How to Organize a Startup Business - Sole Prop - LLC – Incorporate

How to Organize a Startup Business - Sole Prop - LLC – Incorporate

When starting a business you might want to decide on what type of business you would like to venture into, choosing whether to go into a Sole Proprietorship, Limited Liability Corporation (LLC), or a Corporation. You must have solid knowledge of these three forms of business organizations before deciding which to use.

The three business forms mentioned above are classified according to the ownership structure of an entity.

Sole Proprietorship

An individual proprietorship is usually popular for most small businesses owned and operated by a single individual called the proprietor. It tends to be a small service type and/or retail establishment. As a sole owner you are personally liable for all the obligations your business is going to incur. The proprietor receives all the profit earned and absorbs losses.

The good thing about this type of business ownership is that it is:

- Easier to set up and can even operate the business under your name and no need of registering it.

On the other hand as a sole owner, if your business fails:

- You assume all liabilities to the extent of seizing your business assets as well as personal assets for the settlement of any liabilities incurred. The owner is solely responsible for all the debts.

Setting up a sole proprietorship entails less effort. This would include:

- Determine licenses and permits to be needed and how to acquire them.
- Business name must be duly registered in the state or country where you will be operating
- Comply with IRS requirements, including procurement of employer ID number. If you are paying wages for staffs, then you must also secure for yourself a state ID number with the Department of Revenue.

Limited Liability Corporation

This is a type of corporation where owners have a limited liability exposure to any of company’s actions. Personal assets of owners are secured in case of any legal obligations that the corporation might encounter. This is basically a fusion of both partnership and corporation having the characteristics of each.

Let us look on some of its advantages.

• Limited liability – it provides protection for its members in the event of any liabilities incurred by it and they are liable only up to the extent of their investments.
• Exemption from double taxation – This type of business structure avoids double taxation in a way that profits generated by it are divided amongst members and report it on their individual federal tax returns. No federal tax will be paid before distribution of profits to its members.
• LLC is easy to set up and operation is simple compared to a corporation.

How to set up an LLC?

- Create a name for it which must conform to state rules
- Articles of organization must be properly made and payment of filing fee
- Operating agreement must be made comprising the rights and responsibilities of its members
- Secure licenses and permits required in the operation

Corporation

This is a type of business structure wherein it is created by the operation of law, having the rights of succession and the powers, characteristics and properties expressly authorized by law and any incidents to its existence. It has a separate legal entity having a juridical personality separate and distinct from its owners.

It is a complex structure involving a lot of process and paperwork. Management of it is vested on the Board of Directors. It has also the right of succession with the capacity of continued existence regardless of death, insolvency, withdrawal or incapacity of its stockholders and directors.

Forming a corporation can be quite complex and this would include:

- Secure the requirements for incorporating in the state where you will be operating your business.
- Acquire a certificate of incorporation from the secretary of state
- Create a name for it
- Other requirements including selection of the board of directors, stocks to be issued and organizers for the registration of the company.
- Properly filling out certificate of incorporation and payment of filing fees.
- When approved, assemble the first stockholder’s meeting and select officers, by-laws and other important decisions.
- Secure a corporate seal and letterhead.

Incorporation of sole proprietorships

Many small business starting as sole proprietorship eventually decide to incorporate. However, there are some disadvantages coupled with such incorporation and here are some of those:

• Preparation of two tax returns, your personal income and that of the corporation. Preparation of which would mean additional accounting fees to be paid.
• Losses of the corporation cannot be deducted to your personal income, unlike when you are in a sole proprietorship where losses are considered to be an allowable deduction.
• Increased paperwork. More documents are maintained in corporation which would include minutes of the meeting, register of directors, corporate by laws and other documents essential in the operation of it.
• As a corporation, anything earned is taxed. No tax credit is given compared to when you are a sole proprietor you may be subject for tax credit.
• Expensive and complex registration. It involves a lot of serious work since it is a complex legal structure created by operation of law. Legal work, intricate accounting system and tax reporting requirements are also disadvantages.
• Higher income taxes are levied to corporations in some states.

Selecting an Accounting Method

Selecting an Accounting Method

Deciding On an Accounting Method

Accounting is relevant in any type of business. Many new business owners fail to consider how they are going to handle their money.  Accounting will make or break your business.  A detailed and systematic accounting method is a must if you want to own a successful business.

