Posted by Bizbrook on March 27, 2011 under Business, Productivity, Startups, Tax | 
Step 10 of BizBrook’s 10-Steps to Starting a Business.
Every business must be able to maintain and understand its financial position. Businesses have three basic financial documents: (i) income statement (profit & loss); (ii) balance sheet; and (iii) statement of cash flow.
Although your bank statements, a legal pad, and a No. 2 pencil are sufficient for you personally, you will need a more robust tool for bankers and accountants. Luckily, several alternatives are available.
Quickbooks is probably the most popular small business accounting software. Quickbooks is a pretty easy tool to use. Even payroll is pretty easy to use. The reports are very easy to access. Quickbooks also quickly updates its payroll tax schedules. For the past two or three years, federal payroll schedules have changed multiple times. If you live in a state that has a state income tax, then your paychecks may have changed even more often. Most importantly, though, Quickbooks may lower your accounting fees from your CPA.
Peachtree is also a very good and robust accounting system. Not as many start-ups or small businesses use Peachtree. And, Peachtree is more technical in nature (from an accounting sense). However, starting with Peachtree could cause a more seamless transition from a small business to a medium-sized business if you expect to have rapid growth.
AccountEdge is also a robust accounting software. According to their website, AccountEdge is a small business creating small business accounting software. And, a quick review of its website reveals the same. AccountEdge provides a great blog that provides insight into their daily lives and personality. Like Quickbooks and Peachtree, AccountEdge offers check writing, payroll software, mobility, and easy access to the forms that are most important for your business and banking needs. My assumption is that your accountant will be able to easily access your files.
Regardless of which accounting software you choose, you will have the ability to review your strengths and areas for improvement on your income statement. You will be able to make informative capital decisions based on your balance sheet. And, you will be able to maximize cash flow while minimizing taxes. All three accounting systems have similar functionality in regards to payroll capabilities, general ledgers, and inventory management. And, more functionality continues to be added from third-party service providers.
Posted by Bizbrook on under Business, Productivity, Startups |
Step 9 of BizBrook’s series 10-Steps to Starting a Business.
Sales are the life blood to any business. To continue to exist, your business must generate revenue. How does a new business market its products and services? Well, below are a few ways you can market your products and services.
1. Internet Local Listings. Local listings are a very viable way to market your products and services to a relevant target. Some of the most popular listing sites are Yahoo! Local, Google Local and Bing Local, Craigslist, and Angie’s List.
2. Paid Searches. Google Adwords and Microsoft Adcenter (Bing) are the most popular paid search tools. The amount of your marketing budget will depend on a multitude of factors. I like to use the parlay method, which is rolling a portion of the revenues generated from your ads into your advertising budget. The popularity and profitability of your products and services will go a long way in determining how much you will pay per click. Be sure not to outpace your budget or your capabilities.
3. Traditional Yellow Pages. I am not personally a huge fan of the yellow pages, but there is a reason why people still use it. Your listing will always be there. You can determine your own ad placement based on the amount of money you pay for the entire advertising period. And, almost everyone receives the yellow pages.
4. Newspapers & Magazines. Local newspapers and magazines can be a great source of relatively inexpensive advertising. You can direct your advertisements to a target audience in a target location. And, you may be able to place it next to a relevant article.
5. Web Stores. Websites like Amazon and Ebay allow business owners to create their own online marketplaces. They come totally equipped with the ability to accept payments through Paypal or other methods. And, you can even integrate other marketing products in conjunction with your web store.
6. Marketing Partners. Perhaps the best and most lucrative method of marketing your services is to find a marketing partner, in the traditional sense. Essentially, you find other businesses whose clients or customers could benefit from your services. In addition, there should be some benefit to the other business through increased loyalty or an upsale. This is similar to the ways Apple and AT&T joined forces with the iPhone. Apple found a great service provider. AT&T increased their customer base.
7. Blogs. Blogging has become a trend in advertising. Unlike many other advertising prospects, blogging is more of a soft sale. Blogs may provide resources you can provide or tips of the industry. It is a useful way to display your knowledge or product with only a little time. WordPress is a great blogging tool. Additionally, you can market your blog through social media networks
8. Trade Shows or Seminars. Trade shows and seminars are great ways to display your product or service. Trade shows allow you to exhibit your products to an audience that is already interested in what you are offering. And, it could be the way you get your business to scale very quickly. Similarly, seminars allow you to present your services to an audience that is already interested in what you provide. Hopefully, the seminar would keep you busy for a few weeks.
9. Word of Mouth (or Device). Word of mouth is still the most efficient source of advertisement. It costs you nothing. And, the only time you spend is the good service you provide or product your sale. Today, though, it has become increasingly easy to spread the word even faster through the social media networks. Sites like Facebook, Twitter, and and Linkedin provide great ways to get your name out there. Be sure to ask your client or customer to show you a little love on their page.
