Have you ever watched a building being erected or undergoing major renovations? It’s fun to watch the progress as it begins to take shape. Without significant planning and the proper equipment and tools, the project would undoubtedly struggle. At times, unexpected events can happen, and the builder must make decisions and changes on the fly. There are usually a lot of rules, both structural and regulatory, that are in place to help the project succeed. One of the most important pieces of the whole process is the foundation.
Like a structure, a successful business must also be built following certain plans and rules, and in order to succeed long-term, it must have a solid foundation. Some of the foundation can be forged as the business grows, with a master plan guiding the development as it goes along. There are also parts of the infrastructure that may cause problems down the road if not properly constructed.
Here are a few things that can help give you a stable foundation when building your business.
SET UP YOUR BUSINESS PROPERLY
Obtain a Federal Employer Identification Number (FEIN) from the IRS. This is important even if you don’t have employees. (FEIN Application Info)
If your business is an LLC, S Corp, or C Corp, create the appropriate documents to form your entity. It’s critical if you have other owners, whether a spouse, child, or friend, to work with a lawyer to create an operating agreement that covers multiple scenarios down the road. The initial cost and time this takes will save a LOT of time and money in the long run. We recommend hiring a professional to create these documents to ensure everything is covered and accurate. Boilerplate templates often miss items specific to your business and may add restrictions you don’t want.
Register with your state, county, and city.
Open a separate bank account for the business, and use it only for business purposes!
PLAN YOUR EXPENSES
It’s so easy to focus on getting and growing sales and forget about the costs involved. A plan of action for how you allocate funds (and how much) can keep you from quickly getting into trouble. It’s so easy to say, “I need this.” without thinking about how you will actually pay for it. We encourage you to try to get along with only the necessities as long as it doesn’t inhibit your growth.
In planning your future finances, build in thresholds for when you can add certain expenses. This is particularly important with hiring. Planning for your hires and all their additional costs will help you know at which point you can hire and can also help you save ahead for that expense.
HAVE A PLAN... AND FOLLOW IT
When building a structure, there's always a blueprint, and the order of construction is important for certain phases. You can’t install the windows before the walls are built. The same is true for a business. After your foundation has been set up, establish the full framework to support your business.
One of the things we frequently see missing is written processes for operating the business. When it's just you, it may not matter, but as soon as you hire that first employee or contractor, it quickly gets complicated. You can’t assume another person knows the step-by-step procedures you want them to follow unless it’s documented. Your business may not work as it needs to if those that work for you are “winging it.”
Once you have a solid foundation and framework, take some time to envision what you are building. There may be a need to modify your design or timeline in order to ensure the structure is solid and complete, but altering the plan doesn’t mean abandoning a plan altogether.
HIRE THE RIGHT PROFESSIONALS
When building, it seems logical to hire people who specialize in certain aspects - plumbers, electricians, painters, etc. When building your business, it is equally important to hire the right professionals. Perhaps you can do some of the work, but you cannot do it all. Just because you’re good at something, doesn't mean you have to do it.
The cost of hiring good professionals is, of course, a factor to consider. Often, you can partner with a professional to save some money - but don't be too stingy. Not having the right help can cost you in the long run. As an example, do your own basic bookkeeping, but hire an accountant to oversee it. (Hint... We know someone!)
YOUR BUSINESS: A STRUCTURE THAT CAN WITHSTAND THE ELEMENTS
When you’ve made the effort to establish a strong foundation and framework for your business, you can rest assured it will be able to handle the storms that may come along. Take pride in the business you’ve built through solid planning!