What is accounting?

It is the process of identifying, measuring and conveying monetary and economic information.  This information affords the business owner vital information about his business.  Only through proper accounting practices can you know if you business is profitable or losing money.  Don’t confuse cash flow with profitability.  You can have cash in hand and still be running a business that is operating in the “red.”

Purpose of accounting

The primary purpose is to provide financial information about an enterprise showing its performance and condition to help interested individuals make informed decisions.

The users of this information may be grouped into:

Those with direct interests in the company which would include the following:

• Management
• Owners/stockholders
• Taxing authorities
• Suppliers and creditors
• Clients/Customers to which products and services are being offered
• Employees/Staff

Those with indirect interests in the enterprise including:

• Financial advisors and analysts
• Regulatory authorities
• Attorneys with regards to determination of legal provisions
• Labor unions in the formulation of wage and contract demands
• In stock exchanges

When you have an established business there is still a need for you to decide on what accounting method to use.

Description of Accounting Method

A method applied by any company or organization in keeping its records and books with the purpose of determining profit and taxable income. It encompasses all the method of accounting as well as accounting treatment of any item.

Deciding between cash basis and accrual basis of accounting is essential in the recording of business transactions and determination of income and revenue. So business enterprises still are in crucial position to choose between the two methods.

To help you out in deciding which to choose, here are some ideas of what these two methods are all about.

Cash basis-accounting

In this method, revenue is recorded in the books as cash received regardless when the service and/or product is earned. While expenses are recognized when it is paid rather than when it was actually incurred.

Advantages of using this type of method would include:

- It is easier to understand
- Implementation and utilization is simple
- Inexpensive

Disadvantages of cash method:

- Does not comply with revenue and matching principle. The revenue principle of recognition of revenue when earned and not when cash is received. While in matching principle, expenses are matched with its related revenue and not when it is paid.
- Inaccurate method of determining profit since it does not recognize receivable and payables. Difficulty of determination of profit and loss of a company since it does not take into account money owed and money due.

Accrual basis-accounting

In the accrual method of accounting, revenue is recognized when it is earned rather than when payment is collected. More so, expenses are recognized when it is incurred rather than when paid. Cash payments and receipts may be in the form of:

• Cash
• Electronic transfer
• Credit card
• Check
• And other means of payment

Thus in accrual basis, revenue is recorded in the year it is earned regardless of when received and expenses recorded when incurred regardless when paid.

Advantages of using this method:

- Provides a more accurate track of the performance of your company over the long term.
- Complements with revenue and matching principle
- Accurate measure of profit compared to cash basis of accounting.
- A much easier way of determining the overall financial condition of a company.

Disadvantage of Accrual accounting:

- More complex compared to cash basis accounting, poor job in tracing cash
- Implementation is more expensive
- Owing taxes on revenue even before actual payment received.

What to use?

For small businesses that are just starting it is recommended that you use cash basis of recording revenue and expenses for it is easier to comprehend and implement. But as the business grows, you may want to adapt the accrual method of accounting to have a more precise track of your revenues and expense.

While for all companies, from small retailers to manufacturers handling inventories, it is a requirement that they use accrual basis of accounting under the generally accepted accounting principles (GAAP).

When choosing an accrual basis of accounting, a company must use it consistently for all of its financial reporting and for credit purposes.

Starting Your Own Business vs Buying

Every business aims for income and profit and more individuals are willing to engage commerce. But the big question is whether or not to “start a business” or “buy an existing one”.

Before deciding on what strategy to choose, let us first review the positives and negatives associated with both

Starting a business from nothing

Establishing a new business is basically the creation of it starting from scratch. Initiating one involves serious work. It requires an idea for the creation of a unique product or services, a business and marketing plan that will be easily accepted by the market and long hours of research are needed to come up with an original business concept.

Many people fear that when they start their business it will not prosper, or more plainly they fear failure.

It involves a number of risks compared to buying one. Further, studies show that many new businesses fail within the first three years.

Starting a business can be difficult and time consuming; you don’t really know who your target customers are, how many employees you will need; you don’t even have an idea whether or not the business will be successful.

