ESTABLISHING A NEW BUSINESS
© 2018- Joel D. Johnson
Establishing a new business is not difficult. It simply requires entrepreneurs to register their new entity in their county seat (normally the county’s court house), where the entity will be located. Most new business registration forms require the following:
For a sole-proprietorship,the company name, owner’s name, address, business category and SS number.
If a corporation has been formed (C-Corp, S-Corp, PLLC, LLC, or PC), a federal tax ID number is required, which is assigned when the corporate filing is approved.
All forms will ask for the company address, city, state, zip code, description of the business, and an entity category such as manufacturer, retailer, service, or professional services.
It is a good idea to obtain a copy of the form just to make sure you have available information before completing the registration. Registration forms may vary, depending on the state and county where the business resides, but most require basic information that will be shared with city, county, state, and federal agencies.
All this information is designed to notify the government taxing authorities that you are establishing a business and that you may have taxable income and other taxable assets. In addition, through no fault of these agencies, of course, your new company will be added to every snail mail and email data base, and telemarketers phone lists known to man.
As you probably know, a business name and other required data does not make you a successful business owner. It only proves that you have registered a business name. It also shows that you have confidence that you will be successful in selling your products or services—the thing you have long dreamed of. You have to believe you are going to succeed, otherwise, why would you bother registering the company in the first place?
TWELVE THINGS TO CONSIDER BEFORE YOU START YOUR NEW BUSINESS
You’ve probably said to yourself many times, “I’ve been making your stupid widgets for fifteen years now, and if it were not for me, you wouldn’t have a business. If I can do it for you, I can do it for myself.” That, of course, may be true to a certain extent, except for a few often overlooked or unrealized facts that you should be acutely aware of.
- You may be a highly trained and skilled ‘worker bee’. You love working your your hands. You love the feeling you get when you make something and you know it is done right. You pride yourself in creating the best. You are a technician, a “worker-bee”).
- You are creative. You love to come up with new projects, but hate the management responsibilities that go with it. Once the new project is moving forward, you want to pass it on to someone else to manage and then start something new. You are never satisfied. You are a dreamer and have a tendency to grow faster than you should. You have a strong entrepreneurial spirit. You are an entrepreneur.
- You love keeping score and you analyze every detail. You are organized and want everything in its place. You insist on keeping everything and everyone in balance with the company’s mission. You love income statements and balance sheets. You know how to read, analyze, and make necessary adjustments to overall plans. You love to manage people and things. You are a manager, a “controller-bee”.
- You may not realize that you have all three of these business personalities. As Michael E. Gerber says in his book, The E Myth Revisited, “The problem is that everybody who goes into business is actually three-people-in-one: the entrepreneur, the manager, and the technician. And the problem is compounded by the fact that while each of those personalities wants to be the boss; none of them wants to have a boss. So they start a business together in order to get rid of the boss. And the conflict begins.”
- If your dominant personality is that of a ‘worker bee’ technician, you may not realize the other sides to owning a business. You might very well be the best, most qualified ‘worker bee’ technician in the world, but that alone will not guarantee your success in business. If you start your business without business management skills or a qualified manager, you are most likely guaranteeing failure.
- FACTS: Eighty-percent of all new business startups close within the first two years. Ninety-five percent of all new businesses that close their doors, for one reason or the other, do so within the first five years. Most business closures that occur are due to lack of proper planning, poor management, and lack of capital.
- Realize that successful ‘worker bee’ business owners surround themselves with people smarter than themselves. They hire highly skilled and qualified individuals to manage and operate their business. Successful business owners understand that success and true freedom can only happen when the business is properly managed.
- You most likely will not succeed without enough working capital. You will need sufficient working capital to last until you break even, and beyond. Breakeven is when revenue and expenses meet. You will need to understand how to project the breakeven point.
- You will also need to understand how to project realistic revenue for each product or service category, which will require a market analysis; who the potential consumers are, where they are, their shopping habits, the market size, and the competitors.
- You will need to know how to determine needed gross margins (the amount of gross profit generated by the business after paying for materials, supplies, and labor) and how to project needed net operating profit after operating expenses.
- You may not realize there is a difference between mark-on and mark-up, or how to project business expenses, or why this knowledge can spell the difference between success and failure.
- The business model may be the most important item to consider when starting your business. You can offer your targeted customer base quality, service, price, or quantity. A good business model will consist of only two of these choices. You cannot be something to everyone. Successful business owners develop business models that are sustainable and duplicatable. Think Walmart, McDonalds, Mercedes Benz, Amazon, Apple, etc. No matter where you are, when you see one of these businesses you know what to expect when you do business with them. You’ll notice their business locations look the same, their employees dress the same, their products and their prices are consistent. And they are duplicatable because they have not only established a visual concept , but also all the necessary operation manuals and training required to make it happen. They duplicate success.
In addition, you may not realize that the process involved in good business planning could give you sufficient information to overcome these challenges. Business plans do not guarantee success, but they do force you to think through every detail. That process makes success a possibility.
Someone once said, “He who fails to plan is planning to fail”.
The E Myth Revisited
Author – Michael E. Gerber
ISBN – 0-88730-728-0