Entrepreneurship is a process and not a goal; a journey, not a destination. Being a successful owner requires you to think about the future and manage the present at the same time. It means you need to take concrete steps to secure that future as early as possible while being willing to change your plans as opportunity dictates.
One of the first things you need is a plan. You should take the time to develop a formal business plan with realistic financial projections, but any plan that maps out your objectives and gives you a way to measure your progress toward them is better than no plan. Just as it’s difficult to build a house without blueprints, it’s even harder jumping into business without an idea of where you want to end up. The beautiful thing about plans is you can fix them if they’re not working. Without a plan, you’ll be left wondering what happened.
Once you’ve developed your plan, it’s a good idea to build the team you need to pull it off. Your first team members should be a good bookkeeper to keep your financials in order and a CPA for handling your taxes. When selecting a CPA, make sure that you choose one that understands that future financing depends on reasonable revenue today. If Fast Eddie’s Tax Service can take a million dollars in revenue and turn it into a tax return that shows revenues equaling expenses and thus pays no tax, you should think twice about using them.
Before you think I’m crazy, let me tell you why. If your CPA creatively found every possible deduction (dubious or otherwise) to reduce your income making your tax burden exceptionally low, your business will appear to be unable to support repayment of the loan or credit line you’re requesting. And since the ultimate decision about any loan will be mainly based on the prior two years of performance, with your tax returns as evidence, you will be penalized for aggressive tax avoidance.
We have seen countless examples where solid, deserving businesses could not get the funding they needed to grow because the income they reported made the business look weak. This is especially true for cash businesses like restaurants and retail stores where the owner has control over what is reported and what isn’t.
You’ll need the services of an attorney to develop and review contracts and help you with legal challenges when they arise. It’s tempting to buy forms on LegalZoom and many times that approach is appropriate. But if you’re in an issue with a customer you will need to get the advice of someone you trust that will be looking after your best interest and not their billable hours. That can be done by building a relationship with lawyer, before you need them. It’s like getting your teeth cleaned, uncomfortable and necessary.
A good business consultant or coach can be invaluable in spotting gaps in your skills and helping you to exploit your strengths. They can also help you trim your business by eliminating waste and getting your employees more productive. If they’re good, they will be worth many times what you pay them. Sometimes, they can save your business. But like the lawyer, you need to find them before you need them, while they have some room and time to work their magic.
Finally, the linchpin to success for nearly every business is access to capital. Loans, lines of credit, receivables financing are all things that nearly every business will need at some point. Sadly, most business people don’t plan for this. Many will come to the bank, hat in hand, looking for help through a crisis. Unfortunately, banks don’t work like that. They are required to make sure that they lend to those who can repay and have a demonstrated history of repaying.
Developing a relationship with a banker early can smooth the way later. If they know you, they can champion your cause with loan committees and management. Like all of these team members, they will be more valuable the sooner you bring them on board.
A bookkeeper, CPA, an attorney, a business consultant and banker. Five valuable relationships that if chosen wisely, can greatly increase your chance of success. Don’t wing it! Start building your team today!
Dispatches From The Front 