2nd August 2017
Carleigh Machock, Corrigan Krause
Starting a new business is a dream for people. Maybe you have a great idea for a startup company, but aren’t quite sure where to start or what you should consider. Aside from motivation and a strong will to succeed, there are several aspects that need to be addressed before taking the plunge into uncharted waters. MSI's Ohio accounting member Corrigan Krause explains further.
It’s vital to have a solid understanding of the financial position and direction of your future company. Take time to think through these five aspects of starting a new company as you gear up for your new endeavor.
You’ll need cash
Having cash on hand is an obvious first on the list, and usually the first hurdle for many new entrepreneurs. You may not have $50,000 stashed away in your savings account, but you may have equity in other assets that you can tap into. Borrowing against the equity in your home is a common means of cash for many new business owners. Alternatively, if you have a healthy investment account, you can take cash out through a securities-based line of credit where your stocks, bonds, and mutual funds are used as collateral.
Another option is using a venture capitalist. This route will require you to hustle a bit harder for your funding. Unlike banks, you can’t simply run a Google search for loan options and compare interest rates. Finding the right venture capitalist will require meaningful networking and fruitful business contacts. Once you find a venture capitalist willing to hear your pitch, prepare for an in-depth presentation with heavy Q&A. Although this route takes significantly more leg work, you will have more control over how you spend your money as opposed to a bank loan where strict financial requirements and covenants can become deterring.
Cash needs of operating your business
Determine the bare necessities of your new business. How much cash will you need in order to get things up and running? How much will you pay per month for expenses such as rent, utilities, equipment, professional fees, advertising, employee wages, interest and taxes? Decide what expenses are required for running your business and stay within that budget. Try to maintain a thrifty mentality when purchasing items such as furniture, equipment and vehicles, and consider buying used or leasing to keep costs low. It’s critical to have more cash than needed as a business owner. There will be uncontrollable expenses that arise throughout the year, and you want to keep your employees and the lights on, without running into a lawsuit. You can always upgrade to that swanky high-rise office once your business is financially sustainable.
Read more about USA: What to consider when starting a business
Corrigan Krause CPAs and Consultants is a team of dedicated, passionate, experienced professionals who provide comprehensive consulting, tax and accounting services. With a growing team of more than 80 members, our firm has proudly served individuals and privately-held businesses since 1989. We are headquartered in Westlake, Ohio with two additional offices in Medina and Mayfield Heights, Ohio.
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