Episode #4 | Starting a Business; Planning, Financing and Managing Your Business; Legal Resources
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This episode of Wealth Nation is all about planning, starting and running a business. Topics covered include business plans, legal structures, financing options, and online resources to help manage a business.
Show Notes
Steps to Starting a Business
The US government has a great site at Business.gov which covers the steps to starting a business.
- Decide on your business format (Sole Proprietorship, LLC, S-Corp, etc.)
- Register a Business Name (“Doing Business As”)
- Get a Federal Tax Identification Number (EIN)
- Register for State and Local Taxes
- Obtain Business Licenses and Permits
- Employer Responsibilities
Writing a Business Plan
Quick overview of How to write a business plan would be great. Also, how to apply for small business loans and/or gov grants. I’ve been to the SBA site and it hurts my head!
- Paul
First of all, don’t stress about it. Creating a business plan is part of thinking through and envisioning your success, and you should take your time. A good plan could take weeks to fully bake. According to Entrepreneur magazine, there are 7 components to a good business plan:
- The Executive Summary
- Business Description
- Market Strategies
- Competitve Analysis
- Design and Development Plan
- Operations and Management Plan
- Financial Components
Your business plan is more important for proving to yourself that you can absolutely do this than it is to anyone else. However, expect to have investors scrutinize the plan closely if you intend to raise money.
Free Business Apps
What free software suite helps manage people and business best? Google apps?
- Matthew Willis
Google’s apps are great for collaborative sharing. For example, being able to open a shared Word document and having multiple people editing it at one time can be useful for meeting notes and the like. But for true workforce management it seems that Zoho offers the most complete suite of services.
Many are free, though there are some limitations like the number of users. Still after you reach a certain size, you should expect to begin paying for the services that keep you in business. Zoho’s offerings include:
- Zoho CRM – On-Demand CRM Solution
- Zoho Invoices – Online Invoicing. Quick and Easy
- Zoho Meeting – Web Conferencing, Remote Support
- Zoho Projects – Project Management Software
- Zoho People – HRIS & Applicant Tracking System
Cash Reserves vs. Debt Payoff
With the current economic climate, do you recommend increasing ‘emergency’ cash reserves or paying off debt (i.e. Dave Ramsey’s debt snowball)?
- Shannon P
My recommendation in this area doesn’t change relative to the economic environment. You should always have 3-6 months of cash reserves in an untouchable savings account, that is only there in case of a catastrophe. If you have two earners in the family you can probably be closer to 3-4 months, with a single earner a larger cushion is necessary.
Once you’ve got your cushion, you need to aggressively pay off debt, starting with credit cards. Pay them one at a time to get them completed. Consolidate as possible.
Testing a Business Idea
What’s the best way to test out a business idea to see if there’s a market for your service before you spend a ton of money getting ready to provide it? –Sheryl Schuff
This is a tough question to answer, because some business ideas must be built before they can be tested. However, if you have the ability to produce a few small batches of product and test market them before going full bore I highly recommend doing so.
It’s also important that as you are investing in the early stages of a business to set some goals and benchmarks and be willing to walk away if those are not being met. This is the most difficult thing to do with a new business because people get so emotionally attached to their idea.
Business Name Conventions
I recently started an LLC, and it is my understanding that I must always refer to the company as “CompanyName LLC”. Should I ever want to refer to the company’s product, I may occasionally want to say CompanyName’s ApplicationName. To do this, is it necessary to register a DBA (doing business as)?
- Daniel
Technically yes, you registered the name with the LLC attached so in official documents you need to add that in. However, in casual conversation, marketing literature and product documentation I’m not aware of any reason that you really need to ensure the LLC is on the end. I would however eventually register a DBA just to lock it up.
Sole Proprietor Business Issues
What kind of legal stuff has to be filed for a single-person (sole proprietor) freelancing business? At what point must a sole proprietor start filing business taxes instead of just logging the income as “extra income” on their personal tax forms?
- Daniel
There is no point at which you are forced to convert from a sole proprietorship from a legal standpoint. But from a practical standpoint LLCs, S-Corps and other legal structures will provide some protection and some potential tax advantages.
Online Legal Resources
Also, can you provide me in the direction of some web resources on how to trademark a name on your own? As a startup in these tough economic times it would seem prudent to do these types of simple filings on your own rather than enlisting an attorney.
- Rick Huizinga
Got advice to add? Please do so!
Episode edited by Dave Moyer
Other Articles
I found the following link while listening to the portion of your site on business plan writing: http://www.score.org/template_gallery.html
Thought some of your listeners/readers might find it helpful.
Thanks again for your hard work and all the great guidance.
-Sean
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