When I was growing up, I had a handful of family members who ran their own businesses – one in real estate development, a few others selling produce, another running a counseling center, and a law firm passed from father to son for 5 generations. Being surrounded by that entrepreneurship, I’ve always been interested in working for myself someday. Now, I’m running my own outsourced-accounting practice, and it’s a dream come true.
Maybe you had a similar experience, or maybe you first wanted to start a business as an adult. Whether you just want to have a side gig, or want to build something into a full-time job, there are a few steps to get there. Getting started is probably easier than you think, so take the leap and get going. A few things to be prepared for are:
- Write out a plan. This doesn’t need to be novel-length, but enough to help you think through what you’re doing. What product or service are you selling? Who’s your target customer, and how will you connect with them? How big do you want your business to become?
- Make a budget or financial projection. Related to your general business plan, think through the money side of things. What will you charge for your product or service? What will your expenses be? This is sometimes intimidating, but will help you make sure you’ll actually turn a profit and bring in the cash flow you want. If you need help, you can find an accountant to help.
- Decide what type of structure to use. Will you be a sole proprietor, or incorporate as a C-Corp, S-Corp, or LLC?
- Filings and miscellaneous paperwork. Get an EIN for your business, register your business name, and get any licenses and permits you need.
- Open a business bank account and segregate business funds from personal funds. Aside from the money you invest, and the profit you take out of the company, the only money going into the business account should sales your customers are paying for, and the only money coming out should be business expenses. Don’t pay any personal expenses out of this account. At the end of the year, the inflows and outflows from this account will help you prepare your tax return.
- Choose an accounting system. There are several options to choose from, especially if you want something in the cloud. Pick one that is easy to use and gives you good reports. A few popular ones are QuickBooks (desktop or online), Xero, Freshbooks, and ZohoBooks. Larger companies may look at NetSuite or Intacct.
- On a related note, decide whether you’ll do the accounting yourself, or hire someone to help you. Having accurate and up to date financial information is critical so if you’re busy with other parts of the business, hired help is a good investment. Review financial reports monthly, and project out at least a month in advance so you can plan your work. Continue to do financial planning throughout the life of your business.
Starting a business doesn’t need to be daunting. It’s wise to think through how you’ll do it, and have a game plan, but don’t let that stop you from pursuing self-employment. Sit down today and get started.