KJ Tha Great

When you get as far as initiating the 5 documents in the previous blog, there’s no turning back. You’re on this path now! There will be so many obstacles for you to overcome and I believe you’ll be able to handle what can be thrown at you, especially if you’ve come this far. Moving forward, I will explain exactly how the next 5 documents will support your pursuit as you build your new business.

There’s plenty of reasons why a lot of entrepreneurs have unsuccessful businesses; some may lack consistency and stay within their comfort zones, they could be prone to procrastination, or they give up too quickly thinking their business is supposed to make them money immediately. Patience is the name of the game in the career path. There is not one lucrative enterprise out there that hasn’t had to take the time to solidify the foundation before they became prosperous. Having the documents I unfold in this blog will not only protect your assets, but it can make your growth process smooth and allow the business’s lifespan to be long-lasting.

Business License and/or Permits

The next documentation you’re going to need is a business license or seller’s permit. This is the legal permission business owners may be required to obtain to conduct business in their particular area. For some business structures and in some states, this may not be necessary, therefore it will be important for you to research your state’s requirements. I own a product-based business in the state of Georgia, so I am required to have a seller’s permit (which is free to file). If this is your state too, you can visit the Georgia Tax Center (ga.gov) and apply for your free seller’s permit. This is where you will pay your state and local taxes, and you’ll be able to choose whether you want to make payments monthly or annually. On the other hand, if you have to have a business license, like for food-service entities, you will need to visit your local county’s website to print out an application form and schedule an appointment to complete your filing. The fees range between $50-$200, depending on what you are required to have. You’re definitely going to need this document before you make any sales in your business, or you could be penalized. It could cost you BIG time, so make sure you get what’s mandatory for your state before you start operating your business.

Contract Agreements

The next set of forms you will need, especially if you are operating a service-based business, is contract agreements. Have you ever noticed that you have to sign a waiver when going to a thrill-seeking enterprise, such as go-kart racing, ziplining, or trampoline parks? It’s simply because there’s a chance that you could be injured and business must be protected, so they fulfill an obligation by telling you of the dangers and you signing the form acknowledges that you understand the risks. The waiver is one of the most common types of contracts. If you offer a specialized service, like plumbers, tax professionals, marketers, or other contractors, your business will need a service agreement that ensures the work being provided and the payment you set is at a mutual understanding. In my marketing pursuits, I’ve created service agreements for my clients that listed the tasks I would perform for them, how it would benefit their sales objectives, and my price points. I would also generate non-disclosure agreements to legally protect my intellectual property that made sure my ideas would not be used, copied, or exploited without my permission, and I use a lawyer to notarize this form. You can find easy, downloadable contracts through Rocket Lawyers, or use the CobbleStone Integration Software for any contract you may need. You’re going to want to avoid any disputes in your startup at all costs in order for your business to have a chance to grow with a high level of professionalism, and at the same time, maintain ownership of your intellectual property. 

Financial Records

Now, the most looming topic that must be discussed, the significance of having your financial records properly organized. In some cases, the 2 previously mentioned documents may not be necessary for you to have, but you will need to know what to do with the money you earn from your business. There are 3 pivotal bookkeeping records you are going to need to always keep track of, which are the income statement, cash flow statement, and the balance sheet. To learn more about these financial statements, you can read the later blog coming soon. In the meantime, the first thing you’ll need to do is to open up a few business checking accounts, not just one; you will need at least 2 separate accounts: one for operating expenses and the other for reserves. Your reserves will be your savings account, but it will also be the account you use when applying for loans or grants, which I will explain why in the next section, all while the operating account will be what you focus on when creating your cash flow and income statements. Instead of teaching you how to set up these charts and explain the nooks and crannies of financial literacy, my best recommendation is to invest in an accountant (someone local in your area) or incorporate any accounting software, like Xero, Quickbooks, Wave or Sage. These platforms go above and beyond managing your financial records better than you could by hand, and that way you as the entrepreneur can focus on tasks that need more of your attention. All you would need to do is set up an account, link the business checking accounts and label them, and as your business grows the software will keep track of your spendings, the flow of income and even calculate your taxes periodically. This automation takes out a lot of stress of being an entrepreneur so please take into account that this is in your best interest going forward.