Business buying

Purchasing an existing business is quite costly compared to starting one. Despite the cost, many entrepreneurs consider purchasing an existing business as a less risky option than starting one. It can save you a lot of time and energy and is known to have a lesser risk of failure. Buying has grown in popularity for most entrepreneurs and it is said to be easier since all the complex work has already been done for you.

To help you choose, here are some of the advantages and disadvantages of each strategy:

Starting a business of your own

Disadvantages

1. You need to do everything by yourself including creation of a business plan, business name, promotion and advertising.

2. Attracting customers may take more time since there are no established customers yet.

3. Months and even years of insufficient income and slow sales.

4. Financing can also be difficult since most lenders prefer to provide loans to already established businesses.

Advantages

5. Autonomy – You have the independence to make your own decisions.

6. Develop creativity – You will have the freedom to be innovative and creative.

Buying an existing business

     Advantages

1. Established solid customer relationship
2. Verified business methods and concepts
3. Qualified and trained employees
4. Proven cash flow
5. Established supplier relationship
6. Established infrastructure
7. Goodwill included with the business
8. Lenders are willing to finance a loan to an existing business

Disadvantages

1. Staffing problems – new owner versus existing owner can breed distrust
2. Customers loyalty to former owner
3. Goodwill acquisition may be too expensive
4. Obsolete and defective plant and equipment
5. Previous owner may become a competitor by putting up another same type of business. This can be addressed with a non-compete clause in the sales contract.

As you can see the advantages of buying an existing business prevail over its disadvantages.  Compare this to starting your own business where the detriments outweigh the benefits. Still it’s up to you to choose the right strategy that you think is best in your case.

How to Value a Potential Business

Starting a business for most of us is like nourishing a new born baby. You need to invest in them, nurture and guide them as they grow, further recognizing their potentials and develop their potential.

Reasons for starting a business

What exactly are the reasons why people venture into any trade? People start their own business for a number of reasons, some of these are:

- Profit – This is most basic motive of any business

- Charities – Contributing to the social welfare of the community is the purpose of these leading charitable organizations.

- Independence - Having a business of your own means autonomy to make decisions for it and not take orders from an employer.

On the other hand, there are also various reasons why people don’t want to go into trade because of the following:

- Money – The most universal reason not embarking in starting our own business is because of limited cash. Even if we have the most superb business idea, without capital, generally we won’t go anywhere.

- Competition – People are threatened by competition and will fail to even try.  Ultimately they are afraid of failure.
- No solid ideas – lacking concrete business ideas. People may desire having a business of their own but have no concrete ideas of where to begin.

The ultimate goal of all profit-oriented business is income.

Here are some suggestions that will help you enhance and expand your potential business or an existing one:

- Redirect your goals, plans – review your business plan making sure that you did not wander from your initial goals and try updating it.

- Renew and enhance client relationship – effective relationships with your customers are one of the most important reasons for success.  Communication with your existing customers paves way for a more rewarding relationship.

- Review pricing – you may want to evaluate your product or service pricing.  Assess whether there is a need for you to increase your price to gain more income.  However, taking into account competitor’s rates as well as that of the market is extremely important.  The last thing you want is a price war.

- Optimize efficiency and effectiveness of business operations – assess and find ways you can improve business operations with emphasis on product and service quality.

- Cut down cost – find ways how you can effectively cut down cost without sacrificing quality of products and services. Even if you are earning more than you are expecting there is still a need to look for more ways to limit costs and expenses to increase income.  The concept here is Gross Revenue – Costs (Expenses) = Net Income.?

- Assess performance/review strategies – evaluate performance and update or make changes if needed on the strategies currently being employed.  By assessing, it will give you an idea of how well your business is doing.

- Strengthening employee participation – employees are essential assets of any company. Make sure that they are getting what they deserve;  proper remuneration and other benefits. Effective communication with your subordinates, emphasizing to them their importance in the success of the business is crucial to your success.

Negotiations and Doing your Homework

Negotiations and Doing your Homework

Negotiating can be tough and practically every aspect of our business and personal life involves negotiation. This is not something that we are all born with.

We use these skills virtually every day of our life and the good thing about these is that these skills can be learned. We all have that convincing and persuading power; we just have to learn how to develop these practical skills.

What is negotiation?

