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Thursday, January 12, 2012

So, You Want to Start Your Own Business Step One

The very first thing you must do to get started is get your personal life in order. You must determine where you are now and where you want to go. The first part of that is budgeting.

In order to establish a budget, you have to know what you are spending now. Gather all your bills and determine where all your money goes. The best way to do this is with accounting software like Quicken or other similar programs. Set up account listings for all of your money sources. This includes cash, checking, savings, credit cards, investment accounts, and everything else. If you do not have and cannot afford this software, any spreadsheet will do. And, barring all of those, you can always use a pen and paper.
Track every cent. It may take a while to get in the habit of tracking where every cent you have goes, but it is necessary to see what you are spending and where you are spending it.

Once you know where every cent is going, you need to determine from that what could be avoided. What money are you spending that you do not have to spend? Cut these out as soon as possible. Now would be a good time to read books like Debt-Free Forever: Take Control of Your Money and Your Life by Gail Vaz-Oxlade. The idea is to reduce your monthly outgo as much as possible so that you can manage on a less than steady income. Whenever you start out in a business of your own, you cannot be sure when, or if, you will be paid.

One way people finance the startup of their business is called boot-strapping. With boot-strapping, you start your business with little or no money. You have no furniture or file cabinets. You use boxes, plywood, and concrete blocks. You buy office supplies as you need them. You don’t invest much in inventory. You produce whatever goods or services as they are purchased or ordered. During this time, you may have to rely on family and friends to volunteer labor or agree to defer any salary until you are profitable. The owner of the business does not receive a salary.

Often times in bootstrapping, entrepreneurs will live off of credit cards. They will max out their credit in the hopes that someday there will be a big payoff. While I don’t mean to squash your dreams, I need to remind you that most businesses fail in the first year. The likelihood that your business will survive until the five year mark is extremely remote. That being said, are you ready to take on this kind of debt load?

Even the best business plans have a slim chance of surviving to the five year mark. Think it over carefully before you dig yourself into a credit hole. 

The opinions or advice listed in this blog or website should be used as a place to start only. It is not a substitute for the use of a professional.
Please be sure to consult your attorney and/or accountant with any specific questions.
There is no one right answer to any business question that will cover all circumstances.
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