10. Direct Mail. Direct mail allows you to market your products and services to a defined area with certain characteristics. You’ve seen them in your mail. You know – the mortgage insurance and credit card offers. Some direct mail services only target a specific geographic area. Others may use predefined characteristics in addition to geography. Although you may pay more for the targeted mailers, your return on ad dollars could be much higher.
Posted by Bizbrook on under Business, Productivity, Startups |
Step 8 of BizBrook’s 10-Steps to Starting a Business.
Every business needs a website. Even the simplest website adds to the credibility and allows potential customers to locate you and check your credibility. In addition, you will need to cater to the search engines so that your website will appear in searches. This is called “search engine optimization” (SEO).
Search engines have scoring systems that rate your business according to the credibility of the website and the relevance of the website to the search terms. Although many people have determined how to score higher, only the creators of the scoring system actually know the formulas. In short, your website your website should be optimized with meta titles, meta tags, and keywords that are both visible and invisible.
Companies specializing in SEO can assist you. In addition, there are plenty of self-help books. Also, there are programs available through the website design that make the process more user-friendly.
If you register your domain through Yahoo! Small Business, you will have multiple options on building your website. The templates are easy to use. In addition, the tools make it fairly simple to perform your own search engine optimization. As additional information, Yahoo! Small Business offers great customer service.
also offers similar packages that I understand are very good.
If the primary purpose of your website is a blog, then I highly recommend WordPress. I use it and like it.
Posted by Bizbrook on under Business, Startups |
Step 7 of BizBrook’s 10-Steps to Starting a Businesss.
Most everyone has a bank account in the United States. However, commercial banking is a little different. You should determine your banking needs prior to choosing your business’ bank. For instance, some banks are good at retail. Others are better at clearing large checks faster.
Local banks typically offer higher levels of customer service. Also, a balance of a few thousand dollars could also provide you favorable treatment from a local bank, such as, approval for a loan, line of credit, or better interest rate. Also, local banks will often tell you if your account is overdrawn and let you make a quick deposit to cover it.
Larger banks offer additional features, such as photo-check depositing, but larger banks typically rely solely on predefined criteria when deciding whether to grant lines of credit or loans.
Online banking is growing in popularity. PTMoney’s blog is a good resource for online banking.
When opening a bank account, banks will require you to provide the formation document, your governing document, and the authority granting you the authority to manage banking for the company.
Posted by Bizbrook on under Business, Startups |
Step 6 of BizBrook’s 10-Steps to Starting a Business.
Many businesses require you to obtain licenses and permits. Also, if you are operating in a brick and morter location, then you should be aware of any zoning and permitting issues related to it.
Zoning. Zoning allows you to operate a type of business in a specific area. Check with local authorities, your landlord, or seller to see whether the property is zoned for your type of business. If you are buying real estate for your business, make the contract contingent upon obtaining all the required zoning and permits.
Permits. In addition to permits that may arise during the zoning process, be aware of permits that may be required to operate your business. For example, a sales tax permit may be required. In addition, a permit for operating your business, may be required. Often auto body shops and dry cleaners require permits.
Licenses. Licensing is very similar to permitting. Small business resource centers, attorneys, industry organizations, and state statutes are good resources to determine what licenses you may need. Licenses are often required for businesses that involve health, safety, and trust. Examples include licenses are barbers, attorneys, doctors, and massage therapists.
Check with your industry organizations or an attorney to determine what licenses and permits you may need.
Posted by Bizbrook on under Business, Startups |
Step 5 of BizBrook’s 10-Steps to Starting a Business.
Getting an EIN is an essential part of almost any business. EIN’s (employer identification number; taxpayer identification number) are used to open bank accounts, pay taxes, file tax returns and provide to customers and vendors.
EIN’s are received from the IRS. You receive it by completing Form SS4. You can obtain your EIN by phone, fax, or or mail. The fastest way, though is to obtain your EIN online . Be prepared to answer the following questions:
- What is the name of your business?
- What is your mailing address?
- Who is the responsible party ?
- What is the responsible party’s taxpayer identification number (EIN or SSN)?
- Which IRS form will you file for your annual tax returns?
- Why are you applying for your EIN?
- When was your business formed?
- What is the closing month of your accounting year?
- How many employees do you expect to hire?
- When do you expect to hire employees?
- What is the purpose of the business?
Posted by Bizbrook on March 22, 2011 under Business, Startups |
Step 4 of BizBrook’s 10-Steps to Starting a Business.
Forming a company is simple in process, but the devil is in the details. Almost all types of businesses require a formation document to be filed. The name of the formation document varies depending on what type of entity you are filing and in what state you are filing. You can learn more about common types of businesses by checking BizBrook’s last post, How to Choose a Type of Business, which is the third part of the series, 10-Step to Starting a Business.
