Starting a business is a deceptively complicated process.
Its not as simple as coming up with a great business idea and putting that idea into action.
Questions to ask yourself prior to beginning a business
How will this business make money?
This might seem like a no-brainer, but take some time to think about it.
Are you selling a product?
What are they actually buying?
A tool that makes their lives easier?
A skill they can use in their future career?
How much money does this business need to make?
(Plus the amount of money youll need to set aside for taxes.)
Once youve got some numbers drafted, ask yourself when your business needs to start earning that money.
(And taxes.)
What career capital am I bringing to this business?
What actual capital am I bringing to this business?
Some businesses require more start-up costs than others.
Likewise, how much money are you willing to put into your business before it starts making a profit?
Who are my customers?
How will I connect my business to new customers?
Think about how you might reach out to new customers.
Are you going to advertise?
Collaborate with other small-business owners?
Create YouTube how-to videos?
Whats my plan for growth?
Where do you want your business to go, once you get it started?
What does realistic growth look like over the next year?
The next five years?
Under what circumstances would I close down the business?
When will you decide to stop building your business?
When revenue drops below a certain number and stays there for six months?
When youve put X amount of cash or time into the business and havent seen growth?
Know when youll quit before you get going, and you wont end up throwing good money after bad.
Under what circumstances would I sell the business?
Theres a lot of value in running a profitable business, especially if it generates passive income.
Theres also a lot of value in selling a business.
Does their vision of what this small business could be matchor complementyours?
Where should this business be located?
Will you get a separate business mailbox, or will one person be responsible for receiving the businesss mail?
What career capital are you bringing to this business?
Choosing a partner with considerable career capital can help your business grow more quickly.
What actual capital are you bringing to this business?
Is your prospective partner putting their own money into the business?
If so, how much?
(Thisll be a good question to bring up with your lawyer.)
Who do you think is our ideal customer?
How do you think we should connect our business to new customers?
verify you and your prospective partner are on the same page.
What do you see as realistic-but-ideal business growth over the next year?
The next five years?
Youll also want to confirm that your prospective partner understands the path towards their vision of success.
Can they set and achieve SMART goals?
Under what circumstances would you shut the business?
Under what circumstances would you sell?
Again, youre going to want to check that youre roughly on the same page here.
(Youll also want to ask these questions every year you remain business partners.)
How will we resolve disagreements?
Will you bring in a third party?
Will you evaluate the options on a financial or growth metric?
Will you look for a win-win solution?
Answering these questions will help you prepare for future conflict.
More importantly, this kind of discussion will establish you and your business partner asmembers of the same team.
Its not you vs. your business partner.
Its you and your partner and your business vs. the world.
Of all the questions you and your prospective business partner might discuss, this one is relatively easy!
Unfortunately, two business partners cannot split up and still share custody of a business.
Dont assume that your business will be an LLC or a S-Corp before talking with a CPA.
What do we need to know about paying business taxes?
If you thought doing your own taxes was complicated, wait until you start doing business taxes.
Does your business income pass through to the partners, and at what percentage per partner?
How much should you be setting aside for estimated tax payments?
What about payroll taxes?
Can you reduce your tax burden by setting up a SEP IRA?
So talk to your CPA.
Theyve done this kind of thing before, and they know how to help you.
What types of tax forms will we need to complete, and when are they due?
Businesses with partners and businesses with employees have even more forms to fill out and file.
Whats the best way for us to handle bookkeeping?
They can also give you tips on tracking inventory, managing capital accounts, and more.
Do we need business licenses?
Ask your CPA what forms you better complete before your business is in compliance with state and local laws.
Do we need to complete biennial reports?
Are there any other reports or requirements we should be aware of?
Ask your CPA about your reporting requirements and what youll need to include in those reports.
Questions you should ask a lawyer
Is our business name appropriate?
Should we trademark it?
Dont just grab a standard operating agreement off the internet and assume its good enough for your business.
What types of contracts should we prepare?
If youre going to be working with freelancers, clients, or vendors, youre going to need contracts.
Your lawyer can help you draw them up.
Know your legal responsibilities, whether youre going to be working with freelancers or hiring employees.
If youre opening a food truck, youre going to need to get familiar with food safety laws.
If youre launching a hair salon, youre going to need to learn about OSHAs formaldehyde standard.
If youre a blogger who earns money from affiliate links, youll want to understand the FTC disclosure requirements.
