Starting a New Business

A Call to Entrepreneurs Starting A New Business
So, you have a great idea!

By Linda Logan, Partner and President, Fiscal Foundations, LLC

To those of us with an entrepreneurial bent, nothing is more exciting, intriguing, or challenging than the idea of starting a new business or a non-profit organization if your leanings are toward solving social problems.  It’s like the call of the wild to a wolf.  We’re drawn in, consumed by a great new product idea, a service vitally needed, or a socio-economic problem or cause our society struggles with.  Creativity, ingenuity, invention, imagination are our strengths, BUT what happens after the great idea?  What’s the next step?  What’s the secret to bringing your wonderful idea to the marketplace?

The answer may not sound as exciting as the idea, but it absolutely separates the winners from the losers.  The answer is that you must have a complete structure---resources, processes, procedures, a team of professionals, an accounting system, and perhaps a staff of people---for producing, selling and delivering your product or service.  You need to conceptualize this structure before you ever commit to following through on the idea.  In other words, don’t try to wing it!  Have a plan firmly in mind before you start or make any financial commitments.

I know that people often resist the idea of writing a business plan.  That’s because it feels like a dry, meaningless exercise in which they mostly make up answers they think might sound impressive.  If that’s your frame of mind, just say, “Well, that was a great idea.  Hopefully someone will implement it someday, but it’s not for me.”  Save yourself a lot of grief and financial loss.  This article is not about writing a business plan, but all the questions asked and the answers you give will prove useful to you if and when you get to writing a business plan.  My company is in the business of providing training and accounting systems to small businesses.  We’re not like the CPA firm whom you see a few times a year for planning, special advice or tax preparation.  We’re in your place of business, working with you, your employees, and accounting systems to make sure you know what to do on a daily, hands-on basis, to record your financial transactions, and to analyze and make decisions about your business’ performance.  This is where the rubber of your everyday work meets the road to success. 

As you’ve imagined this product or service, you’ve considered what it would consist of (product features), who would buy it (various types of customers) and why (benefits and achievements from using your product/service).  From these definitions, you have the beginning of a mission statement.  As you continue to ponder your product and business idea, you’ll refine that statement to a brief, inspirational message that describes your reason for being in business and what you intend you and your customers to accomplish through it.  This is an excellent exercise because it focuses your attention and efforts down a defined path.  Stick to your mission; don’t try to be everything to all people.  Do what you know best.

The next question is what processes are necessary to produce, sell, deliver and service your products and services?  Your list may include:

Additionally you need systems for managing human resources:

You’ll need professional assistance from some or all of the following:

Let’s draw a picture of your business.  If you can answer all these questions, you’re ready to take the next steps.
 
WHY?     

PURPOSE?     

BY WHOM?     

HOW?     

WHAT?     

FOR WHOM?    

LEARNING HOW TO IMPROVE

The next step is to get your accounting system set up so you can get your business started off on the right foot.  You may think it premature to concern yourself with accounting before you’ve even begun any start-up activity.  Here are the reasons you need an accounting system from Day 1:

Choosing the right accounting software for your business and obtaining professional help for set-up, training and support can prevent endless nights of worry and lack of sleep.  An exaggeration?  Not according to the many business owners we work with everyday!  Most of our small business clients use QuickBooksTM software.  It’s comprehensive, affordable, and accountant and user-friendly.  Unless your type of business requires an industry-specific application, it will likely suffice for your needs.  An accounting or bookkeeping professional can confirm this for you.

The second task is designing and setting up your Chart of Accounts.  This must be done by a professional unless you have that level of accounting skill yourself.  Accounting education and/or significant experience is required.  The Chart of Accounts provides the framework for your accounting system and reports.  Customizing the Chart of Accounts and management reports ensure you can stay on top of your business performance and manage for success.

We also recommend you engage professional help for:

Most small businesses don’t have enough accounting work to justify hiring an employee.  Though professional suport bears a higher hourly rate, you will save money on payroll taxes, benefits, and insurance, and you’ll only pay for the time it takes to get your work done. Because of advanced knowledge and experience, a professional will be more efficient than an employee in general.  This type of assistance is best provided by a professional bookkeeper.  CPA’s do not offer these services, or only offer them on a very limited basis, and charge about twice as much as a professional bookkeeper. 

Following these steps will significantly increase your chances for success.  A statistic you hear frequently is that 95% of new businesses fail within the first five years.  Our clients in the Minneapolis-St. Paul metropolitan area and western Wisconsin are having a different experience.  In contrast to the statistic above, while 32% of our clients are still within their first five years, 10% have been in business 5–10 years and 58% have been in business over 10 years.  Having good accounting systems and on-going support has significantly contributed to their success.  Ask successful business owners you know how important accounting is to their business.  In the future, we expect to open branches in other metro areas around the country, but in the meantime---

Thanks to the internet, we can help you get started wherever you are!
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