Starting a Business in 7 Simple Steps
I’m starting up a baby and maternity store with my business partner and friend Kathleen. In the midst of creating and changing our business plan, here are some things we did to get things moving.
1) Create an advisory board
This was both a selfish and strategic act. Kathleen and I mused about the people in our lives who would be the most supportive and knowledgeable, and we asked them to join our advisory board for a share of the company. This gave us four more brilliant women to bounce ideas off and delegate work to. With each one specializing in a different leg of the retail universe, we’ve gotten some great feedback and suggestions from them. Also, instead of two women under 30 (that’s Kathleen and me!) asking for business loans, etc., we became a team of six with a combined 100 years in retail management/ownership, plus an MBA.
2) Get some operational funds
Although you may not need a ton of money yet, you do need some. We were incredibly lucky and acquired two investors early. Keep reading; I’ll tell you what to do with your money, however much you have to spare.
3) Talk finances early
When everything else starts to spin like a tornado, changing address information is the last thing on your mind.
Not only is it incredibly important to talk money with each other, it’s important to start your relationship with the bank. Go to any commercial lender and ask about small business loans. Banks WANT to loan you money and they want you to be successful. We picked our bank with help from the connections we had made through some free business classes offered at our local community college.
Meeting with the commercial loans department and understanding their process is instrumental. They’ll explain what the loan process is like, what the options are, and what they’ll need from you. Completing financial statements materializes everyone’s strengths and weaknesses and maps out a course of action. What follows could take as much as a year to navigate—read: we’ve been in this exhausting process for over a year—so doing this early saves a lot of time. The more people you have on the note (i.e., the folks on your advisory board), the more people who must be aligned to form a strong borrowing team. Open an account that day and drop in whatever cash you have dedicated for the business. This becomes your operational funds.
4) Get a lawyer
Our guy knows his stuff and that’s the kind of guy you need! Our lawyer helped Kathleen and I set up formal contracts between each other and between ourselves and our investors. He also helped us with certificates of stock/ownership and filed the business with the state in order to create our tax ID number (this number is like a social security number for your business and allows you to operate, buy wholesale, file taxes, etc.). This is stuff that’s hard to get a handle on when you’re on your own.
I didn’t understand it at the time, but our lawyer also suggested we set up a PO Box for the business to help create separation between ourselves and the business. But three potential retail spaces later, it was the best $116 (for six months) we ever spent. When everything else starts to spin like a tornado, changing address information is the last thing on your mind.
He also suggested that we deposit funds into our business account to reflect the ownership of the business partners. All these small details create distinct separation between you and the business. For example, if there are four people involved with equal share in the company and you can each swing $250, voila, you’ve got $1,000 deposited into the business account. This way, each person has the same amount of “skin in the game” as their value of the shares in the company. The IRS loves that.
5) Get a CPA
I met my CPA many years ago as I developed my Mary Kay business. Over that time, I learned on a smaller scale what they liked to see prior to tax time every year.
I met with her to talk about the new project and make sure we were all on the same page. We discussed every business model and the characteristics of each. Between what we learned from our lawyer and the CPA, we chose LLC filing as an S-Corp. Basically, we wanted separation between personal tax returns and the business tax returns. Opening that bank account and operating out of that account streamlines everything for the CPA and validates your operations. This creates clear intention with the IRS. And by the way, keeping every single invoice/receipt and an organized checkbook register saves hours of time (and money, since you might end up paying your CPA at an hourly rate).
6) Get a realtor
Now, this is when it starts getting real. Opening a business—or at least a baby and maternity store—isn’t just about the business plan and the money; it’s cornered in the WHERE. Where will you be successful? Where is there adequate parking, ramps, windows? Where can you afford to be? Where does your target audience go? How do they get there and where are they going afterwards? Your realtor has all the answers and is paid only when he or she finds the perfect fit for you, so answering all your prayers is a realtor’s only desire. They’ll also keep you out of all the trouble you didn’t even know was lurking as they have the inside line on building history, good or bad landlords, etc. Find one that knows your area and has a true appreciation and understanding of your business.
7) Stay flexible
Using your resources will be like playing a game of Twister. In one day, you might ask your advisory board and business mentors the same question and get a variety of advice and answers. The right answer is whatever works for you.
We use our whole professional team like one unit since we all have the same goal, despite our varying levels of expertise.
AWESOME advice!! :)
Thanks, Dr. Jazz! ;)