Starting a business

It seems that saying you are starting a business, going off on your own or being an entrepreneurial is really trendy right now. It seems like some see entrepreneurial employment as the entry into adulthood. Somehow you have made it, or you are better than your friends because you are not a slave to your employer and your desk job. I am not sure how entrepreneurial-ship has become such a prideful term, but I unfortunately do not feel it needs to have that stigma. My personal story with entrepreneurial employment is all I know. My Dad has owned his Commercial Landscaping business for 30 years in Central MN and before him, my Grandpa started a local Glass Company in the same town. Yes, I have highly influential family members in the traditional work sphere, but for some reason I personally was more attracted to my Dad and Grandpas work style than others. 

In 2011, Spencer started his Real Estate Company. He left his University Recruiting/Golf Coaching position for the unknown career of Real Estate. The leap into Real Estate was so unknown to both of us. Spencer was highly confident in his abilities, but I was highly incompetent in my abilities.  I promoted myself to CFO quickly and decided I wanted to make sure all the income Spencer would generate would be managed with excellence. I knew that his income was our only source of 'steady' income. I was pregnant and working a part-time bookkeeping job. I took the job to be taught by someone and make money as the same time. I wanted the job to be a launching pad for our business. It was exactly that. I am forever grateful for my first bookkeeping job. I learned SO MUCH! In the first year of our business these were the steps that were most critical to our success:

BUSINESS NAME

1. We determined our business name. We spoke with several people within the real estate community and outside the community and landed on the business name S & A incorporated. I know what you are thinking, but Amber I thought your business was called CommonWealth Real Estate Group. You are correct to the public eye it is CWRG. However, legally and with the Secretary of State we are S & A incorporated we just Do Business As (DBA) CWRG. This is a convenient way the state allows for business owners to only have to register one name, but host multiple DBA's under the business name if needed. Additionally, if we ever go to sell the company or pass it on to our kids, we do not want it to be called the Spencer Hutton Empire. Seems a bit more polite to call it S & A incorporated. 
2. Once the business name was determined, the next step was to confirm no one else had the name (you can search this on the Secretary of States website). This is really important. If you take someone else's name they could take legal action against you. Be wise when you are choosing your name. 

BUSINESS TYPE

1. Next you want to discuss with your CPA to determine what business type you should register as. You are likely most familiar with LLC's, S-Corps, C-Corps, Sole-Proprietors and Non-Profits. Discussing your intentions with your business and your realistic income goals with your CPA will help you determine which business type to register. 

BUSINESS ACCOUNTS

1. Once your business is registered and you have selected a name then you will go to your bank and open up business accounts that align with the business name and business type. This is important. Please DO NOT co-mingle your income from your business with your personal income. What I mean is, do not deposit business earnings into your personal checking account. This is a very risky move as it relates to IRS Audits. 

ACCOUNTING SOFTWARE

1. After all the accounts are opened your next step is to learn and implement an accounting software. Yes this is boring and takes up time, but it is the bread and butter of your business. If you do not have a strong accounting resource you will never know the true profitability of your company and without this, you are no better than the business owner who takes cash for his/her work, deposits it into their personal checking account and spends it all without preparing for tax season. The goal of being a business owner is to run a successful company that provides excellent service AND remains profitable while doing it. I use QuickBooks and love the software. I do not use the online or employed version because I feel they both limit the type of reports I like to analyze. You will need to make the decision for yourself on which software you prefer. 

EARN INCOME, SAVE & PAY YOURSELF

1. Lastly, begin earning income. When you are paid for your work, be sure the income is made out to your business, you have provided the client with a W9 tax statement and a workers compensation policy and that you deposit it into your business account. Once the funds are deposited it is time for you to shuffle the funds accordingly. 
   1. 20% into business savings for taxes
   2. 20% into personal checking for Employment and CEO compensation
   3. 50% retained earnings for business growth and development
   4. 10% savings for future growth and net profit
2. With this business model you will be receiving 50% compensation (Tax Savings, Employment Comp and Net Profit) however, you are not liquidating it all for yourself. You will need to learn to live off the 20% until you are able to understand your full tax liability.
   1. Each Quarter I provide our Profit and Loss & Balance Sheet report from QuickBooks to our CPA to cross reference that we are paying enough quarterly for our Estimated tax payments from our Savings account. If we are ahead or behind based on her information. I know whether or not I need to increase or decrease our savings percentage. At the end of the year, if all funds are not used then they can be transferred into our personal account. Same goes for the net profit or the business growth dollars. If the amount is larger than needed, then these funds can be cash-flow for us personally. 

There is a lot that goes into running a business successfully and with profit. This process is a proven process. We have implemented these steps and others for the last 7 years and have on average turned a 35% profit. This is better than my goal above for you, but it can always be improved on as your years go on. Start with these benchmarks, establish a healthy profitable company and then modify from there. 

Good luck and let me know if you have any questions!
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