Negotiation is basically an art. It encompasses persuasion and convincing to get what you want. It is an interactive communication between two individuals both benefiting from each other insuring that each of the parties get what they want

How to negotiate?

Here are some guidelines when conducting negotiations…

- Be specific. Have a clear description of what you want to achieve from the dealing. It must be something practical and achievable.

- Know who you are dealing with. Since negotiation is a two way process, you must learn about the other person. Obtain information regarding the person, product or service you will be dealing with.

- Establish rapport with the other side. You must know in advance whether or not the other party is willing to cooperate, because if not, then the whole negotiation will just be a waste of time.

- Do not let your emotions get the best of you. You must maintain your composure and keep it professional. Be objective and stay focused on the real purpose of the dealings.

- Be firm. Do not allow the other person to see your desperation to close the deal. If this is so, they will tend to use this against you.

- Never make false promises. In the course of the negotiation process, do not make any promises that you cannot or do not intend to perform, in doing so, you will lose your credibility.

Essential elements in negotiation

- Attitude

Your attitude towards the negotiation is very important in closing the deal. You must be firm and stay positive. The common mistake by most neophytes in this field is that they easily give up.

- Compromise

There should always be a compromise between two parties in order to have a win-win situation. Compromise addresses the core concerns.

- Communication

Without communication there can be no negotiation. This is just one of the basic elements that are essential in the negotiation process. Establishing rapport is a good way to strengthen the communication course. One must be able to converse to the other party what he or she really wants.

- Listen

You must also learn to listen and know the other side’s concerns. Listening actively to what the other party would like to convey and acknowledging them will let them know that you are serious about the deal.

Strategic negotiation plan

It is a must for you to develop a negotiation plan, with key strategies to be employed in each phase of the process. Strategies must be flexible to accommodate changes in the course of the dealing. A good negotiation plan must answer these basic questions.

• What do you want to achieve?
• Where should you start?
• When to make your move?
• How will you close the deal?

Basic phases of negotiation process

- Pre-bargaining phase – This is where all the planning and gathering of information takes place. It encompasses information gathering, leverage evaluation, issue analysis, rapport building, establishment of goals and expectations and formulation of negotiation plan.

- Bargaining phase – This is where the real negotiation takes place. Negotiation skills and strategies are employed here. Tactics are used to get the other side to conform to your offer.

- Closure phase- Closing the deal. Do not try to rush or delay the closing.

Do your homework; do your part.  Negotiation entails much preparation and research on your part. Go over the different phases of the process, essential elements involved in it and try to develop the skills needed.

Planning and preparation are just basic elements but are very significant in the negotiation process. Do your part by mastering the skills needed in this field. You won’t go wrong if you follow and understand what has been mentioned above. Do your part and do it now!

How to Write an Offer to Purchase

How to Write an Offer to Purchase

The quality of your purchase offer is an essential part in doing purchase dealings. This is just as important as the price being offered by you. Further, the purchase offer also depends on the kind of purchase being offered.

What is an offer?

It is basically an expression of interest to contract on a particular asset being offered by one party to another.

What is an offer to purchase?

This is a written intent to buy an asset (real estate property, equipment, supplies) by one party from another which is available for sale.

What is a purchase contract?

A purchase contract or a contract to purchase is a binding written contract between two or more parties to purchase an asset which is based on established laws. It is a legal contract.

There are a variety of things being offered for sale by any party, as mentioned above it can be a real estate property, personal property (e.g. car) and shares or bonds for a company’s equity and debt.

Parties involved in the purchase process would include:

- Buyer – a person or an entity that shows interests in the purchase of an asset being offered by another.

- Seller – a person or entity that trade goods or services in exchange of payment which is usually paid in cash.

- Broker – someone who poses as the middle man between a buyer and seller. They function as the liaison for both the buyer and seller. Although they can be disregarded, brokers can help ease the complex purchase process.

The process involved in the writing of the offer or the process itself is complex and requires sufficient knowledge. Thus, hiring a professional to help or assist you will lessen the complex in and outs of the process. Nowadays, more brokers are available; make sure you choose someone who is competent to do the job for you.

