Planning Your Start-up

So far this checklist has helped you identify questions and problems you will face converting your idea into reality and determining if your idea is feasible. Through self-analysis you have learned of your personal qualifications and deficiencies and through market analysis you have learned if there is a demand for your product or service.

The following questions are grouped according to function. They are designed to help you prepare for "Opening Day".

Name and Legal Structure

1. Have you chosen a name for your business?

2. Have you chosen to operate as sole proprietorship partnership or corporation?

Your Business and the Law

A person in business is not expected to be a lawyer but each business owner should have a basic knowledge of laws affecting the business. Here are some of the legal matters you should be acquainted with:

1. Do you know which licenses and permits you may need to operate your business?

2. Do you know the business laws you will have to obey?

3. Do you have a lawyer who can advise you and help you with legal papers?

4. Are you aware of

Occupational Safety and Health requirements?

Regulations covering hazardous material?

Local ordinances covering signs snow removal etc.?

Tax Code provisions pertaining to small business?

Workmen's Compensation laws?

Protecting Your Business

It is becoming increasingly important that attention be given to security and insurance protection for your business. There are several areas that should be covered. Have you examined the following categories of risk protection?

Fire

Theft

Robbery

Vandalism

Accident liability

Discuss the types of coverage you will need and make a careful comparison of the rates and coverage with several insurance agents before making a final decision.

Business Premises and Location

1. Have you found a suitable building in a location convenient for your customers?

2. Can the building be modified for your needs at a reasonable cost?

3. Have you considered renting or leasing with an option to buy?

4. Will you have a lawyer check the zoning regulations and lease?

Merchandise

Have you decided what items you will sell or produce or what service(s) you will provide?

Have you made a merchandise plan based upon estimated sales to determine the amount of inventory you will need to control purchases?

Have you found reliable suppliers who will assist you in the start-up?

Have you compared the prices quality and credit terms of suppliers?

Business Records

Are you prepared to maintain complete records of sales income and expenses accounts payable and receivables?

Have you determined how to handle payroll records tax reports and payments?

Do you know what financial reports should be prepared and how to prepare them?

Finances

A large number of small businesses fail each year. There are a number of reasons for these failures but one of the main reasons is insufficient funds. Too many entrepreneurs try to start and operate a business without sufficient capital (money). To avoid this dilemma you can review your situation by analyzing these three questions:

1. How much money do you have?

2. How much money will you need to start your business?

3. How much money will you need to stay in business?

The chart below will help you answer the second question: How much money will you need to start your business? The chart is for a retail business; items will vary for service construction and manufacturing firms.

The answer to the third question (How much money will you need to stay in business?) must be divided into two parts: immediate costs and future costs.

Start-up Cost Estimates

Decorating, remodeling

Fixtures, equipment

Installing fixtures, equipment

Services, supplies

Beginning inventory cost

Legal, professional fees

Licenses, permits

Telephone utility deposits

Insurance

Signs

Advertising for opening

Unanticipated expenses

Total start-up costs

Total start-up costs __________

From the moment the door to your new business opens a certain amount of income will undoubtedly come in. However this income should not be projected in your operating expenses. You will need enough money available to cover costs for at least the first three months of operation. The chart below will help you project your operating expenses on a monthly basis.

Expenses for one month

Your living costs

Employee wages

Rent

Advertising

Supplies

Utilities

Insurance

Taxes

Maintenance

Delivery/transportation

Miscellaneous

Total expenses __________

Now multiply the total of the chart above by three. This is the amount of cash you will need to cover operating expenses for three months. Deposit this amount in a savings account before opening your business. Use it only for those purposes listed in the above chart because this money will ensure that you will be able to continue in business during the crucial early stages.

By adding the total start-up costs to the total expenses for three months (three times the total cost on The chart above) you can learn what the estimated costs will be to start and operate your business for three months. By subtracting the totals of the charts from the cash available you can determine the amount of additional financing you may need if any. Now you will need to estimate your operating expenses for the first year after start-up.

The first step in determining your annual expenses is to estimate your sales volume month by month. Be sure to consider seasonal trends that may affect your business. Information on seasonal sales patterns and typical operating ratios can be secured from your trade associations.

(NOTE: The relationships among amounts of capital that you invest levels of sales each of the cost categories the number of times that you will sell your inventory (turnover) and many other items form "financial ratios." These ratios provide you with extremely valuable checkpoints before it's too late to make adjustments. In the reference section of your local library are publications such as "The Almanac of Business and Industrial Financial Ratios" to compare your performance with that of other similar businesses.

Next determine the cost of sales. The cost of sales is expressed in dollars. Fill out each month's column in dollars total them in the annual total column and then divide each item into the total net sales to produce the annual percentages. Examples of operating ratios include cost of sales to sales and rent to sales.

