The Often-Overlooked Steps When Starting a Business

As we celebrate the birth of our nation each July, we're reminded of the vision, values, and determination it took to establish something entirely new. Starting a business may not involve drafting a declaration or leading a revolution, but in many ways, it's a similar endeavor. Both nations and businesses begin with a core set of values and a framework for how things will operate.

I once met with a client who had already launched their business. They had passion, great ideas, and even some customers. But they were struggling to generate consistent profit. The problem wasn't the product—it was the lack of structure. Like many entrepreneurs, they hadn't asked the foundational questions that create a sustainable, organized business.

Step 1: Define Your Vision, Values, and Offering

Just as the United States was founded on principles like liberty and individual responsibility, a business should begin with clearly defined values. These values provide direction and motivation, guiding your decisions and shaping the kind of service or product you bring to the marketplace.

The first step usually entails having a product or service you want to offer. Defining this offering and aligning it with your core values ensures you're creating something meaningful. Successful business owners communicate these values to employees and stakeholders as the business grows, helping preserve the company’s legacy and purpose.

Step 2: Assemble Your Team

No founder succeeds alone. To build a solid foundation, you need a trusted team that includes a CPA and a financial advisor.  Depending on your business structure, you may also need a bookkeeper. Your CPA plays a critical role in helping you establish the right framework and understand the tax and administrative implications of your choices.

Before starting a business, you’ll want to ask your CPA:

• What structure fits my business best?
• What are the tax implications of each structure?
• Is this a pass-through entity, and what does that mean for me?
• If I have partners, how should we define our ownership and responsibilities?
• How do I track expenses effectively?
• What deductions am I eligible for?
• What forms do I need to file?
• How can I prepare in case of an audit?
• What tax deadlines and requirements do I need to plan for?

Knowing these answers up-front can save you from financial headaches and problems down the line as your business becomes more established.

Step 3: Develop a Financial Plan

Many new business owners underestimate the time and money it takes to become profitable. It's wise to assume you won't generate income for the first few years and plan accordingly. For married couples, one spouse might work while the other builds the business. Others may choose to save significantly before launching.

Whether you're working with a financial advisor or planning independently, consider these key questions:

• What are my startup costs?
• How should I fund the business (savings, loans, investors)?
• How much should I charge to cover costs and earn a profit?

Also, don’t forget commonly overlooked costs: paying your taxes, covering your own benefits, taking time off, and reinvesting in your business. These are important to plan for even if you’re the only employee. Many entrepreneurs underprice their services in an effort to be affordable, but pricing too low can quickly lead to financial strain.

Step 4: Protect Your Business

As your business begins to grow, protecting it becomes essential. This is where insurance comes in. Based on your industry and legal structure, you may need business liability insurance, professional insurance, or even personal coverage if you are liable for the business.

Ask your CPA or financial advisor:

• Am I personally liable for my business?
• What kind of insurance do I need for my industry?

Insurance is easy to overlook or put off, but the costs of unexpected liability can be devastating to a young business. Many business owners may also begin with enough coverage but fail to increase it as their business grows, leaving potential coverage gaps.

Step 5: Seek Wisdom in Counsel

Starting a business is exciting, but it's also a calling that requires diligence, wisdom, and patience. Proverbs 15:22 says, "Plans fail for lack of counsel, but with many advisers they succeed." Surround yourself with wise counsel, take the time to lay the groundwork, and align your business with the values you hold dear.

To succeed in business, you need more than a great idea. You need a clear vision, a defined set of values, a structured plan, a supportive team, and a willingness to do the hard work. Start strong, and you'll lay a foundation for something that lasts.

 If you're thinking about starting a business or recently launched one, reach out to your financial advisor and CPA today.