Corporations. Corporations file Articles of Incorporation (or similar document title) with the Secretary of State (or equivalent filing office). The Articles of Incorporation details the company name, registered office and registered agent, business purpose, initial directors, and the authorized number of shares and par value. The registered office is not necessarily the principal place of business. The registered agent is the person to whom service should be sent.
You will also need organizational minutes. Organizational minutes provide the initial resolutions that elect the officers of the corporation, issue the shares , authorize banking, make an S-corporation election if it is an S-corporation, and ratify the bylaws. Bylaws are also required. Bylaws detail the conduct at meetings, how to pass actions, and how to keep records, amongst other things.
Limited Liability Companies. Limited liability companies file Articles of Organization or an equivalent titled document. The Articles of Formation details the company name, the registered agent and registered office, who will manage the company (manager, or one or more members), and the business purpose. Keep in mind any limited liability protection is based on management of the company. You will also need an Operating Agreement. The Operating Agreement contains the management’s authorities to transact business, capital contributions, and membership interests, allocation of profits and losses, and distributions of cash flow.
General Partnerships. General partnerships are not always required to file a formation document. However, you are strongly encouraged to have a partnership agreement. The partnership agreement speaks to the management of the partnership, the partnership interests, and the taxation of the partners.
Limited Partnerships. Limited partnerships file a Certificate of Limited Partnership. The Certificate of Limited Partnership details the partnership name, registered agent and registered office, the general partners, and the principal office of the partnership. The limited partnership agreement describes the management of the partnership, the capital requirements of the partners, the percentage interests of the partners, the taxation of the partners, and the distributions of cash flow of the partnership.
Sole Proprietorships. There are no filing documents required for a sole proprietorship. You may need to file a DBA (odoing business as) in each county you conduct business. A DBA provides notice to your customers and vendors that you own the business.
Please note that you are strongly encouraged to speak with an attorney licensed to practice law in your jurisdiction to determine what type of business is right for you and what should be included in your governing documents.
Posted by Bizbrook on March 20, 2011 under Business, Startups |
Choosing the type of business is the third step in the BizBrook series 10-Steps to Starting a Business. First, speak with an attorney and accountant.
The most common types of business include corporations, limited liability companies (LLC’s), partnerships, and sole proprietorships.
Corporations. The prevailing two are C-corporations and S-corporations.
C-corporations. C-corporations are the traditional corporation. Examples include most major companies. However, C-corporations pay federal tax. In addition, stockholders must also pay a tax on the dividends the C-corporations pays. Thus, in theory, the dividends paid by C-corporations are taxed twice. However, C-corporations do offer limited liability protection if corporate governance and separateness is followed. And, sometimes the tax rules do favor C-corporations.
S-corporations. S-corporations are merely another class of corporations. A corporate election to file for S-corporation status with the IRS is needed to be recognized as a S-corporation (Form 2553). S-corporation typically do not pay federal income tax. Rather, the company income “passes-through” to its shareholders. Many eligibility rules apply to S-corporations and it is not always the best entity status. S-corporations provide the same limited liability protection as C-corproations.
Limited Liability Companies. Limited liability companies (LLC’s) are currently the most popular small business entity. Similar to corporations, LLC’s provide limited liability protection to its members so long as the members are not too involved in company management. Interestingly, LLC’s may be taxed as partnerships or corporations, depending on the election of its managers or members. Also, single-member LLC’s are usually disregarded as an entity for federal income tax purposes and its member is taxed as a sole proprietorship. Otherwise, the taxation of the members of the LLC will follow the company operating agreement or the Treasury Regulations.
Partnership. Partnerships require two or more members. The most common partnerships are general partnerships and limited partnerships.
General Partnerships. Each partner in a general partnership is liable for the accounts of the partnership. The income and loss of a general partnership passes through to its partners in accordance with the Treasury Regulations or the partnership agreement.
Limited Partnerships. Limited partnerships are most similar to LLC’s. Although the general partners are liable for the accounts of the limited partnership, limited partners are not typically liable unless the limited partner engages in the management of the partnership. The income from the partnership passes through to its partners in accordance with the partnership agreement or the Treasury Regulations.
Sole Proprietorship. You will be liable for the accounts of your business. You will file the income and losses of your business on a 1040-Schedule C. And, you’ll pay self-employment tax.
Again, it is real important to ask your attorney and accountant on which business is the best for you.
Posted by Bizbrook on under Business, Startups |
Below is a quick guide on how to write a business plan, which is the second step in BizBrook’s series 10-Steps to Starting a Business.
1. Title Page. First, create a title page. The title page includes the title of the document (“Business Plan”), the date, the company name, and a statement that business plan is confidential. Placing your logo is also a nice touch.
2. Table of Contents. A table of contents is very important for a business plan. Readers will have different sections that matter most to them. Some readers may prefer the financial projections. Other readers may be most interested in the groth strategy.