 

 

Say that you are the type who's starting new small business. You Have given attention to the general opportunities for success,
and have selected the new business you wish to establish.

What technical problems will you face in starting your business? How Much cash will you need for beginning new small business?
Where can you obtain it? What form of business organization will you have? Where should you find the company? (start company tips
to follow)

The very first question you need to reply is: Just how much cash will I need? However, this question can't be answered until other
questions are answered and many choices are made.

To decide how much money is needed to start a business, enter all Of your potential income and all of your planned expenses onto a
job sheet or form.

Though you might feel that This Type of planning is more than You need to initiate a simple small business it is beneficial to
begin with this particular approach to management which puts figures down in black and white. You'll discover exactly the same
approach valuable in an established small business.

First, estimate your sales volume. This will depend on the overall Amount of business in the area, the number and ability of
opponents now sharing that company, and your own capability to compete for the customer's dollar. Obtain assistance in making your
sales estimate from wholesalers, trade associations, your banker, along with other business-people. Several business and
statistical books could be useful in making sales volume quotes.

In reaching your final estimate of sales do not be over-enthusiastic. A brand new company generally grows slowly at the beginning.
Should you overestimate sales you're most likely to spend too much in gear and initial inventory, and commit to heavier operating
expenses than your real sales volume will warrant. As you're just beginning you might have no earnings for the first few months.
At any rate you may expect your first few months to be very low.

You must also determine what proportion of your earnings will be money And what percentage will be sold on credit. If you guess
that a particular part of the earnings are going to be on credit then you have to figure when you're likely to have the money for
these earnings. One month? 2 months? More? Never?

Next, in our guide to starting new small business, estimate how Much cash will be paid out. Bear in mind that in starting a
company you might be purchasing equipment, paying licenses and fees, which makes deposits on rent, utilities and so forth, several
months until you open the door. Some of these expenses are simple to estimate. In case you've opted to lease a building (more
about this later) then you know what your deposits will be and how much you will need to pay out each month. You can probably get
the expense of fees, licenses and utility deposits with a few telephone calls.

Other cost figures might take a little more work to get. 1 way Is to acquire typical operating ratios for the type of company in
which you are interested. One of the sources for such ratios are Dun & Bradstreet, Inc., trade associations, publishers of trade
magazines, specialized accounting firms, industrial companies, and colleges and universities. The normal ratios for your kind of
company multiplied by your estimated sales volume will serve as bench marks for estimating the various items of expense. However,
do not rely solely on this method for estimating each cost item. Verify and modify these estimates through investigation and
quotes in the particular market place in which you plan to operate.

Don't forget to pay yourself also. You Might Need money to live on if You have to quit your job. If your partner is working and
can encourage the family for a while you may not need to withdraw money from the business. The longer you can go without taking
cash out, the quicker you will develop a strong cash position. Now you've estimated your cash receipts and expenditures, write
down the amount of cash you'll put into the company to start. This goes on line 1 at the case below. Next, add lines 1 and 2 for
the first month to get line 3. Then add up all of the expenses to get 5. Subtract line 5 from line 3 to get line 6. This cash in
the end of month then goes to line 1 to the start of the following month, etc.

If you continue this for the Whole year, very soon you'll find You've got negative amounts or a negative cash flow. About this
time you will also realize that you should be working on this kind with a pencil which has a good eraser.

In this overly-simplified illustration, you notice that by the end of June you're minus $200 in money. Two options can be tried -
reduce your purchases in June by $200 or start with $200 more. You might not be able to reduce costs (they will probably go up as
your business starts). So you will need to put in $200 more to start with. If all you have is $4000 then the additional $200 you
need is capital you must get from somewhere else.

Do not be misled by this very simple illustration. Many small businesses Begin with the 200, and try to acquire the $4000 from
somewhere else. Since a Major cause of failure in the first stages of a business is Under-capitalization, be very careful on your
planning at this stage. You can Almost always plan on some unexpected expenses and some flaws in anticipated income.

 custom-clothing custom-jewelry custom-shirt custom-shoe custom-t-shirt-printing custom-wig dairy-farm dance-studio data-center data-entry dealership decal deck-building demolition departmental-store design-studio diagnostic-laboratory diamond-jewelry digital-marketing digital-printing direct-selling disc-jockey-service dispatcher distillery diy dog-breeding dog-grooming dog-kennel dog-training dog-walking dollar-store door driving-school drone dropshipping dry-cleaners drywall dsa dually-truck duck-farm dumpster-rental dump-trailer dump-truck durag earring egg-farm electric-scooter electronics engraving epoxy-countertop