Starting a New Business? Here is a checklist.

Are you thinking of starting a new business? While this is a scary time with the current market environment, disruption can also be the perfect time to realize an opportunity. This checklist guides you through what you need to know in order to get your new business up and running.

New Business Startup Checklist

Create your business plan.

While you may feel the urge to hit the ground running, slowing down and documenting a business plan will increase your probability of success. A business plan challenges you to create a mission statement, define your niche, and to do research on your target market and competitors.

Prepare a projected profit and loss (P&L) statement.

Estimate your business income and expenses for the first year. I am surprised at how many people completely skip this step because they have 1 or 2 projects lined up and they think if they build it, they will come. There are typically a lot of upfront and ongoing expenses required to get you started. If you will be cash flow negative for a period of time, ensure that you have enough of a cash reserve to prevent you from accumulating credit card debt. I have gone through this exercise with clients before they made a transition. Seeing the numbers on a page made them realize they were not ready to take the leap. It is easy to get excited about your website and services, but you have to ensure that at some point, you will be profitable.

Choose a business name.

Once you have decided on a business name, confirm that the URL is available and register it at a site such as GoDaddy. You also need to register the name at your Secretary of State's (SOS) office. For example, here is California’s SOS business page.

Decide on a business structure with your lawyer and accountant.

For many people, a sole proprietor is a fine way to start, but not always. Consult with your advisors to get their opinion. Whatever you decide, complete the necessary paperwork and pay the associated fees.

Be clear on your federal, state, and local tax requirements.

Most businesses will need to obtain an Employer Identification Number with the IRS. That will be your Federal Tax ID. You also want to review your state and local tax obligations. For example, San Diego has a business tax licensing requirement.

Obtain the insurance necessary to protect yourself.

Errors and Omission Insurance

If you will be in the business of giving advice, for example, you may need Errors and Omission (E&O) insurance. This will protect you from negligence, errors, misrepresentation, and more.

Disability Insurance

Disability insurance will protect you in the event you have an injury or illness that prevents you from being able to do your job. You may have had disability insurance through your employer in the past. Now that you are self-employed, you will need to obtain and pay for this on your own.

Business or General Liability Insurance

This type of insurance will protect you against claims that result from normal business operations. Examples include third party bodily injuries, medical payments, and personal injuries.

Once you start making money

Create a separate checking account for your business.

All business income and expenses should be deposited and debited from an account separate from your personal accounts. This will make it clear that your business is a separate entity and it make it easier to keep track of your financial records.

Purchase accounting software with online payments ability.

Consider a service, such as Quickbooks Online, to keep you organized. For example, Quickbooks allows you to run a variety of reports, such as a Profit and Loss statement and Balance Sheet, with the click of a button. You can also issue invoices and receive payments electronically through the system.

Begin implementing your marketing strategy to find new clients.

I read Donald Miller’s Building a Story Brand in one of my study groups and found that it helped me clarify my message and brand. I have also experimented with client surveys created in Google Drive, which were a great way to collect feedback. I emailed the client a link to the survey after completing their financial plan. If they filled it out, they received an Amazon gift card. The survey asked about their favorite and least favorite part of the process, whether they would refer to me, and more targeted questions on the plan itself to ensure their questions were answered. As a highly regulated professional, I cannot show the results of the survey to prospects, but it has helped me ensure that I am delivering the best possible product on a consistent basis.

Build flexibility into your plan.

Networking is still important.

Continue networking with old co-workers and other business owners to maintain your contacts and stay on top of best practices within your industry. This can help drive new business, but also serve as a safety net if the new business does not work out.

Remember to save for retirement.

While you may have needed to pause your retirement savings while starting your business, re-assess this annually to see if you can re-start saving for the future. Read retirement savings options for the self-employed to help you find the best savings account for you.

Be careful when you hire help.

As your business grows, get educated on the difference between hiring a contractor versus an employee. The IRS has specific rules that you need to follow. Getting it wrong can lead to penalties with interest.

Starting a new business can be incredibly rewarding and energizing. It can also be stressful and lead to financial strain. If you want to learn about what else you can be doing to get your business off on the right track, schedule a call for us to chat.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.