3. Executive Summary. The Executive Summary you drafted earlier will serve as the first section of your business plan.
4. Company Overview & Strategy. Provide the company’s name, state of formation, and date of formation. Also, include a quick background on the founder and why he started the business. Following the founder information, provide a fairly detailed perspective of the business opportunity you identified in the Executive Summary and a fairly quick synopsis of how the business plans to exploit the opportunity.
5. Critical Factors for Success. Critical factors of success typically include adequate financing, a continued lack of financing, a successful patent application, continued lack of competition, favorable laws, etc. Each business has a different set of risk factors critical to success. Determine yours and you’ll have a better understanding of your own business.
6. Competition. Research your competition. List the biggest players in your market. Mention any relevant statistics you can find, such as percent of market share, gross revenues, etc. If the company is public, you should be able to locate a wealth of information. If the company is private, check the company’s website and look at other websites, such as manta.com or hoovers.com. Beware, though, it is difficult to determine how accurate any reporting is for private companies.
7. Marketing Overview & Opportunity. Tell the reader why your company will be successful. Detail your marketing overview by describing your marketing strategy, outlining your speed to market, and projecting growth strategies. Further, define the market potential, your competitive differentiation, and specific prospective customers (low hanging fruit).
8. Growth Strategy. Detail your organizational growth strategy. Your organizational growth strategy includes the projected growth of personnel, anticipated infrastructure needs, and the amount of funds that it will require. This section should also discuss any anticipated exit strategy.
9. Anticipated Projections. Create a very detailed monthly pro forma. Show all types of revenue, costs, expenses, and any other cash flow projections (such as loans and equity injections). Although I urge you to create a monthly pro forma, your business plan will only show the 6-month mark, 12-month mark, 2-year mark, and 3-year mark.
10. Source and Use of Funds. Prepare a source and use of funds. The source of funds will show how your business plans on funding its growth. It will typically include loans and equity injections. Following the source of funds, detail the use of funds. The use of funds provides how much money is needed, and how it will be used, to achieve stabilization.
10. Key Personnel. Draft a quick biography on all key personnel. Include recent career history, accolades, and education. Also, pictures are always a nice touch.
11. Contact Information. Provide your company name, contact person, phone, fax, e-mail, and website.
Happy writing!
Posted by Bizbrook on March 18, 2011 under Business, Startups |
An executive summary provides high-level information that details the motivation for your idea and provides the excitement to bankers, investors, customers, and other outsiders. It is the face document of your company. And, it should only be two to three pages.
1. Company Overview & Objective. The first sentence should state the business name and its state of formation. The remaining three to five pages should explain the objective of the business.
2. Business Opportunity. The Business Opportunity section describes the shortcomings in the market. Quickly explain whether the few companies offer your goods or services or whether the market needs better efficiencies that presently do not exist.
3. Current Competitors. List a few competitors in the industry. It provides the reader with a sense that you are aware of the market players and that it can be overcome. If possible, provide some general information about them.
4. Providing the Solution. In a couple of paragraphs, provide a few high-level details on how the business will exploit the opportunity.
5. Marketing Strategy. After describing how your business will exploit the opportunity, tell the readers how you will market the solution. Examples would include sales representatives, internet marketing, distributors, signs, etc. Also describe the market potential if it can be ascertained. For example, “50,000,000 widgets were sold in the US last year.” Of the 50,000,000 widgets sold, the business has the opportunity to penetrate 15,000,000 widgets.” Or, “50,000 people within our demographic criteria live within five-miles of the prospective restaurant. Presently, there are only two other restaurants within the demographic area and the average wait time is sixty minutes.”
6. Company Management. Provide a quick one paragraph section on the company’s executive management team. Be sure to detail accolades, education, and any relevant career history.
7. Contact Information. Always end an executive summary with the contact information for the company, which should include the business name, contact person, address, phone number, e-mail address, and website.
To summarize how each of the components interrelates, I have provided a short example of each.
ABC, Inc. (the “Company”) was founded as a corporation under the laws of the State of Texas in 2008. The Company has invented a new technology allowing widgets to last three times longer. Currently, the widget only lasts six months. The largest manufacturer of widgets is XYZ, LLC, which sales 15,000,000 widgets per year. ABC has invented a widget that lasts eighteen months by improving its design, which we have patented. ABC will market its new widget through sales representatives. ABC was founded by Jerry Best. Mr. Best obtained an MBA from Outstanding College where he also obtained a BS in Finance. For more information, please feel free to contact us at the following address:
ABC, Inc.
Attn: Mr. Jerry Best
555 Fifth Avenue
Widget, Texas 00000
Ph: (111) 222-3333
Fax (111) 222-3332
E-mail: jerry@abcincwidget.com
www.abcincwidget.com
Happy writing!
