Starting a company can be a motivating idea specifically for first-time entrepreneurs or employed individuals tired of the 8 am-5 pm job. It’s encouraging to start a business whenever you look at the freedom of not working 8-9 hours each day in a confined office, lacking accountability to an employer, and the chance of endless profit.
Starting a company is a great decision. However, it can also be stressful, challenging and not as simple as it looks.
I’ve personally started many business endeavours in the past handful of years. Some succeeded, some didn’t. In addition, I’m also managing and catering to the internal business process of varied clients. And with that experience, I’ve seen many businesses thrive while others close down. I understand a well-known fact that many will start a business, but only very few will last.
I’m writing this information to talk about with aspiring entrepreneurs, even existing ones, what exactly to consider before jumping into the business world.
1. Nature of the business
The first you will need to consider is what’ll you offer. What have you been going to sell in your business? In general, you can choose to offer the next: service, merchandising or manufacturing.
Service can be selling time and expertise, such as, for example, professionals, event organizers, IT, marketing, etc., or it can also be restaurants, food kiosks, transportation, salon, spa, etc.
- Merchandising – also called retail, wholesale, trading or distribution. Buy-and-sell of goods. Examples are grocery and malls, retail outlets, online resellers, etc.
- Manufacturing – combining raw materials, labour and use of equipment, then transforming it into a saleable product. Examples are manufacturers of cars, gadgets, clothing, bags, daily essentials, etc.
2. Target Customer
Having a service or product to sell will not allow you to be profitable if you do not have customers who’ll buy it.
Suppose you plan to start a business, and do you know what to sell before you begin? Study when there is a market for it. Identify who your customers are. Remember the old saying, an item or service for all of us is a product or service for nobody.
In several business events I’ve attended, I hear this advice “location is everything&rdquo ;. “Location, location, location&rdquo ;.
Make sure you identify or look for the best location for your business. Your business should be seen by your target customer or near them.
Once you’ve identified what to sell, who to sell it to and where to sell it, think about how you’ll form the business. You can choose between sole proprietorship, partnership or corporation.
Single proprietorship – you’re the sole owner of the business.
- Partnership – you can divide the business with another person(s) that you will call partners. You will need at least two different people to form a partnership.
- Corporation – you can register as One-Person Corporation (OPC) or divide the business among two (2) or more individuals.
Capital is the total amount or value you will need to set up the business to have it started and operating. It could be cash or non-cash. To know how much capital you will need, list down all the possible spending you will need to make to start and operate, such as, for example, assets to buy, renovation, lease payments, operating expenses etc.
6. Asset Requirements
When starting a company, plan the assets you need to operate. This may include the next example: computers, equipment, furniture, vehicle, etc. List down not just them but additionally the quantity and price.
7. Lease, Renovation and Improvements
The next item to consider is if you will rent out a space. When renting, normally, lessors require advance rent and security deposits which will add up to three (3) to six (months) of monthly rent. Also, rental space is usually bare and requires renovation and improvements. Consider these costs in your business plan.
Identify potential suppliers needed to produce the service or goods you will sell. Consider their price, location, reliability and operating hours.
9. Operating Expenses
Identify and list down all the expenses or spending you will need to use the business, such as salary, rent, office supplies, utilities, etc. Consider the monthly costs in your business plan. This task is also important in your capital requirement because normally, you must keep at least six (6) months to 1 (1) year of monthly spending as capital.
10. Hire People or Outsource
From my experience, people management is one of many toughest jobs of business owners. This may be exactly why outsourcing is in demand. If you plan to start a business, consider if you will hire people or outsource it. If you decide to hire, look at the salary and other government regulations you will need to comply with, such as, for example, DOLE, SSS, PHILHEALTH and Pag-big. If you think about outsourcing, look at the expertise and reliability of the business you will outsource to.
After considering all the capital and expense requirements, make sure you have the registrations needed to legalize your business before you begin operating. At a minimum, you’ll want DTI or SEC, Barangay, Mayor and BIR. If your employees register to SSS, PHIC and HDMF.
12. Bank account fully for the business
Consider opening a bank account separate for the business. This is to simplify your record-keeping and avoid mixing your personal with your business, especially if you are a single proprietor. When choosing a bank, it should be accessible and available.
Rarely does a company sell without a good marketing plan? Marketing is one of many key factors why businesses succeed and why it fails. Choose the right marketing platform for the business.
14. Government Compliance
Another important item to consider, but often neglected, is the federal government reporting you will need to comply with every month, quarterly and annually. I’ve seen many businesses succeed but, down the road, face government penalties because of neglect of this important item. Government Compliances include at minimum filing and payment of taxes, SSS/Philhealth/Pag-big contributions. Along with the yearly payment of Barangay and Mayor’s permit.
15. Accounting and Financial Analysis
Last but not the smallest amount, whenever you start a business, ensure you have a reliable accounting and financial reporting process in place. Accounting could be the language of business. To know what’s happening in your business, you’ll want a reliable accounting and financial reporting system.