Startups: 4 Things You Need To Start Your Business
I’m on the phone a lot — daily (so glad the days of “minute limits” on cell phones are gone now). Over the last few weeks I’ve had conversations with a few individuals each beginning the route of the startup business. After finishing these discussions, I realized there were only a handful of themes in all the conversations.
“What do you do for banking? How do you manage the books? Should this person be an employee versus a contractor?”
If you haven’t owned a company before (or in a high level of management) then you can easily get overwhelmed by the options you have actually running your business. Here are the highlights so you can hit the ground running.
For keeping track of your income, expenses, reconciling your bank accounts, knowing what clients haven’t paid in over a month, creating 1099s and W2s for contractors/employees it is fantastic. When it comes time to payroll and direct deposit your team members, it even does that. It makes accounting super-simple and your accountant will be very happy you chose a product that he or she already knows how to use. We use it to setup recurring invoices for clients, make sure our people get paid on time as well as generate reports on how well the company is doing from a profitability standpoint.
A quick note on QuickBooks and Banking
QuickBooks allows you to migrate all of your bank accounts and credit cards into their system so you can categorize everything that comes into (and out of) your business. I have found that a lot of small, local banks do not have great QuickBooks connectivity and thus make accounting much more difficult. Personally, I would suggest banking with a larger bank in your area so you can reap the benefits of “accounting made easy.” If I had to manually reconcile all my expenses (and income) from our different accounts, it would take away from the time I have to give to our clients during the week — and that’s not time I can get back.
Employee or Contractor?
The IRS has a detailed set of rules that defines who is a contractor versus who is an employee. The three basic rules are:
- Behavioral: Are you controlling when and how this person is doing the job?
- Financial: Are you reimbursing their expenses? Do you provide the tools necessary to complete the job?
- Type: Does the work the person is doing perform a critical role in the business? Does the get benefits?
What it mainly boils down to is understanding and documenting the reasons for/against employee/contractor. There isn’t a “certain number” of items you have to check off a list to make a person an employee (or a contractor). Just make sure you take into account everything the IRS tells you to do and make your determination logically.
During the beginning phases cash on hand is typically a bit tight. However, there might be that one person who you just have to have on your team in order to make it a success. You might not have the cash on hand to guarantee a market-rate salary, but if this person is in a position to effect your revenue stream, you might want to consider a simple bonus structure in connection with a lower-than-market salary offer.
First, find out where you want your business’s overall profitability percentage to be. Let’s say that number is 35%. If the work this employee touches over each 6 month period is at a 35% profit margin, give out a small bonus. Do a tiered bonus structure (increasing bonuses for higher profit margins) so the person has the drive to help make the company as profitable as possible.
If you are going to run a business you have to have (at minimum) a simple but solid online presence. People need to be able to verify you actually exist and the first way people typically do that is through a quick Google search. If you can’t be found online, you may not actually exist; in the sense of Google-credibility. If you don’t know where to even start with your website, make sure you budget out some money to get something online before you start passing out business cards.
I admit, I too have been caught in that “oh my gosh, what is going on” moment. When there are so many moving pieces and things … just feel too much. Stop yourself. Give yourself a minute. Boil things down to your basic priorities. These are the 4 things I’ve found (and discovered personally) are essential for getting the operations of your small business running. Whew… just breath. You got this.