3 things to know before starting a business
Many people start a small business hoping to achieve personal and financial freedom. When you work for yourself, a flexible schedule and unlimited earnings are indeed possible. But if you don't take time to set your business up for success before you make your first sale, you might be in for a few unwelcome surprises.
Here are three things you need to know if you're thinking about turning your passion into profit:
- A business plan can help you navigate potential issues before they arise. Where do you see your business in three years? How about five years? Forecasting beyond quarterly sales and annual earnings can help your business grow at a steady clip while preparing you to overcome changing market conditions. You will also need a business plan if you apply for certain business loans or hope to attract outside investors.
- Business accounts can give you a solid financial footing. You may run into trouble with the Internal Revenue Service if you use your personal bank accounts or credit cards for business expenses — especially if you incorporate your business or plan to deduct business expenses on your tax return.
Maintaining separate business accounts also makes it easy to track your business income and expenses. Commingling personal and business funds makes it difficult to know when the company is making a profit.
- Even sole proprietorships need partners. You don't need to have a business partner for your business to thrive, but you do need to nurture relationships with three professionals:
- An accountant, who can explain the tax consequences of your strategic plans
- An attorney, to help you avoid risky business moves and save you from costly litigation
- A business banker, who will help you explore your financial options to support business growth