When the survival rate is low for new businesses, entrepreneurs should ensure they have everything they need to beat the odds. Often, though, they focus too much on a few factors, such as marketing, neglecting other equally essential things.
For first-time or budding businesspeople, take time to sit down and consider the following too:
1. Business Path
It may be cliché, but a business without a business path is like a ship sailing in uncharted waters without navigation tools. At some point, you’ll get lost. Then, all your efforts go to waste.
To make one:
- Start with a business plan — It’s a document that contains your business goals, the steps you should undertake to reach them, and the timeline. These pieces of information can help guide you in making critical decisions later. The plan also comes in handy when you want to apply for enterprise loans.
- Create a sales forecast — A sales forecast is a projection of how much you’ll likely earn within specific periods. It can be monthly or yearly. Usually, forecasts are up to five years. The figures give you a benchmark to hit and let you anticipate profits and possible expenses.
- Include an exit plan — Many entrepreneurs avoid or don’t know about having an exit strategy. Some consider it as a bad omen, but you have to realize you don’t last forever. Would you like to pass the business to your children in the future or sell it after 10 years? What happens if you die suddenly? Who will take over?
2. Business Registration and Permits
Some entrepreneurs rev up their company engine without making everything legal. The most common contention is they’re new and small. They may think they don’t need it, but they do, especially in states like New York.
- It spares the company from future litigation, particularly from the state.
- A legitimate business sounds more trustworthy and credible. It can even be a competitive advantage.
- You can claim your business name or determine whether another business owns it. This way, you can avoid potential intellectual property issues.
- You can give your business a structure. To register, you need to identify if it is a single proprietorship, partnership, or corporation. The choice can spell the difference in many factors, like taxation, business path, and profit and expense limitations.
3. Access to Banking Loans and Services
When you’re already an entrepreneur, you need to have a separate business bank account. First, accounting and bookkeeping is easier. Second, claiming your deductions is more convenient. Third, banks usually offer different services for entrepreneurs, which you may need:
- Loans, which helps boost your capital so you can grow your business faster
- Overdraft protection, which stops your bank account from closing or checks from bouncing
- Night depository, when the business has to remain open after banking hours
- Safe deposit boxes, which securely store not only cash but also essentials like documents or more valuable assets
- Various banking options like online, mobile, drive-by tellers, and bank by mail
4. Knowledge of Taxation
These days, taxation seems easier since you can already use tools like TurboTax or hire a seasonal tax specialist. However, even the most basic knowledge can go a long way. After all, the software can sometimes break down, and your firsthand information will help you make smart decisions later.
Some important taxation basics include:
- Schedule for filing — Usually, it is on April 15, but the dates may still change depending on circumstances. For example, in 2020, the filing for 2019 personal and corporate tax returns extended to July 15, 2020, because of the pandemic.
- Items you can deduct — You can claim certain business expenses to lower your personal taxable income, such as asset depreciation, utilities attributable to your operations, bank fees, advertising, and accounting fees. However, you need to itemize your deductions in your returns instead of claiming a standard deduction. When you have proper accounting and taxation know-how, you can weigh which type of deduction provides the bigger benefit.
- Penalties — Contrary to popular belief, the IRS won’t send you to jail immediately if you make a mistake. Often, it just involves paperwork. But when you know the penalties, you also identify the errors you need to avoid. You won’t like the hassle and extra expenses later.
Building a website, designing a product, and planning for logistics are vital, but so are others like the ones mentioned above. The more you cover the bases, the more likely it runs smoothly and survives the critical five years.