Money Management
FOR IMMEDIATE RELEASE: August 6, 2007
HOW TO OVERCOME START-UP BUSINESS HURDLES
Every year about 600,000 new businesses are launched in
the United States. Many people dream of owning their own
companies, but starting a business can be risky if not
planned carefully. U.S. Small Business Administration
data show that more than one-half of all new businesses
do not survive at least four years. If being an
entrepreneur is your true calling, don’t let these
statistics hamper your dream. According to the North
Carolina Association of CPAs, new ventures can succeed
if their owners take the right steps from the outset.
THE
IMPORTANCE OF PLANNING
A great idea for a service or a promising new product
can be excellent starting points for a new business, but
you’ll need a lot more than a marketable idea to make
your venture successful. You should begin with a
strategic plan that covers every aspect of your venture,
including details on:
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The product or service you plan to sell.
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Your potential customers and how you are going to
market to them.
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The company leaders and their experience.
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How you plan to produce the product or deliver the
service.
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Financial information. Financial statements or
projections prepared by a CPA add credibility when
you meet with lenders or potential investors.
CPAs
recommend that you record all this information in a
business plan, a document that describes how you expect
to run your business. Creating a thorough business plan
is not only a great strategic exercise for a new
company, but it’s also a requirement if you hope to get
outside financing or attract investors. Don’t skip this
important initial step.
CONSIDER THE COSTS
Money
is, of course, a crucial element in any business
start-up. Your expenses will fall into two groups:
one-time needs and ongoing costs. One-time costs include
items such as the expense of equipment and furnishings,
legal fees for incorporating the company, registering
the name and the cost of a franchise or license, if
required. You will also have to begin paying ongoing
costs, which will include rent, salaries, supplies and
utilities. Some of these ongoing expenses, such as
leases, will be fixed, while others, such as inventory
costs, will depend on your sales from month to month.
Create
a projected budget of start-up expenses, including both
one-time and ongoing costs. You can gather information
for this budget from potential vendors, landlords or
businesspeople running similar operations.
Your
budget will tell you how much money you’ll need in the
early stages of your business. Next, determine how you
are going to pay for the expenses you incur before the
company begins generating income. Many new business
owners use their own savings to cover these costs, while
others borrow from banks or find investors who provide
financing in exchange for part ownership in the
business. Your budget should help you determine what you
can cover with your own funds and how much you will need
from outside sources.
CONSULT A CPA
This process may sound complicated, but there are many
valuable resources available. The American Institute of
CPAs 360 Degrees of Financial Literacy Web site (www.360financialliteracy.org;
click on “Entrepreneurs”) contains a wealth of
information on business planning and small business
issues. The U.S. Small Business Administration site also
provides advice for start-ups (www.sba.gov). And the
North Carolina Association of CPAs can offer tools to
address questions on Financial Literacy.
In fact, CPAs can help you understand all the financial
aspects of a business launch. Be sure to talk to a CPA
about the best ways to ensure your company gets off to
the right start.
Produced in cooperation with the AICPA
©2007 The American Institute of Certified Public
Accountants
