Starting a Business: Guidelines to Consider

Starting a business and being your own boss can be exciting; for many, it is the personal and professional goal of a lifetime. Thousands of new businesses are started every day. Going into your new business with a plan can help you avoid pitfalls. Here are things to consider before taking that big step.
 

What type of business makes sense for you?

Hundreds of thousands of ventures are started each year in all types of businesses. Starting a business from scratch, buying an existing business, or entering into a franchise arrangement are all things to contemplate, and they each have pros and cons.

Be sure to do your homework. Consider the current and potential markets for whatever business you are contemplating. Examine competitors’ strengths and weaknesses. The Internet, local chambers of commerce, and trade associations can be sources of valuable information. You may be surprised by what you can find readily available.

Find a type of business that matches your skills, experience, and interests. If you are considering starting a personal service business, having at least one existing customer can be a good way to start. Whatever type of business it is, be sure you like it. If you are successful, you may spend many years, several decades, or your entire career in that business.

If you are considering purchasing an existing business, investigate it thoroughly. While stepping into a business with existing operations may be attractive, learn why the current owner wants to sell. Buying someone else’s failing business is significantly different than buying a successful business from an owner who is retiring. Have professionals look at the financial statements (accountant) and any contracts you may sign (attorney).
 

Are you starting alone, or should you have a partner?

This can be one of the most challenging issues you face. Running the business yourself gives you the opportunity to make all the decisions, but you must live with the results. A partner can bring skills, experience, and capital; however, you should be confident that you work well with that person for an extended period.

If you choose to have a partner, define each party’s responsibilities and authorities. How will decisions be made regarding capital contributions, spending, operations, personnel hiring, and all the hundreds of other issues that will arise? The more you can structure the decision-making process, the more you reduce the risk of having major operational problems as the business faces difficulties or grows.

If you choose to have a partner, you may also want to discuss how your relationship can be ended. While everyone has good intentions in the beginning idea phase, things can and often do change. Having a buy/sell agreement or a contractual agreement may avoid difficulties and hard feelings later.
 

Where will you get the financing you need?

Starting and growing a business takes money. Consider the funds you may need for office space, equipment, inventory, marketing, and working capital. You will also need funds for your normal living expenses, and remember that not all customers pay quickly. One of the most common causes of business failures is inadequate capital. Create a spending plan that covers everything you think you may need, and then build in a contingency amount.

Arranging that needed capital should be undertaken early in the start-up process. Once the business is operational, you will want to focus on running it and not have to look for funds constantly. Be sure to talk with your QNB Banker about what is needed for a loan to a new business. QNB can help you with a Small Business Administration (SBA) loan. The SBA offers several types of loans, and you will want to work with a banker to help you navigate the process. There are other types of bank loan products that may be an option based on your qualifications and collateral. Again, working with a banker to help you understand your options will be key in obtaining funding.

The final observation on needed capital is to consider limiting how much you are willing to risk or lose before shutting the business down and accepting failure. While this may be difficult to consider when starting out, having a contingency plan for failure is prudent.
 

Summary

The entrepreneurial spirit is alive and well in America. As you consider your future, remember that being in business for yourself is risky and rewarding. Taking some key steps early in the process, hard work, a good idea, using sound business practices, a dedicated QNB banking team, and maybe a little luck can make all the difference.

This article is for informational purposes only and is not intended to provide specific advice or recommendations. When deciding your financial situation, consult a financial professional for advice on your business objectives.