#1 USE REALISTIC PROJECTIONS
• Develop a written business plan that outlines financing, marketing, operations and other key elements.
• Create and follow a cash flow budget.
• Keep a rainy day fund for unforeseen circumstances.
• Consider the need for a business line of credit to mitigate cash flow fluctuations.
• Think big but start conservatively. Consider buying used equipment or running the business from home initially.
#2 KEEP BUSINESS AND PERSONAL RECORDS SEPARATE
• Use separate bank accounts and checks for personal and business activities.
• Use separate debit or credit cards for personal and business expenditures.
• Software packages like QuickBooks and Peachtree can be helpful if set up properly.
#3 PAY ATTENTION TO TAXES
• A CPA can provide valuable tax guidance in addition to other bookkeeping, accounting and business activities.
• Payroll tax payments and related compliance will be required if you have employees.
• Your business may be required to pay personal property or real estate property taxes.
• Federal, state and possibly local income taxes will be due on any taxable income generated by the business.
• Set aside funds for quarterly estimated tax payments. Penalties will be assessed on late or insufficient payments.
• Be sure to consider all allowable deductions such as the home office deduction or vehicle mileage expense.
• Tax planning is critical for minimizing income tax liabilities and preventing surprises.
#4 LEGAL CONSIDERATIONS
• Ensure that your business has sufficient liability and property insurance coverage.
• Consider an umbrella liability policy.
• Other types of insurance, such as workers' compensation insurance, may be required.
• Utilize an entity structure. Limited liability companies (LLCs) and corporations are common types of entities.
• Ensure that you have operating and buy-sell agreements, particularly if there are multiple business owners.
• Strongly consider seeking the advice of an attorney regarding formation and operation of the business.
#5 LEARN FROM MISTAKES
• Instances of failure are inevitable.
• Success can follow failure in close succession if you learn from your mistakes.
• Seek to learn mistakes that others have made so you may benefit from their experiences.
• Networking with other business owners and professionals can help you learn of potential pitfalls and may also expose you to best practices that have worked for others.