Starting a new business requires research, including adequate funding, demographic and competition analysis, and hiring a CPA and attorney. The first five years will be challenging, but success can bring a sense of accomplishment and higher income.
There are a number of reasons people go out on their own and start a new business. Some wish to avoid the daily grind of cubicles, mid-level overseers, and the nine-to-five routine. Others seek the satisfaction and feeling of freedom that can come from being your own boss. Sometimes, especially in the 2009 era of layoffs, downsizing of businesses, and high unemployment rates, working for you can feel like the only viable option.
Before starting a new business, however, you need to realize that the first step is research. Nearly 65 percent of new businesses fail in their first five years of operation, the main reason being a lack of proper research. There are steps that can increase your odds of success, and while they’re not foolproof, they will increase your chances of survival.
The first step is to make sure you’re over-funded by making sure you have enough funds to not only open your own endeavor, but also cover your personal and business bills if times get tough. A business without adequate reserve capital is virtually doomed from the outset. Before you sign a lease or open your doors, make sure you can afford five lean years.
Next, do a demographic study of your potential customer base and existing competition. Make sure the city where you plan to open your business has an age and income demographic that allows people to buy goods or services. Also, spend some time identifying your competition. For example, it is unwise to open a floral boutique in an area where you will compete with many similar well-established and successful operations. Your goal is to fill a void, not fight a giant.
If all these conditions are met, you can consider opening a new business. Understand that costs and overheads will almost always be much higher than expected. The unexpected is to be expected and will come in the form of everything from escalating equipment, lease and insurance payments to surprising local, state and federal taxes and fees. Again, before you open your doors, hire a Certified Public Accountant (CPA) and attorney. The expense of getting the services of these two professionals will pay for itself many times over.
Your attorney and CPA will advise you on whether you should operate as a sole proprietorship or as one of the many varieties of small businesses. They’ll make sure you’re complying with the inevitable maze of licenses, taxes and regulations, as well as handling tax payment and payroll matters. The CPA and attorney will free up your time to focus your energy on running your business and strategizing for success.
Last but not least, realize that as a business owner, you will work longer and harder than you ever have as an employee. Your first five years will be filled with stress and sleepless nights. Starting a new business can also put great pressure on family life. On the other hand, if you were to pass the magical five-year point, you could be rewarded with a sense of accomplishment and income that far exceeds what you received working for others.
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