional IRS audit where you have to turn over every receipt from every business transaction. This is a higher level look at where you’re at as a business to help you scale and is best recommended in the first three years of operation to help set up the right practices. Best of all the value will be seen immediately… tightening up finances, fixing accounting errors, more efficient processes, and fraud mitigation, to name a few.

Final Stage - Strategic Execution

The last phase of the top-down risk assessment is the strategy and operations of the company and putting a plan in place to execute on the results. This involves working with management on high areas of risks and timeline for control implementation. Then establishing a tracker to have accountability and ownership. Hawk Consulting offers retainer services to assist with year-long implementation plans, or can create a roadmap for self-management.