Five smart questions to ask when starting a business
Every year, entrepreneurs launch roughly 600,000 new small businesses in the United States, according to the U.S. Small Business Administration. For those who dream of running their own shop, the Wisconsin Institute of CPAs recommends asking these questions to be sure you get off on the right foot.
What’s the starting point?
No matter how much energy or expertise you may possess, they will not be enough to guarantee success if you don’t start out with a realistic and thorough business plan. Your plan explains your business to potential investors, lenders, vendors and other business partners and reassures them about the viability of your company and the value of doing business with you. Putting your plans down on paper also helps you, as the owner, to better understand how your new venture will operate and makes it easier to spot potential strengths and weaknesses. Creating a business plan can help answer some critical questions, including what you will need to get started and how long you may have to wait to earn a profit.
What goes into the plan?
Plans generally begin with an executive summary that introduces readers to your business and spotlights key aspects of your company. This is usually followed by a market analysis discussing conditions in your industry, the short- and long-term outlook for your market and how your market research has affected your business plans. The company description (a general overview) is another key element of the plan, as is a review of your company’s organization and management, including discussions of the background and experience of company executives and how these attributes will contribute to the organization’s success.
What do you offer?
Of course, you’ll also need to include a detailed description of the product or service that you will be selling. Be sure to write this section with the reader in mind. That means that in addition to talking about the excellence of your products and services, include information on why customers will benefit, what makes your products or services unique and what competitive advantages you would have over others in the same market.
Do the numbers add up?
If you will be seeking funding from investors or lenders, your business plan will also include information on how much money you need and how it will be spent. You should also be prepared to provide estimations of possible future funding needs. And no matter what your goals for your business, the plan will include financial statements. If you have already begun operations, your financials would include income statements, balance sheets and cash flow statements for at least the most recent year you have been in business. In addition to this historical financial data, your business plan readers will also want to see prospective data that gives a realistic sense of your company’s expected financial situation over the next five years. That will include prospective income statements, balance sheets and cash flow statements, as well as budgets for capital expenditures going forward. You may choose to illustrate your data with charts or other graphics.
Keep in mind that business plans are not only for start-up operations. They can help even the leaders of established companies to better understand where they stand and make well-considered plans for the future. They can serve as a valuable blueprint for your company’s future. That’s why it’s important to update your plan regularly so that you can use it to chart your business’s future course.
Consult your local CPA
CPAs across the country work with thousands of small business owners each year. They have experience addressing all the many challenges that these company owners face. Be sure to contact your local CPA for valuable advice with all your questions about starting or running your business. To get a sense of the many ways in which CPAs can help small businesses, visit the American Institute of CPAs 360 Degrees of Financial Literacy site dedicated to small business needs.