Credit Lines/ Tradelines

I mentioned in the above paragraph that I would explain how the reserves account should be used when you apply for grants and loans. Establishing credit lines (or tradelines) is what’s going to qualify you for the capital you’re going to need to grow exponentially. The reserves account will show investors that you have a positive bank account that shows money going into it without any losses. It’s important that you put aside money into this account frequently. Meanwhile, you are going to need to build the credibility of your business and that starts with tradelines. First, you’re going to have to register your business on Dunn and Bradstreet, the largest business credit reporting agency. Setting up the account with them is free, and I would advise that you don’t purchase any of the crediting services because I’m going to give you the juice to spend the least amount possible Tradelines are credit accounts you can apply for from other companies that help businesses build their credit. Since your business is new, there is a slim chance you will be able to apply for business credit cards with high credit limits from a bank, so tradelines take on the initiative to support your growth. You can be offered net10, net30, and net60 accounts in which you can purchase from these sites, like Quill, Uline, Grainger, Business Tshirt Club, or Faire, and you won’t have to pay the balance for 10, 30 or 60 days, respectively. Depending on the needs of your business, these tradelines sites can provide supplies to help grow your business and they truly come in handy.

The best way to build your business credit as quickly as 6-9 months, you are going to have to use at least 3 of these companies simultaneously, spend at least $100 on each site monthly, and pay the balance off in half the given timeframe. To monitor your business credit progress, you should create an account on Nav, it is totally free, unless you want to receive credit reports from all 3 business credit agencies (DnB, Experian, and Equifax). If you are investing in an accountant, speak with them about managing your tradelines, otherwise use the accounting software to schedule your payments for each supplier to stay on track with your total accounting process. In Nav, they will let you know your business credit score, ranging between 0-100, and as you maintain a 90+ score for at least 3 months, you should apply for your first business credit cards. I suggest applying for a gas card from Shell, WEX, or Exxon, then applying for a Sam’s Club credit card. You will have to already have a Sam’s membership if you’re going to apply for their card so make sure you purchase an annual membership early in the venture. Build a good business relationship with your starter business credit cards for the next 9-12 months. There’s a reason for this route; a lot of high limit credit card companies, like American Express, want to see that your business is active for at least 2 years before you can qualify with them. The same goes for large SBA loans from $500 to $5.5 million. As long as you’ve maintained a steady cash flow into your reserves account during this process, you will have access to all of the capital you need to grow your business, from equipment to employees to real estate.

Insurance

Again, I have to stress how important it is to have your business plan in place so that you and your investors are aware of all the needs of your particular entity, how it all will operate, and who will be involved. Your executive summary will cover most of the details you will need to set up the business insurance policy. Though this part may not be an immediate prerequisite, it will eventually need to be considered to protect your assets and be accessible in case of liability claims. Being a person who’s worked for insurance for 2 years on personal lines, I have never been fond of the idea of insurance; that is, until it comes to business motives. I hate to even use this as an example but it is highly relevant: pharmaceutical companies have been sued quite often in the last 50+ years to where that particular entity is forced to dissolve and their owners/shareholders do not hold the responsibility of the damages. I thought this was due to the protection of the corporation type, but it is really because the insurance takes on the debt of the lawsuits, and they would enforce the newly dissolved companies to payout the policy. The owners/shareholders get to start a new company, tweaking the contents of the products just enough for it to be “different” and they are back in business bringing in billions of dollars. That is why as small business owners we need to start protecting our assets under the clause of insurance and let the insurance company take on those kinds of responsibilities. Also, when you start hiring employees, you can offer them benefits whereas they get coverage under the insurance policy to be able to have healthcare, dental care, injury compensation, cybersecurity, etc. I strongly advocate having business insurance, particularly Allstate, to persuade your employees to stick around long-term, and to also upscale the stature of your enterprise.

Starting and growing a successful business is a long, hard road ahead. It’s important to always learn new ways to improve and progress. When you build a team to help you through the process, everything gets easier and faster than just you alone in this journey. I hope you’ve gathered a ton of useful information in this blog, but if there were anything you would like to talk to me directly about, please feel free to email me your questions, or if you would like to schedule a consultation to get started on your business plan, click here. Until next time, take care of yourself and your business.

Author:

KJ Tha Great

Project Duration:

6 Minutes