Starting a business is a dream for many looking for work-life balance, and greater control over their futures. However, it is fraught with many frustrations and challenges, which is why it’s important to know these key truths about starting and structuring your own business.
Truth 1: It Can Be Very Overwhelming
While having your business has its share of rewards, it also comes with many risks. In the beginning, things can be very overwhelming. In fact, statistically speaking, 80% of new start-ups fail within 18 months, and another 80% within five years.
There will be times you will want to quit as you come face-to-face with harsh realities, the long hours, bad deals, challenging customers, and—most commonly—a distinct lack of cash flow.
When it comes to growing your business, Forward Progression Development empowers business owners with the capability to tackle business development challenges.
Truth 2: Your Business Structure Does Matter
Apart from complying with all the legal requirements of running a small business, how you set up and structure your business does matter. Your business structure will affect how much you pay in taxes, your ability to raise capital, the paperwork you need to file, and your personal liability.
A sole proprietorship is easy to form and gives you complete control of your business. Of course, the risk is that your business assets and liabilities are not separate from your personal assets. This type of structure makes it difficult to raise capital, and you will be held personally liable for all debts and obligations.
Partnerships are a step up from sole proprietorships wherein two or more people go into business. As opposed to a sole proprietorship, partners are able to pool their financial resources and skillsets sharing the responsibility of the business. While they share the profits and the losses, they also share the risks of the partnership. These risks are similar to a sole proprietorship where the collective business assets and liabilities may not be separate from your personal assets.
Limited Liability Company (LLC)
An LLC structure will protect you from personal liability in many instances where your business will be called to task. The greatest benefit of an LLC structure means you have limited liability whereby your personal assets won’t be at risk if your LLC faces bankruptcy or lawsuits. Owners pay a lower tax rate than they would as a corporation.
Corporation (C corp)
A corporation provides the most robust protection to its owners from personal liability. The cost to set up and run a Corporation, however, also requires more extensive record-keeping, operational processes, as well as reporting.
If you are unsure of what business structure is right for you, the Forward Progression Development team has experts to assess the level of risk you are prepared to take and inform you of the various tax rates and other legal requirements so you can find the perfect structure for your future business.
Truth 3: There Will be Frustrations
New start-ups face various frustrations that come part and parcel of business ownership. One of the biggest is trying to do everything yourself. The truth is that you can’t be expected to be an expert at business development, IT, Marketing, or administrative essentials. If you try, you will run yourself and your business into the ground.
If you lack sales, marketing, and business development skills, it might be time to bring in the experts.
Truth 4: Profitability is a Long Wait
Those new to business expect instant success with their start-up however the reality is, it can take 2-3 years for your business to become profitable. According to Forbes, building a successful and profitable business takes time. Most businesses experience slow growth at the beginning—which is normal.
The first year is about survival considering that up to 80% of businesses will fail in this infancy period. The second-year is where you start to see some, if not small, growth and by the third year, you should be making a profit as you have learned to fine-tune your approach to business development. Additionally, you’ll have begun to understand your customer base and what they want.
The burning question is, can you afford to wait three years to make a profit?
Truth 5: You Have Consultants You Can Rely On
Savvy entrepreneurs and business owners realize that they don’t need to struggle on their own. The key to growth and profitability is knowledge and experience. You can find out the hard way and learn from your mistakes or you can take a shortcut and enlist the help of someone with the right expertise to circumnavigate known obstacles.
With the right training and support, you can build your knowledge base faster than on your own at affordable prices.
At Forward Progression Development, our team helps aspiring entrepreneurs navigate the complex pathways towards achieving their business dream. We understand the frustrations and challenges business ownership brings. Contact us if you want business development support — we can help you tap into the resources you need to succeed while letting you get on with what you do best.