Offer and Acceptance process

This is a process wherein an interest party (buyer) makes an offer to another party (seller). The seller has the option whether or not to accept or reject the offer. In the event of rejection, seller may make a counter offer (a type of offer in response to another offer which was found to be undesirable). In return, buyer can either accept or reject (without counteroffer or with another counteroffer). In the event that one of the parties accepts, he then communicates this acceptance to the other and consequently a purchase contract is created.

Basic elements of a standard purchase offer

An offer to purchase encompasses detailed and complex information. If you have no idea of how to make one, you may want to hire someone to assist you on this one. Since this is a binding document, ask or hire someone that will thoroughly discuss the contents of such offer for you to understand what you are entering into and avoid further legal consequences.

Here are the elements comprising a purchase offer…

1. A clear identity of the buyer and seller
2. Sales price/purchase price
3. Closing date
4. Legal description of the asset which is the subject matter of the offer
5. In case of down payment or earnest money
6. Financing terms
7. In case of required fees associated with the offer
8. Contingencies
9. Other terms agreed upon by the buyer and seller

The offer is conveyed to the seller with the option to accept or not. Acceptance is evidenced by the seller’s signature affixed on the purchase offer document.

What is earnest money?

Earnest money or earnest payment is a deposit in security of the purchase of a real estate property which is made by a buyer to a seller. Generally, it is not required in an offer to purchase, however payment of earnest is usually done to demonstrate buyer’s good faith on the contract and it is likely that the seller will accept the offer if there is an earnest payment.

How much should you offer?

Factors that may affect or influence in the determination of your offer price:

- Your budget
- How badly you want it
- Number of other interested buyers
- Asset which is the subject matter of the offer compares with other similar assets

Business Buying | About the Buying Process

Business Buying | About the Buying Process

Buying a business is a tedious process and also involves serious research on the buyer’s part. It is a huge decision for a buyer to make for it entails a huge amount of money at risk.

The process of acquisition is quite complicated for most of us and we do not understand some of the process involved. So if you are new in this field, you might want to tap a broker to help you out. However, you must remember that most brokers are hired by sellers to work for them so be careful in choosing one.

What does a broker do?

A business broker typically acts as the middle man between the seller and buyer. They help in the transfer of ownership from seller to buyer. The broker’s main role is to guide buyers by giving out all essential information needed in the purchase of the business.

They can assist buyers in many ways including:

• Information – they can help in providing research and information for the buyer that is essential for a decision.
• Lay out facts – presentation of relevant facts about the business.
• Bridge of communication/negotiation – they are the passage of information between the seller and buyer, facilitating in the communication and negotiation process.
• Identify your interest – By determining what your interests are, brokers can help you to decide on what kind of business will suit you.
• Aid in handling paperwork – As you know, the buying process is a complicated process which involves a great deal of paperwork. Brokers assist you on the policies and laws governing the purchase.

The purchase process involves the following:

• Know what your investment objectives are
• Business valuing
• Seeking right opportunities
• Thorough examination of the business before acquisition
• Supervising and negotiating the purchase
• And closing the contract

Steps in the buying process with involvement of a business broker:

1. Meeting between buyer and broker wherein broker assists in deciding on what type of business.

2. Confidential information will be kept in private by buyer in order to protect seller’s interests.

3. Detailed facts are presented by the broker to the buyer.

4. When a buyer has chosen a number of businesses to select, he or she then visits the premises of each business with the broker.

5. Buyer now decides and selects the business to be acquired.

6. A Purchase Offer in writing will be made by the buyer with the assistance of the business broker. A Purchase offer would include the following:

- Statement of intention to buy
- Amount of money to be paid and payment terms
- Inclusion of a non-compete clause, which prohibits opening a competing business near the premises at a given period.
- Request for information and documentation of the business to be purchased.
- Indicated in it is the purchasing of the business in good faith.
- The Purchase offer is still for further review and not yet binding.

7. Presentation of the established Purchase offer by the broker to the seller.

8. Acceptance of Purchase offer by the seller with signature affixed on the contract.

9. An escrow account will be opened consisting of the down payment for the acquisition of the business.

10. Thorough investigation of the business done by the buyer.

11. A final draft of the Purchase offer contract will be made with the aid of a lawyer which and a notary.

12. Final fixed selling price is established by both buyer and seller.

13. Determination of whether there will be retention of staff.

14. Pending debts will be paid by the seller that is not covered in the purchase offer by buyer.

15. Signing of the final purchase offer in the presence of a notary with the full payment paid to the seller.

16. Seller turns over the business to the buyer.

Legal considerations involved in purchasing

There are many legal considerations that need to be taken into account. Find out everything about the business you are going to buy. Know and learn about your responsibilities associated with the acquisition.

