We all have passions and creative talents that we want to share with the world. Many of us might refer to these as our hobbies, but the truth is, these passions can certainly produce profit. That is, if you set up a successful and legitimate business structure. Here, we will share 7 easy steps to starting your profitable business.
Granted, success is up to supply and demand, customer satisfaction and more. At the very core of it all, however, is a foundation that is both legally and logistically sound. The following tips and tools will give you the outline for both a legitimate business and a successful one at that.
Obtain Employer Identification Number (EIN) and Tax ID number
First things first. If you want to start a business, you have to create your business. Making it official is the first step to owning a business versus a hobby or passionate side hustle. Every organization must have an employer identification number (EIN), even if your business will be just you and will not have employees. The EIN is a unique number that identifies the organization to the Internal Revenue Service. You can apply for an EIN online, by mail, or by fax.
Investigate employment laws when starting a profitable business.
If you plan on hiring employees for your business, it is very important that you investigate employment laws and how they will impact your business finances. Employment laws impose additional costs to your business because you will have to spend additional money on training, recruitment and pay. Don’t shy away from these though. The truth is that investing in your people will significantly help your business’ bottom line. When your staff feel they are treated fairly and there is more security, they will be more motivated.
In fact, this is a common reason we are hired to guide companies and their teams through organizations major changes or project management plans. The service is also beneficial if you are working through a poor implementation that requires refinement and improvement. The change does not have to be around finance, we can support you in any arena.
Determine startup costs.
How much money will it take to start your business venture? You’ll want to calculate the startup costs for your small business so you can request funding, attract investors, and estimate when you’ll turn a profit. Include everything you’ll need to buy or lease to include equipment, fees, office space/supplies, inventory, advertising, website, utilities, payroll and of course, professional consulting fees. As business owners, ourselves, we’ve already thought of the ways we can provide our services to you at an affordable and tiered price.
Develop a pricing structure for services.
We recommend developing a pricing structure for your products and services that is both competitive and consistent with the market. You’ll want to offer pricing that is obviously in line with the quality of your services and products but also consider discounts or pricing that can bring in volume as word-of-mouth reviews bring in more clientele.
Create a business bank account when starting a profitable business.
When creating your EIN, one of the prerequisites is a unique business checking account that is specifically for funds related to your company’s finances. You may create your business checking account and then return to using your personal checking to buy supplies or to deposit a check out of habit, but it’s best to take the extra steps to keep these deposits and withdrawals separate. This is one of 7 easy steps to starting your profitable business.
By keeping separate business bank accounts, you will be better able to see all of the components involved for managing business throughout the year. This will allow you to easily spot any potential tax deductions and give you the biggest return on your taxes. Every payment should be made with your business account. As bookkeepers and accountants, we have seen this issue come up most frequently and can work with you to clean your books and ensure your numbers are accurate. This way, you can strategically plan future financial goals.
Develop internal policies and rules when starting a profitable business.
A successful bottom line is dependent upon workplace rules and policies being followed consistently. Develop and implement strong internal controls through a foundation of effective written policies and procedures. As a matter of fact, employees are more inclined to embrace rules when they understand their purpose. So, having your staff trained on how to optimally run your business in your absence is ideal.
Hire employees and/or contractors.
Firstly, you’ll want to decide if you want independent contractors or employees (or of course, a mix of both). You’ll want to ensure new employees return a completed W-4 form so that tax filing is accurate. Schedule pay periods to coordinate tax withholding for IRS, as well as, create a compensation plan for holiday, vacation and leave. This is where choosing an in-house or external service for administering payroll is a smart move. Commonly used by many business owners, outsourcing accounting is the wisest way to stay atop your finances and in-the-know for decisions that will impact your future growth goals for your organization.
A great resource that the IRS shares is known as the Employer’s Tax Guide. This document provides guidance on all federal tax filing requirements that could apply to the obligations for your small business. Check with your state tax agency for employer filing stipulations. This is one of 7 easy and important steps to starting your profitable business.
At Two Sense Consulting, we are more than just accountants, we are business leaders. With a robust network of experts, we can cater to any industry. Our business development consultants are ready to help and we are just a phone call away from your first free consultation.