Starting a business or being your own boss can be incredibly satisfying and fulfilling. Businesses provide financial flexibility unlike when one is employed, and can act as a source of inheritance for your beneficiaries or spouse. The new venture requires an individual with perseverance, because it will take the owner committing his or her time—maybe every waking hour, to build a successful business.

Developing an idea
Before one can start a business, there has to be an idea that will determine the type of business and opportunities available in the business. For example, brainstorming with the Maslow Hierarchy of Need may provide some viable business ideas.  Also, leveraging existing life and work experiences might help in coming up with an opportunity.

Feasibility Study
After the idea is developed, the most important part of ensuring the idea is viable is to conduct a feasibility study. This will help gauge whether the business idea has a good chance of success. The feasibility study identifies competition, the market target, uniqueness of the idea, and other factors such as technicalities involved in developing the idea, human resources factors, financial capital, and legal requirements. Knowing the economics of the business will help the entrepreneur make pertinent decisions.  In addition, researching whether the business idea is practiced elsewhere or is a brand new concept will aid in determining viability—after all, why reinvent the wheel?

Determine the reason for starting the business
A business idea can be effectively implemented if the owner has a close personal connection to it. This requires the owner to examine the goals and expectations of developing a new venture. There are several motivating factors: independence, personal fulfillment, lifestyle change, income improvement, respect, and control.   If you have a good idea and a solid reason to start the business, the next step is to develop a business plan.

Business Plan
A business plan is important as it contains all strategies needed make your business a success.  It should contain an executive summary which gives a brief overview summarizing what appears in the business plan; reveals the mission statement, and explains why the venture is being started. The business plan acts as a blueprint and helps the business owner make decisions on whether to proceed or abandon the venture.

  • The business description is contained in the business plan and it describes the business legal structure. Generally we recommend the use of Limited Liability Companies.  This part also describes how the business will stand out in the market and the type of products or services that will be offered and target clientele.
  • The market analysis describes the ins and outs of the industry, and the specific market approach.
  • The SWOT analysis is used to identify strengths, weaknesses, opportunities, and threats that might affect the success of the business.
  • The management and organization description tells who will help in running the business. If it is a sole proprietorship family members may be included. The structure of the organization is developed showing a chain of command.
  • A breakdown of products and services is developed which gives detailed information on how the product will be developed and sold. Also it will describe the material suppliers and outline the cost of manufacturing.
  • The marketing plan describes how the products or services reach the customer, and the budget that will facilitate the delivery of the products. Considerations within the marketing plan should include developing a website. Be sure to choose an internet address that is easy to remember. It should be able to support customer traffic and offer fast processing.
  • A sales strategy describes how the product will be sold. It may include advertisements, personal selling, discount strategies s and promotional methods.
  • The funding component discusses the amount needed to make the business a success. The capital may be obtained from a venture capitalist, angel investors, family members, equity, debts, sale of personal assets and other approaches of getting funds.
  • The last component is developing a financial projection which shows the breakeven of the business. I suggest projected financial statements that describe the financial performance over at least the first 12 months of operation.

Decide on Vendors and Suppliers
Consideration should be given to what services the business will need and selecting the right vendors to work with such as cleaning, maintenance, security, insurance, accounting, and retirement plans.

Rent or lease?
Before opening a business one should make a decision on whether to lease or rent facility space and/or equipment.  Leasing may act as an off-balance sheet transaction, and with no down payments required, this may improve the credit of the firm. However, leasing may be more expensive in the long run and it probably does not allow for up-front income tax expensing.

These are just some of the key considerations to evaluate when starting a new business. For additional assistance call the KTLLP Team for a consultation or request a copy of Is Owning a Business Right for You?, an electronic booklet written by the tax and valuation experts at KTLLP.