Charleston Regional Business Journal
Small Business Ownership – Is it for you?
By William A. Russell III, CPA
We all know Tom. He golfs every Wednesday, takes long weekends to the most chic resorts, and is always available for Junior’s t-ball games. He owns a thriving small business, and appears to be in total control of his schedule.
Sure, we’ve heard stories of those long hours when the business first started, and there were times when finances were strained. We’ve heard the statistics about the failures of small business ventures, but it’s worked for Tom. So how do you know if you are ready to start a business?
According to Wall Street Journal business reporter Kelly Spors, although we hear statistics citing that “close to 80 or 90 percent of businesses fail in their first few years, there is no clear evidence to back up that claim.” Spors adds, however, “The bad news is, they may be true.”
It appears to be a case of the proverbial glass half-empty or –full. As reported by the U.S. Small Business Administration’s Web site, two-thirds of new employer establishments survive at least two years, and 44 percent survive at least four years, according to a recent study. The key is figuring out how to be among those that survive.
In our accounting and business advisory firm, we’ve seen that success or failure can be greatly affected by how honest and thorough you are in the process of evaluating if and how you should approach establishing a business. We ask clients to share their vision for a business five and ten years down the road. Then we set out to provide a road map for getting there.
Most people have an idea of what type of business they’d like to own, but many haven’t thought through the ramifications of the type of business it is. Some are subject to long retail hours, seasonal business, or changes in governmental regulations. Potential business owners should take a hard look at the market, with research into competitors and industry trends.
It’s important to think through the average day or week in the business as you evaluate whether it’s the life you really want to lead. Are you prepared to be on call on the weekends? Do you mind fluctuating cash flow? Will you face ongoing liability threats? Many businesses require employees, and you’ll suddenly be in personnel management.
Once you’ve chosen a type of business, there are numerous details and legalities such as setting up the ownership structure, entity type and financial structure. An experienced accounting firm and attorney are a must, ideally with significant small business expertise.
As you sit down with these professionals, it’s time to take a hard look at the financial picture. What’s the plan for financing this business? What are your insurance needs? And the real zinger… how long can you live without a paycheck? All of these issues should be folded into a solid business plan, accompanied by a personal financial plan, that forecasts income and expenses several years out.
All of these and many other details should be thoroughly explored and developed before contacting the first customer, signing a lease or making any significant financial commitments. The foundation you lay and the thoroughness with which you approach the planning phase will, no doubt, have a significant impact on whether you succeed.
Still reading? Haven’t broken out into a cold sweat yet? You may just be cut out for the odyssey known as small business ownership.
William A. Russell is a principal with Jarrard, Nowell & Russell, a certified public accounting and business advisory firm based in Charleston. Will can be reached at (843)723-2768 or email@example.com.