Bruce Bechhold, CPA, is committed to helping business owners with their tax, accounting, and business needs. His goal is to help clients grow their company, understand their financial statements, and reduce their tax exposure.
Contact Bruce at 216-573-2330 or B.Bechhold@Walthall.com.
By Bruce Bechhold, CPA, Walthall CPAs
According to the National Women’s Business Council, there are approximately 10 million women-owned businesses. Many started small, begun by women seeking the exciting and potentially rewarding experience of “being their own boss” while doing something they enjoy. If you’re thinking about starting your own business, you’ll need a sound plan, a little creativity, personal dedication, and some form of financial investment.
First, why do you want to start a business? You should believe you have a great idea that you are passionate about. Are you prepared to invest the time, money, and personal resources to get your business started?
Do you have a unique idea, or do you want to get involved in a type of business that already exists, like a franchise? What products or services will your business provide? Have you identified your target market? Who is your competition, and what will separate your business from your competition? Is there a viable place in the market for your business? Depending on the type of business, how long will it take before your products or services are available to your target market? How big and how quickly do you want your business to grow?
You’ll have to do some market research to determine the potential size of your market, identify the competition, and set the price of your goods or services. Develop a written business plan, research the best legal entity to use for your business, and understand what licenses and/or permits you’ll need. You’ll have to figure out how much capital you’ll need to start your business, and where that capital will come from.
A business plan is essentially the story of your business. It serves as a road map to success, and if you’re seeking financing for your business, you most certainly will be asked for one. Most plans cover these essential elements:
- An executive summary, which describes your business, your profile, and goals
- An in-depth explanation of the history and development of your business
- A product/services summary
- A customer description, market analysis, and competitor analysis
- A description of your business’s legal entity and management organization
- An explanation of your marketing plan and sales strategy
- A capitalization plan, including projected revenues, cash flow projections, pro forma financials, and an explanation of how you’ll use funds
What form of legal entity will your business will take? If you’re starting a business from scratch, your options are many. The type of entity is important because it can determine the permits you’ll need, where and how your business should be registered, the extent of protection from personal liability you’ll receive, and the amount and form of taxes that may have to be paid. Consult a financial or legal professional before selecting the type of entity for your business. All the business structures are outlined in our Guide to Staring a Business in Ohio (www.walthall.com/ohio-new-business/).
You’ll need to figure out where to get the funds to set your dream in motion ̶ and sustain it. Develop a line-item budget, projected over a period of months and/or years. The two general categories of financing available for businesses are debt and equity. Debt requires repayment of a loan. Equity involves raising capital by selling parts of the business to investors. You may be able to raise money for the business from your savings or borrow against a retirement plan, life insurance policy, credit card, or the equity in your home. People often turn to friends and family for new business funds. This type of funding tends to be more successful if structured in a business manner, with clear terms of repayment or ownership participation.
You can also apply to banks or credit unions for loans. Visit the Small Business Administration site at www.sba.gov/content/women-owned-businesses to find resources to help you start and finance your business. Also, your local chamber of commerce may be able to refer you to state and local agencies that provide financial assistance to new businesses located within your geographic area.
There are plenty of other things to consider: taxes, licenses, fees, permits, location, advisers, and marketing. Will you have employees? Will you add a retirement plan? If so, you’ll have regulatory requirements and tax responsibilities, as well as possible workers’ compensation to consider. Be sure to seek guidance.