Along with the legal considerations, there are also legal costs accompanied with the purchase and it will depend on how complicated the transaction and amount of work needed.

Buying a Business

Buying a Business

Many would be entrepreneurs consider purchasing an existing business as a less risky option than starting one from scratch. Research shows that most businesses fail within the first three years of operation.  Some feel that buying a business may lessen the risk involved.

Why buy a business? Why not start a new one?

Starting a business can be tough and time consuming; you don’t know who your target customers are, how many staff you will need; you have no idea whether or not the business will be successful. On the contrary, when you purchase an established business all the hard work has already done for you.

There are many advantages as well as disadvantages associated with the acquisition of an existing business.  Some of them are:

Benefits of buying an existing business

• Less risk of failure
• Established solid customer relationship
• Verified business methods and concepts
• Qualified and experienced employees
• Proven cash flow
• Established suppliers
• Set up location
• Goodwill included with the business
• Lenders are more willing to finance to an existing business

Disadvantages associated with buying an existing business

• Some staffing problems – resignations of current employees due to resentment of change to a new owner and even shoulder staff entitlements
• Customers lack of faith in a new owner
• Good will acquisition may be too high
• Outdated and defective plant and equipment

So, ponder on these pros and cons laid out for you before deciding to purchase an existing business.

How to find the right business for you

- Look into the past performance, current status, operations – investigate historical performance, its operations which would include sales, costs, expenses, existing liabilities, profits as well as assets.
- Workforce and management
- Competitors
- Queries – Asking about the business from its present owners and existing customers is a must.

Gathering all the information mentioned above will help you decide on the right business to acquire. The broker will give more accurate information. If it is possible, ask for externally prepared financial statements which show the status of the company being acquired and also request income tax returns, bank account statements and other information that will guide you on your decision. Success goes with recognition of the right business for you.

Determine the business that best suits you

You should decide what kind of business you want to be involved in.  And, as much as possible, choose something that you are good in. For example, if your specialty is food then venture into a line of business that will permit you to do that. Here are some points to help you out:

- Evaluate the knowledge, skills and experience that you currently possess
- Choose an industry that you are familiar with and understand well
- Identify your strengths and how you can contribute to the business
- Identify your weaknesses and how to handle them

Purchase Price

Some people get the wrong impression that acquisition of an existing business would cost more; indeed more often it is less expensive compared to starting a new one. The purchase price of a particular business is allocated to goodwill, leasehold improvement, plant, and equipment. Allocation of the purchase price can have a huge effect on the buyer and seller, wherein it may result in an increase or decrease on the seller’s gain on sale as well as the future taxable income of the buyer following the year of sale.

Allocation of which can lead to tax consequences and that is why there is a need for a buyer and seller to consult with a financial and tax specialist with regards to the purchase and sale of the business or trade, price allocation and other information involved in the transaction.

Innovation and creativity will still take part even though the business is already established. With these you are able to bring in new ideas, putting your skills and experience to good use. Enhancing and improving it which would consequently heighten the possibility of increased profitability.

Choosing the Business Model

Choosing the Business Model

First of all what do we mean when we say business model?

A business model is a representation of how the company will make money. It is a condensed description of how an organization or company conducts business and how they generate income.

Some pointers when selecting a business model:

- Read and examine models that other successful individuals have used when offering related product and services.  Innovation is a good thing however, duplicating a proven business model insures success.

- It must be clear and comprehensible.  The simpler the plan is the clearer the revenue model will be.

- Something that is viable. Unless you have plenty of money to put at risk, do not reinvent the wheel.  The best option is to duplicate a successful business.

The 9 building blocks of a basic business model would constitute the following:

1. Core capabilities – competency and capacity needed to accomplish the model.

2. Key partners – partner network participation in the model and other aspects of it.

3. Value configuration – underlying principle for a mutual beneficial relationship between an organization or company and its customers.

