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Five Tips For Setting Up Your Own Business

By Jana Walker, CPA

 

As we start back to school each fall, one of the first questions I ask my students in the Introductory Financial Accounting course is, “How many of you would like to own a business?”. Each year, the number of students with hands raised have grown. Starting a business is not for the faint of heart. Although the majority of startup businesses still make it past the first year (75%), nearly 50% are not in business after their 5th year according to the U.S. Bureau of Labor.

Here are five tips for setting up your own business so that you can be on the right side of the 50-50 coin flip:

  1. Do your homework

The first question to ask yourself is “Does the market need my product or service?”. The key to this question is what does the market say, not your biased opinion of what you think the market wants. Conducting an extensive amount of market research will identify whether you have the opportunity to turn your idea into a successful business. If there is no market for your product or service – regardless of how well you plan or how much capital you have to start – then there is realistically little potential for the idea to be turned into a profit-oriented business.

 

  1. Map your business plan out in writing

It’s one thing to be a dreamer with an abstract idea and another to put pencil to paper (or keyboard to screen these days). A written business plan serves as the foundation of your business. There are a ton of different decisions that you will have to consider as a business owner. For example, what type of product will you be selling, where will you be located, where will your customers be located, do you have any employees? The United States Small Business Association (SBA) provides a free guide to writing business plans. You can access these plans on the SBA website at https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan.

 

  1. Create a budget

Determine how much start-up capital you will need for your business. Are you going to self-fund your adventure? Alternatively, will you seek outside investment or lending options? If you are a product producing company, there are many costs associated with production. You want to ensure you have proper margins between your selling price and cost of production to cover your overhead. The financial planning component of your business cannot go understated or take a back seat to your operations.

 

  1. Talk to your attorney and CPA

Once you have decided you do have a business, you need to determine what type of legal structure is most appropriate. A licensed attorney is the best professional to answer these questions. Each state has its own organizing rules and regulations. In correlation with the legal structure, there are also tax implications.  The Internal Revenue Service (IRS) will treat your organization differently depending on what type of legal structure you select. A licensed Certified Public Accountant (CPA) will be able to tell you what would be the most advantageous for your circumstances. An attorney and CPA can assist you in getting your business registered with all required agencies. Getting your business set up properly from the beginning will save you an enormous amount of time and money down the road.

 

  1. Put in the work and be realistic

In today’s business environment, the entry into the market is relatively easy. Although certain industries do have more extensive barriers to entry, essentially anybody can deem themselves a “business” owner or the hotter term “entrepreneur.” Becoming a business owner means you will be working longer hours, with a greater deal of responsibility than ever before. There is also a good chance you may be taking little to no draws from the business during the beginning, so make sure you are financially ready to take that hit. There is no substitution for hard work and dedication to running your business.

 

 

 

About the Author – Jana Walker, CPA, is the owner of Jana A. Walker, CPA, PLLC in Woodward, Okla. She graduated from Northwestern in 2012 with a Bachelor of Science degree in Accounting. She earned her Certified Public Accountant (CPA) license in 2013. Ms. Walker continued her education at Oklahoma State University in Stillwater and graduated in 2014 with her Master of Science degree in Agricultural Economics. She is currently a full-time faculty member for the Division of Business at Northwestern. She is married to Wade Walker, ’05, and they reside with their two children on their ranch near Freedom, Okla.

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