Financial Fitness Column provided by: Michael Unterreiner – Financial Legacy Associates
According to the National Women’s Business Council, there are approximately 10 million women-owned
businesses.* Many of these businesses started small, begun by women seeking the exciting and potentially
rewarding experience of “being their own boss” while doing something they enjoy. If you’re thinking about
starting your own business, you’ll need a sound plan, a little creativity, personal dedication, and probably
some form of financial investment.
Before you make the commitment to starting your own business, you’ll need to determine whether it’s
the right move for you. Here are a few important factors to consider.
Why do you want to start a business? For the most part, you should believe you have a great idea that
you are passionate about. Giving your business a chance to be successful will require a personal
commitment and probably some sacrifices. Are you prepared to invest the time, money, and personal
resources to get your business started?
As you might imagine, there’s a lot that goes into starting a business. You’ll have to do some market research to determine the potential size of your market, identify the competition, and set the price of the goods or services you’ll offer. You should develop a written business plan, research the best legal entity to use for your business, and understand what licenses and/or permits you’ll need. You’ll have to figure out how much capital you’ll need to start your business, and where that capital will come from.
TYPE OF BUSINESS
What kind of business do you want? Do you have a unique idea, or do you want to get involved in a type
of business that already exists, like a franchise? What products or services will your business provide?
Have you identified your target market? Who is your competition, and what will separate your business
from your competition? Depending on the type of business, how long will it take before your products or services
are available to your target market? How big and how quickly do you want your business to grow?
The type of business you choose should not only match your talents, abilities, and interests, but it also
should have a viable place in the market, based on your competition and the potential demand for the
products or services your business will offer. Getting this information will take some time and effort, but
many businesses fail simply because they’re in the wrong market or the competition is too strong.
Additional questions to consider
• How will you manage your business?
• How many employees will you need to start up?
• What types of suppliers will you need to contact?
• How will you price your product or services relative to your competitors?
• What kind of insurance do you need?
THE BUSINESS PLAN
It’s one thing to have a great idea for a business, but it becomes much more real when you put it down on
paper. A business plan is essentially the story of your business: the name of your business, what your
business does, how you came up with the idea for your business, what markets you serve, what
differentiates your business from the competition, where your business is now, and where you see it in
the future. Not only should your business plan serve as a road map to a successful business venture, but if
you’re going to seek financing for your business, you’ll almost certainly be asked for a business plan. There’s
generally no set form for use in developing a business plan, but most plans cover these essential elements:
• An executive summary, which briefly describes your business as a whole and touches on your business’s profile and goals
• An in-depth explanation of the history and development of your business
• A summary of the products and/or services you offer
• A customer description, market analysis, and competitor analysis
• A description of your business’s legal entity (e.g., corporation, partnership, sole proprietorship) and management organization
• An explanation of your marketing plan and sales strategy A capitalization plan including projected revenues,
cash flow projections, pro forma financials, and an explanation of how you’ll use funds
SELECTING A BUSINESS ENTITY
One of the first decisions you’ll need to make is what form of legal entity your business will take. If you’re
starting a business from scratch (as opposed to buying an established business), your options are
many. The type of entity you select is important because it can determine the types of permits you’ll
need, where and how your business should be registered, the extent of protection from personal
liability you’ll receive, and the amount and form of taxes that may have to be paid. While it’s a good idea
to consult a financial or legal professional before selecting the type of entity for your business, here’s a
brief description of the more common forms of business structures.
Sole proprietorship: A sole proprietorship is the most straightforward way to structure your business
entity. As a sole proprietor, your business is simply an extension of you. Sole proprietors are liable for all
business debts and other obligations the business might incur. This means your personal assets can be
subject to the claims of your business’s creditors. Partnership: A partnership is a business entity where
two or more people enter into a business relationship for mutual profit.
Partnerships are organized in accordance with state law. In a general partnership, all partners can act on behalf of one another in furtherance of partnership business, which means each partner is personally liable for the acts of the
other partners, and all partners are personally liable for the debts and liabilities of the partnership. Limited
partnerships and limited liability partnerships may provide some liability protection for partners
according to the state law where the partnership is formed.
Corporations: There are several different types of corporations. Generally, two advantages of corporations are that they provide a shield from individual liability and are the easiest type of entity to use to raise capital. Some common types of corporations are S corporations and limited liability corporations or companies. S corporations and most
limited liability corporations pass income, gains, deductions, and losses of the business through to the
shareholders. By comparison, a C corporation is taxed as a separate entity.
FINANCING YOUR BUSINESS
Your business plan is in place. Now you have to figure out where you’ll get the funds to set your dream
in motion–and sustain it. The first step in determining your financing needs is to develop a line-item budget,
projected over a period of months and/or years.
Next, you’ll need to figure out how to finance your business. The two general categories of financing
available for businesses are debt and equity. Debt requires repayment of a loan. Equity involves raising
capital by selling parts of the business to investors.
One place to look for capital might be your own assets. You may be able to raise money for the business from your savings or borrow against a
retirement plan, life insurance policy, credit card, or the equity in your home.
Another common source of funds for new businesses is what’s called “friends and family.” However, such
funding is most likely to be successful if it’s structured in a businesslike way, with clear terms of repayment
or ownership participation.
You can apply to banks or credit unions for loans. The Small Business Administration has a website devoted to women-owned businesses at www.sba.gov/content/women-owned-businesses. There you can find resources to help you start and finance your business. Also, your local chamber of commerce may be able to refer you to state and local
agencies that provide financial assistance to new businesses located within your geographic area.
There are plenty of other things to consider, such as taxes, licenses, fees, and permits. You’ll need to think
about where to locate your business and how you’ll market it. Will you have employees? Will you add a
retirement plan? If so, you’ll have regulatory requirements and tax responsibilities, as well as
possible workers’ compensation to consider. But you don’t have to go it alone. There are experts available
to serve as mentors or counselors. Check the Women’s Business Resources section of the Small
Business Administration website at www.sba.gov for information on locating a mentor.
*Source: National Women’s Business Council Fact Sheet, 2015.
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Securities and advisory services offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Additional advisory services offered through Financial Legacy Associates, LLC, which is not affiliated with Royal Alliance. Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016
Financial Fitness Column provided by: Michael Unterreiner – Financial Legacy Associates
About: C. Michael Unterreiner, ChFC, founded Financial Legacy Associates to create an environment where financial professionals could serve their clients better by sharing their experiences and ideas. Since 1992, he has served his clients by recommending investment and insurance solutions to their financial planning, retirement planning, and college funding challenges. Connect with him on Facebook and Linked In for more Financial Fitness related articles and posts.
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