4. Value proposition – the products and services being offered to the market.

5. Target market – the objective of any business is to attract customers to buy the products and services offered in order to earn income. The target audience to which businesses rely for earnings and determination of different target segments.

6. Distribution channel – communication and distribution route to reach customers and offer them the value proposition which would include the marketing and distribution strategy.

7. Client/Customer relationship – the link that is established with the customers and the process of client relationship development.

8. Cost structure – the monetary requirement in deploying the business model.

9. Revenue streams – how the company makes money which constitutes the revenue model.

Once you have chosen your business model, the next step is to create your actual business plan.  One of the best things about creating your business plan is that it may cause you to rethink aspects of your business model.

Welcome Changes

A change in the model chosen is just part of the process. Although the model picked is firm and tested, there is still a need to make minor changes. Change is good but too much change may pose a threat to your company. An example would be working with other contractors to get a better deal.

Picking out business models that other successful companies use has been proven to increase the chance for success. This has been the strategy used by most leading companies in different industries nationwide. Adopting a business model does not necessarily mean completely copying it.

Business model innovation

Innovation is closely related to the creation of business models. New and innovative models create a threat to replace other established trade models and traditional means of doing business. Some established organizations and companies look for new and unique business models that will compete with other companies thereby securing their position and success in the industry they are in.

Entrepreneurs and executives heighten their competency to manage continuous change and adapt to hasty changes in the business world.  They do this by embracing and implementing new ideas into their business models.

A great business model does not ensure you that you are going to be successful. You still have to put effort into making it work. Hard work is certainly a great weapon for anyone’s success!

Why Go Into Business for Yourself

Why Go Into Business for Yourself

Why Go Into Business For Yourself?
If you are sick and tired of working long hours for little pay you may be ready to become the owner of your own business.  Many people are finding that owning their own business is the only way to truly declare their independence and survive these troubled economic times.

Why are people finding this so attractive? Let us give you some ideas how having a business of your own benefits you.

1. Independence – As you know, you will have no employer directing your every move.  Instead you will have the autonomy to make your own decisions and be in charge of your own success.  However, there is a trade off.  You may no longer have a single boss, you now will have many customers each of which is your “new” boss.

2. Benefits solely for you – All profits of the business are yours.  With the exception of Uncle Sam and your overhead, whatever is left is yours alone.

3. Manageable work time – You will no longer need to punch a time clock or be accountable to anyone but your customers.  You control your time.

4. Develop creativity – Here you get a chance to be innovative and creative. Put your talents to good use.

Who do we consider self-employed?

A self-employed person is someone who works solely for himself instead of having an employer, gaining income from a business or trade operated solely by yourself.  You are considered to be self-employed if you:

- Pursue a trade or business as an independent contractor or sole proprietor.

- A member of a partnership pursuing a trade or business.

Starting your own business requires careful planning and effort. Planning is the major factor for a business to be successful. It may be tedious but the rewards are remarkable. It also entails thorough examination and research. The following are some points included in the planning process:

• Type of business – decide on what business you would like to venture into. You may want to include the benefits and detriments involved in this venture. Determine what products and/or services you will be offering to your future customers.

• Marketing – you also want to consider how you will promote the business. Determine what market you wish to target

Operating your own business can be difficult and there are many factors that need to be considered before you tackle this new career path.

Here are some things that you might want to take in to account…

Capital/Investment

Every business needs capital to operate.  Many businesses start with a small investment.  Some will thrive and be able to reinvest their cash flow.  However, many start up businesses fail because they began with insufficient funding.

Federal Taxes

You need to secure a federal tax identification number if you incorporate or hire employees in order for you to operate. If you operate as a sole proprietor your social security number will suffice.  You are obliged to pay taxes as you earn or receive income during the year.

Market Research

Before any business can operate, you must know who your target market will be. Market research is one of the basic steps when operating a business of your own. It entails systematic gathering, documenting and analyzing information and data about potential customers and even competitors.

With this, you are able to determine who will be receiving or purchasing the product and service you will be offering. Finding customers can be really challenging, and a good marketing research plan will definitely help in doing so.

There is an enormous risk in starting a business for yourself and many do not succeed.  Before you enter into this new venture make sure that you have thoroughly studied the pros and cons of having a business of your own. With proper planning up front, eventually all your hard work will pay off!