Where Growing Businesses Falter
In the beginning stages of a business, every decision you make is critical in shaping its future success. The pressure to make the correct moves can be immense and you may often find yourself subject to conflicting advice, whether it be welcomed or unsolicited. Growing businesses face many inevitable roadblocks, regardless of industry, and it is important to know how to handle these issues when they surface.
Being unprepared for rapid growth is just as damaging to your business as attempting to grow too quickly. It is great to dream big, but you must also plan. Is your goal to stay local or expand statewide, nationwide or international? It is important to define your expectations for growth and profitability, then realistically determine what steps you need to follow to get there. Take into consideration your competition, which could stunt your business’ growth. Reflect on your customer base, where they are and what they want. While it’s important to have a vision and plan to achieve it, preparation for the unexpected will help you get ahead.
Doing It All On Your Own
Many small businesses start with one person. Though finding good employees may seem like a daunting task, it is important to recognize that you can’t do everything by yourself and that you need to devote time to finding qualified people to help you. Often with start-ups, employees are required to wear many different hats, so looking for talent that has experience with emerging businesses is beneficial.
Social media is a great recruiting resource for small businesses that do not have the budget to work with recruiters. Try actively scouting LinkedIn, and even Facebook and Twitter for potential employees. Though some businesses focus on raising capital prior to finding employees, pursuing these at the same time can work to your advantage. You may not find an employee willing to jump on before you have the capital; however, if you focus on searching for talent and building relationships during this time, you may find someone who is ready to make the leap when you are ready to hire.
One of the biggest problems that growing businesses face is simply running out of money. Regardless of how small of an operation you are running, constructing a budget should be a top priority. If you need help financing your business, there are many factors to consider.
Traditional funding would include bank loans or Small Business Administration (SBA) guaranteed loans. Investment funding is more difficult to obtain and can include angel investing, venture capital, private equity and crowd funding, an increasingly popular method. If you need cash fast, there is asset-based lending that requires collateral. Or you can consider equipment leasing for just about anything needed for your business. For start-up companies, business incubators and accelerators can provide a number of resources to get you up and running on a budget. Whatever type of financing you decide on, be diligent in your research, weigh the pros and cons and understand the offer completely before a contractual agreement is made.
When starting a business, one of the most important decisions you will make is what type of entity to establish. This will impact how you file your income taxes, as well as the limitations and liabilities placed on you as the business owner. The most common forms are the sole proprietorship, partnership, corporation, S corporations and limited liability corporation (LLC). Many start-ups choose to operate as a sole proprietorship, but keep in mind that this structure places complete liability on the owner, meaning that personal assets such as your home could ultimately be seized to pay business debts.
Now that you are self-employed, your tax responsibilities will change. As mentioned above, the structure of your business will dictate how you file, what taxes you must pay and how you pay them. If you are set up as a sole proprietorship or partnership, you will only file one return and you may qualify for additional personal tax credits. If you are operating as another kind of entity, you will have to file two returns: personal and business. Keep in mind that even when filing your business return separately, owning your own business can affect your personal return. For example, you will now have to report self-employment tax. To make sure you are handling your taxes appropriately, it is best to work with a Certified Public Accountant.
Though it is important to be prepared when it comes to the areas above, keep in mind that these are the top five problems as seen through the eyes of a Certified Public Accountant. Make sure to consult any other trusted advisors you have on their “top fives.” Taking into consideration these different perspectives will help you gain a well-rounded approach to building your business.
Jennifer Spooner, CPA is a tax partner and the director of tax services at Cross, Fernandez & Riley, LLP, a large local CPA firm with four offices in Orlando, Lakeland, Tampa and Winter Haven.