All start-ups begin with a vision, but it takes a lot more to build a business into a successful enterprise. You'll need dedication and discipline to create or incubate an idea that has economic value. You'll also need funding and a team of expert advisors who can help you avoid legal and financial pitfalls.
My business partner, Jay Rossin, and I founded Kaufman, Rossin & Co. in 1962 with just $2,000. I'm proud that we have grown to be one of the top CPA firms in the country and are celebrating our firm's 50th anniversary this year. We've experienced our share of challenges, as all entrepreneurs do, and I've learned more than a few lessons along the way.
As I tell our entrepreneurial clients, there are no secret weapons in this business. Some entrepreneurs prosper with the right combination of timing and talent, but many don't make it. Here are a few tips to give your business a firm financial foundation and the best chance at a bright future:
1. Choose the right entity type. This will affect your tax situation, risks and liabilities, how you have to keep your books, even how you can pay yourself.
2. Assemble professional advisors who understand entrepreneurs. Your college roommate may be a great attorney, but if her specialty is real estate, she's not going to be the right choice to set up your corporation. A CPA who works with startup enterprises knows what you're going through; your uncle who does the family's personal tax returns may not be the best fit for your business.
3. Find out about regulations and laws that affect your business. This can be good news or bad. Are there restrictions that relate to your product line? Are there opportunities in the tax code? If you hire a scientist or engineer, for example, ask your accountant about research and development credits.
4. Have one year's expenses in the bank. If you're not prepared to finance this idea for a year, how committed are you?
5. Develop a business plan and projections. A good idea alone isn't a business, and having a plan can help you secure funding. There are books and websites with simple templates for your business plan. It should include:
- a general description of the company's products and services
- your operational plan
- your management structure
- your financial plan, including capitalization
Your marketing plan is one of the key sections and must include an assessment of your competition. Who are they, what do they offer, and why are you better? Don't forget your target market -- who will buy what you're offering, and are there enough customers to be profitable?
6. Select accounting software that fits your needs. QuickBooks is easy to use and has versions for many specific industries. Ask a financial professional to train you and help you set it up correctly.
7. Consider various funding sources.
- Partners are one source, but that can get complicated. If you do bring in a money partner, create a strong partnership agreement.
- Some banks are lending, but you'll need good financials to qualify.
- Crowdfunding is a new option. The JOBS Act empowers businesses to use crowdfunding platforms (online sourcing from strangers) to raise as much as1 million in capital per year from individual investors without registering with the Securities and Exchange Commission (SEC).
Business plan competitions seem exciting, but remember there's a lot of work and few chances to win.
8. Get help from the SBA. The Small Business Administration offers free counseling and training for people like you, both online and in-person locally. Programs include everything from grants and loans to counseling and training. They can even hook you up with help in starting an export business.
Entrepreneurs who combine their vision with professional advice and capital sources will be off to a great start. Remember, there is a tremendous benefit to starting small and testing the market so you can learn how your product or services will be received. It's important to have the discipline not to overextend yourself by trying to grow too quickly. Tap into your available resources and learn from the experience of seasoned entrepreneurs who have walked the path before you.
James R. Kaufman is founding principal and CEO of of Kaufman, Rossin. Kaufman, Rossin & Co. is one of the top CPA firms in the country. He can be reached at jkaufman@kaufmanrossin.com.