By Aaron Allen
The Seattle Medium
As we embark on life after COVID or the possibility of living with COVID for years to come, many people are making life-changing decisions that for some could mean becoming an entrepreneur. According to the U.S. Census, one million more new business applications were filed in 2021 than in 2020 – the highest total on record.
If starting a small business is on your horizon, Sheila Winston, a senior business consultant with Chase, offers five steps that can help potential business owners establish a foundation and pathway towards success.
The first step consists of writing your plan down. Taking it from a thought or dream and putting onto a living document.
As a matter of fact, planning and putting your business idea(s) is something that Winston encourage any new or established business owners to do.
“The most important thing even before we get into the five steps to consider is that you want to make sure that you have a strong business plan,” says Winston. “I say that because there are so many businesses that I run into that don’t actually have a business plan, and that’s whether they were a new business or existing business, that’s the most important thing you always want to start with.”
According to Winston, writing down your plan provides direction and can help chart a pathway to follow as you begin your journey into business.
“Your business plan is like a blueprint,” Winston said. “[Operating without a business plan] is like putting something together without directions, your business plan for me is the most important part of your business.”
From dream to paper, Winston cautions that it is important to be flexible and prepared for changes, especially as your business grows and evolves.
“One thing about one’s business plan is that you gradually want to build on your plan,” says Winston. “It is not going to be robust in the beginning. It will be a gradual build as you build your business. Like a living document it will always be changing as your business changes.”
The second step Winston suggests is to build and protect your credit. Knowledge of and the maintaining your credit score is vital and the cornerstone of whether or not a business meets their overall financial goals.
“Building your credit is essential to a business,” says Winston.
“A lot of business owners don’t understand that this is an important step,” she continued. “[Many potential business owners] think that they are just going to go on the credit of the business, but when you’re first starting out because you don’t have anything really established for your business, we [banking institutions] are going to look at your personal credit score. You want to keep this in mind in the beginning because as your business grows there are a lot of things that you will want to accomplish and building and protecting your credit score will help you reach your overall goals.”
During this time of year, many young people will be graduating from high school or college, going off to conquer the world and some may not have established or learned how to manage credit. Graduates and young people can be inundated with credit card applications/offers, which, if not managed properly, can impact their quality of life both long-term and short-term. Winston suggests being very careful and not to overindulge in credit or credit card debt.
“Be careful about all of the solicitations you are going to get with credit cards,” says Winston. “So many young people going to college, or they get things in the mail asking to apply for this or apply for that, don’t touch credit until you fully understand how it works and have the ability to pay it back. I’ve heard so many stories of people getting a card and going out there and maxing it out and don’t have a plan on how to pay it back.
According to Winston, chase.com/financialgoals is an excellent tool to help people understand credit, how to improve their score and walks them through the whole gambit of what you’re going to need to help build your credit.
The third step is to separate personal and business accounts. A lot of burgeoning business owners start their enterprises with their own money, but it is very important to practice the habit of keeping personal and business finances separate.
“I one hundred percent agree with this step,” says Winston. “Keep your personal and business accounts separate. If you don’t separate these two, you can set yourself up for a financial nightmare.”
“You never want to intermingle your accounts, you want to keep them separate because these accounts are not the same and by keeping them separate will allow you to help allocate you money properly,” Winston adds.
Think about expenses. Start-up costs can vary in different ways and one can easily get lost in the numbers. Getting a clear understanding and a clear picture of how much startup money you will need is essential to help avoid cash-flow problems until your business starts turning a profit.
“When you think about your expenses, first of all you have to make sure, again, that you separate your personal accounts from business accounts and the main thing you want to think about is the startup cost of running your business,” says Winston. “How are you going to allocate the monies for the different things you are going to do with your business. There are a lot of things that you are going to have to take into consideration, because you are going to have a lot of expenses that you may come across.”
Your credit score is very important when it comes to securing a loan, a credit card or line of credit. A credit card or line of credit can be useful as it helps you avoid using cash, because cash and access to cash are very important when it comes to the longevity of your business, particularly in hard times. Winston says one mistake a lot of companies make is using up their cash and becoming “cash poor”.
The last helpful tip is not being afraid to ask for help. A lot of people do not like asking for help, but it doesn’t hurt to ask. There are a lot of tools that can really help to get your business started.
“For a lot of business owners, it is important to think through the whole process,” says Winston. “I know it’s exciting that you want to start your business, but you have to make sure that you take the proper steps. Writing your idea on paper, build and protect your credit, separate your business account from your personal account, think about your expenses and lastly do not be afraid to ask for help. All of these will help you have the proper tools in place that your business can be profitable.”