plan for your retirement
• Recommend the mix of investments your portfolio should contain
• Recommend specific investments and even be able to purchase them on your behalf
• Help you determine your insurance needs
• Recommend other financial products, such as mortgages and tax-deferred shelters
Questions to Ask Advisers
You will want to ask your potential external advisers several key questions to ensure that they are a good fit with you personally and with your company. You not only need to assess their experience and skill level, but also softer skills, such as communication style and availability. Here’s a starting list of questions to ask:
• How long have you been doing this type of work?
• How many other clients similar to my company do you deal with?
• Can you describe your background and training?
• On what basis will you be billing me?
• Do you prefer face-to-face meetings or telephone calls or e-mail?
• Can you provide me with references?
• How do you see your role in helping my company?
As you evaluate the answers to these questions, you will also be assessing your comfort level with these professionals. Always trust your intuition. You will have to work with these advisers for many years to come, and it’s imperative that you feel comfortable with them.
Finding a Board of Directors
As you start your business, you may consider it silly to think about putting together a board of directors. In business news and on television, a board of directors is usually portrayed in a large corporation such as ibm. Every corporation, though, is required to maintain a board of directors, regardless of its size. It may only be a single director (you) that is required. It’s advisable to at least have an informal board of directors for your bookkeeping practice.
A board of directors is simply a group of people who help advise and guide the management and owners of a company. Board members may comprise mentors, retired business owners, or others who have skills that can help your business. The incorporation documents of a corporation outline the board’s duties and responsibilities, including which issues must be voted on by the board.
In a small company, getting external board members may be difficult, as they will take on some liabilities for the operation of the company, but having them is even more critical than in a larger organization. Experienced board members bring knowledge and advisory skills to the table that you may lack. If nothing else, they bring new ideas and opinions.
Know Your Competitors
Before you start up your bookkeeping practice, take some time to assess who your competition will be. It won’t just be other bookkeeping practices, but also accounting firms, tax preparation outfits, and bookkeeping software companies who make it seem so easy for business owners to do their own bookkeeping.
Assess what your competitors do well and where they are weak. Is the bookkeeping practice across town offering a service guarantee? That may be a model you should adopt for your company. Is the accounting firm charging $75 per hour for bookkeeping with no added support to the client? Perhaps you can improve on that level of service.
The process of finding who your competitors are and what they’re doing is called competitive intelligence, and it is something every smart entrepreneur does on a continuous basis. It is simply the process of uncovering, analyzing, and presenting publicly available information on your business’s competitors in order to maintain a competitive advantage in the marketplace.
Here are the basic steps to learning more about your competitors.
(1) Identify the competition. Find out both who is competing directly with your services and who is competing for the same customer dollars.
(2) Analyze what they do right and what they do wrong. Assess the strengths and weaknesses of your identified competition.
(3) Determine how they are positioned to take advantage of opportunities. In this step, you will assess how well you think your competition could adjust to changes in their external environments, such as what might happen if they hired a tax expert.
(4) Assess how vulnerable your competition is to changing market conditions. How would your competition be able to handle external threats to their businesses, such as changing tax laws, legal action, new competitors, or theft — all things that are potential land mines for businesses that are not prepared.
(5) Consider how your business stacks up against the competition. Once you understand your competitors better, determine where you stand in relation to them based on the same criteria. Are there things you can improve in your business model to make your business stronger in the markets you serve?
Chapter Summary
• Before you start your bookkeeping practice, spend time articulating your motivations for wanting to start such a venture.
• Plan your business thoroughly and set up a preliminary business plan that projects where your business is headed.
• Begin by thinking about the end. Have an exit strategy in place so you will know how to harvest the value from your business.
• Choose your external advisers carefully, for they will have much influence over your success.
• Gather all the information you can about the markets you will be operating in and your competitors. This will help you strengthen your own business and find your niche.
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Financing Your Business
One of the major causes of small-business failure (aside from the lack of financial management skills of the owner) is the lack of adequate capital. The amount of financing you need may be different depending on whether you buy an existing business or start one from scratch. The monetary needs of an existing business will be more easily predicted than if you’re starting up a new business. If you are starting your business from the beginning, you’ll need financing to get you to the point where the net profits of the business can provide the needed capital to replace assets and grow. Many small businesses start up underfunded hoping that the internally generated revenues will quickly grow to provide financing, but this doesn’t always work out as planned. So how much money do you need to start up your business?
How Much Money Do You Need?
There are many considerations to keep in mind when trying to assess how much money you’ll need to start up your bookkeeping practice. From a financing perspective, it’s a benefit that your business is service-based, which means that you won’t require substantial up-front financing
