The following is designed to be a simple and brief checklist of some of things you will need to consider.
1. Purchase or Set Up
Before going into business an important consideration will be do I purchase an existing business or start my own. The advantage of purchasing an existing business is that much of the hard work has been done. The clients are already there, the systems in place and the revenue is quicker to start coming in. The downside is that you pay a price for it. The advantage of starting your own business is that it is a lot cheaper, however all the hard works needs to be done in generating revenue and a client base.
When purchasing a business you may consider some of the following issues:
- What is the value of the business?
- Are there any major clients contributing to a large portion of revenue?
- What will be done by the current owner to ensure a smooth client transition?
- Am I buying the Goodwill or the Structure as well?
- Will key staff remain under the new ownership?
- Is there a claw back provision if clients leave?
- Are there any pending legal issues?
2. Plans, Analysis & Processes
Before commencing business it is a good idea to consider where you want your business to end up and how you will get it there. Some of the following are useful plans to put into effect and can be used to keep you on track and may be modified from time to time.
a) Business Plan – Your business plan is your guide to the future, it details how you will get from point a to point b. A business plan keeps you on track and may also assist you in obtaining finance.
b) Marketing Plan – A marketing plan may form part of your business plan and will help you understand your industry, your target market and your competition.
c) SWOT Analysis – Identifies your Strengths, Weaknesses, Opportunities & Threats.
d) Budget – It is a good idea to have a budget. This is something that can be used to keep your spending on track and is a useful tool to look back on to see how your actual results compare to your budgeted results.
e) Break Even Analysis – A break even analysis is more important for a business who is selling a product as opposed to a business selling time. A break even analysis shows you the point at which you sell enough of your product to cover your expenses.
f) Cash Flow Statement – This gives you a plan as to how you can manage your cash flow and plan for expenses. This is also a document that may assist in obtaining finance.