foodconsumer.org: Should I take the Plunge and Start My Own Business?

Should I take the Plunge and Start My Own Business?
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admin on 10/30/2009 00:03:00
 
By Rachel Stockton
Karen Mills, the head of the Small Business Administration, told CNN that now is
a great time for those who have been pondering whether or not they should start
their own businesses to do so.  Necessity, she reminds us, is the mother of
invention.
So how do you know if you should go ahead and take that plunge? Many people are
convinced that being self employed is the way to go, simply because you can be
your own boss, establish your own hours, etc. All of that's true; but the fact
is the GREAT majority of small businesses do not make it.
Despite the fact that most small businesses crater, for some, being self
employed is preferable to working for an employer. However, there's one caveat:
in order to succeed, one must not only do her homework, she must remain very
nearly anal when it comes to record keeping. There is no magic formula for
success; in my experience, the same basic problems keep most business ventures
from taking off. This article starts on the assumption that all of the necessary
market evaluations have taken place, and that you've come to the conclusion that
your business idea is indeed, a viable one. Assuming this is so, let’s take a
look at some fundamental issues to consider:
1. Make sure you understand the necessity of establishing a detailed
accounting/bookkeeping system BEFORE the first transaction (which could mean
loan closing, or initial investments preliminary transactions that must be dealt
with before business commences). I have worked with many people who didn't
bother to get all of their bookkeeping ducks in a row from the very beginning,
and that simple oversight was the kiss of death. I remember one client, a
builder, who thought that he was making between $10,000 and $12,000 profit per
house he sold. When I finally got his books in order (and this was no small
task, I had to locate and enter EVERY transaction, from land closings, to rolls
of housewrap, to packages of nails), I discovered he was, in fact LOSING $2000
per structure. By the time I brought this to his attention (he didn't call me in
until he'd been building for a year), the bank cut off funding for further
development.
2. If you have employees, make sure you stay on top of filing your payroll
taxes. I have seen MANY small businesses go under because they are late getting
payroll to the state and the IRS, respectively. In the case of employee taxes,
the states and the IRS show no mercy. This is because when you fail to file
employee taxes, you are holding on to money that isn't your own some of those
funds were taken from the payroll checks from your employees. So, in essence the
government looks as fondly
n this as they do embezzling and it takes a grim, GRIM view when it comes to
embezzlement. Additionally, the penalties and interest accumulate almost
exponentially. Picture how fast the dollars roll by when you're filling your car
with gas. This is very nearly how quickly the penalties will rack up on overdue
payroll taxes.
3. Be timely filing your monthly sales tax, if you are in retail. Similarly to
payroll taxes, sales tax funds NEVER belonged to you; they were the government's
from the moment the sale was finalized. If you are even one month late, the
state will be on you in fast and furious fashion. On the flip side, when you do
business with someone who charges sales tax, make sure you see their state
issued sales tax permit (which is supposed to be in plain view). One of my
clients was paying sales tax to someone who didn't even have a permit. So, she
was charged an extra 9% on top of retail, while her supplier was pocketing it.
Said supplier is now under investigation for sales tax fraud.
4. Consult with an accountant. While accounting isn't rocket science, people who
practice it have had to go to school for 4-5 years to be qualified to assist
you. Let them use their knowledge. You'll save much more money in the long run
if you invest in their professional services. Remember the old saying, "Never
lie to your doctor, lawyer, or your accountant!"
5. Invest in good accounting software. My personal preference is QuickBooks
certainly there are quirks, as there are with any software package, but in the
case of QB, the benefits outweigh the quirks by a long shot.
6. Have your accountant regularly go over the financial statements generated by
QB or other software. I had one client who couldn't understand why he had very
little income after bringing in forty thousand dollars into his lawn care
business. He didn't understand that $40,000.00 in gross earnings didn't mean a
whole lot if his expenses were out of control. Analyzing your statements will
show you which expenses are out of control, and which ones could be reduced with
a little care and ingenuity. Preferably, do this at least every quarter,
although monthly would be better.
7. Finally, and all of the above suggestions hinge on this, make peace with the
fact that keeping immaculate records is absolutely imperative. Most people are
afraid of this aspect of running a small business. This fear keeps them from
going the necessary lengths to maintain proper accounting records. Don't let
this happen to you! Hire some help initially. If a one time consult is all you
need, great. If not, don't be afraid to pay for the services of a professional.
Again, you will save much time and money if you do this AHEAD of time, rather
than hiring someone to clean up the detritus of sloppy bookkeeping, which is
much, MUCH more costly in the long run.
And, remember, doing what you love to do is a wonderful thing. If you decide
that the self-employment route is indeed for you, make sure you stay on top of
the minutia. Doing so will increase your odds of long term success.