Finance & Grow Your New Business. Angie Mohr

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      FINANCE & GROW YOUR NEW BUSINESS

      Get a Grip on the Money

      Angie Mohr, CA, CMA

       Self-Counsel Press

       (a division of)

      International Self-Counsel Press Ltd.

      USA Canada

       Copyright © 2012

       International Self-Counsel Press

       All rights reserved.

      Introduction

      Entrepreneurs are people with a dream. They build on their skills and abilities and try to provide a stable income for themselves and their families.

      There are as many reasons for starting a business as there are entrepreneurs. For some, it’s about the money. For others, it’s security and stability that are most important. Many entrepreneurs find satisfaction and fulfillment in building something from nothing and witnessing the quickening; that point where the business takes on a life of its own.

      The freedom that comes from running your own business, and your successes and failures, is an irresistible pull for most entrepreneurs. This drive is what fuels them and keeps them going even when money is tight and business is bad. This sets them apart from others and makes them a special breed of individuals.

      Entrepreneurs quickly learn that starting your own business is incredibly hard work, and it requires great commitment with little financial reward in the beginning. This book will help explain how you, as an entrepreneur, can get the money you need to finance your business, and how you can manage it on an ongoing basis.

      Part One of this book, “Finance Your Business,” will cover questions such as—

      • What kind of business should I start?

      • Should I buy an existing business or start one from scratch?

      • What’s a business plan?

      • Where will I find money to start up?

      • How do I find my external advisers?

      • How will I know how I stack up against my competition?

      • How do I know when it’s time to hire people?

      • Should I invest in new equipment?

      • Where do I get money to expand?

      Part Two of this book, “Grow Your Business,” will delve deeper into the ongoing process of running your business. Businesses are like machines, and they need monitoring, maintenance and the occasional rebuild. This section will help you look at critical financial processes that separate successful businesses from failures, and teach you how to apply those processes to your growing business.

      Part 1

      INTRODUCTION

      1

      So, What Kind of Business Should You Start?

      Just because you are a hairdresser doesn’t mean you should start a salon. In this chapter, we’ll examine the pros and cons of different types of businesses.

      Introduction

      Starting a business can be scary, exciting, and fulfilling, all at the same time. Frequently, small businesses are started by people who have been employees in the same industry. For example, hair stylists often open salons and accountants start accounting firms. You may feel that because the industry you’ve previously worked in is familiar to you, you would be successful at starting a business in this industry.

      It’s important to keep in mind, however, that building a business, managing a business, and doing what the business does are three very different activities requiring different skill sets. You may be interested in doing only one of these three things. For example, you may get great pleasure out of hair styling, but have little patience for managing the day-to-day operations of a business. In this case, you will want to reconsider your decision to start a business. No matter how much joy it gives you to “be your own boss” while doing the thing that you do best, you will come to despise all the other tasks that go along with owning and managing a small business. On the other hand, you may love building the business: designing the office space, putting together the marketing plan, forecasting, and building the customer base. You may, however, be thoroughly bored with the management aspect or with doing what the business does. Entrepreneurs who feel this way tend to build a business, get it up and running, sell it, and start all over again. The thrill for them is in the creation process.

      If you plan to build your business, manage it, and be its chief employee, make sure that you have the energy and the skills to do all three of those things. If not, you will have to hire other people in those positions that you do not wish to do yourself, or rethink your business plan entirely.

      Once you have assessed your strengths and weaknesses in terms of building, managing, and operating a business, it’s time to look at your personal goals.

      Why Do You Want to Be an Entrepreneur?

      Before you jump with both feet into starting a business, take some time to examine your motivations. What is it that is driving you towards starting and running a business? Many small-business owners cite things such as more money, freedom, and empire building as their motivators.

      Money

      Owning and running a business has the potential for providing you with a higher level of investment return and remuneration than you would receive working for someone else. The profit potential is definitely there, but high profits are a trade-off for high risks. Starting a small business is a risky proposition and you, as the owner, face the potential for financial loss as well as gain. It’s important to keep this in mind as you build your business and make sure that you not only have the ability to survive failure, but also the ability to tolerate risk. We will examine business risk in greater detail in Chapter 9.

      When small-business owners talk about money, though, they often don’t mean that they want money for money’s sake. Money means something slightly different to each person, but in general, it represents financial independence, prosperity, and security. The more time you spend planning your business model before you begin, the more likely you will be building a profitable enterprise that will meet your personal financial goals.

      Freedom

      Many small-business owners like the freedom that comes with not having a boss and being able to make their own decisions. However, with this freedom comes ultimate responsibility for the business, including responsibility for customer satisfaction, working conditions, supplier shortages, product failure, and the economic well-being of your employees. Look at whether you are the type of person who can handle these responsibilities while simultaneously making considered, but quick, decisions on a daily basis.

      Empire building

      For many small-business owners, the most important consideration is that they are building something that will outlive them and perhaps provide income and stability to future generations. If this is an important consideration to you, it will be critical to make sure that you are building