A business meeting

The Basics to Opening a Physical Business

By Thoreson | Tempest in a Coffee Cup | 6 Sep 2020


Before opening a business you need four things.

  1. A Business Plan
  2. A Banker
  3. An Accountant
  4. A Lawyer

For the Business Plan, you need to do your research. Take your product/service and determine what the actual demand is in your area. Who is going to be your customer? What problem are you going to solve for them? What are they willing to spend to solve that problem? How much is it going to cost you to solve their problem? How can you solve their problem better than everyone else out there? What are the REALISTIC projections for growth? How will you make money? Is it really worth opening a business, or is it better to just keep it as a hobby? What structure are you going to use (Sole Proprietor, Partnership, LLC, S-Corp, C-Corp?) What are the pros and cons of each?

Once you have answered these, and similar, questions, try to poke holes in your assumptions. Project for downturns, recession, increased costs, decreased income. Try to find any potential problem and try to figure out a way to mitigate it. Make 3 sets of financial projections, Optimistic, Pessimistic and Realistic. Get all of this on paper.

Take this paper to each of the three persons you have identified. Get your lawyer to look at your structure and risk mitigation, licensing requirements, zoning, etc. Get your accountant to look at your numbers and get the tax implications/strategy. Get your banker to look at everything and discuss credit needs, banking needs, Merchant Account needs.

Then take all of their recommendations and incorporate them into your plan and decide if this is really something you want to do. Just so you know, most business owners do not make money for at least the first 3 years of their business. That’s why the US Internal Revenue Service only requires you to show a profit for 2 out of 5 years to classify as a business and not a hobby.

Being a business owner is a thankless job that requires long hours and blood, sweat and tears. But can be an extremely rewarding one, if you plan correctly and have the right advisers!

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Thoreson
Thoreson

Writes about anything and everything, as long as it is interesting.


Tempest in a Coffee Cup
Tempest in a Coffee Cup

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