Building on a Solid Foundation
by petrosianii, Window Shopper
- Created: March 24, 2010, 12:00 am
My firm is going on its third year of being in business. I'm proud of what we've accomplished. Over the past few weeks I've been revisiting various foundational documents. Not just revisiting, but revising, tweaking, improving. So far what I've learned through trial and error experience and the help of business forums like Business.Gov has been invaluable. I wanted to pass on some of those learnings.
Building a Solid Foundation
I've found (and am still learning) that there are some things that are really just fundamental to good business operating and success.
1. Operating Agreement
We are an LLC. Though our state (NJ) doesn't require an Operating Agreement to be filed publicly, we nevertheless have taken the suggestion of others and the members of this forum to create an OA. Once you get over the initial fear of the drudgery of it all :) this has been an enriching experience, crystallizing and clarifying how we're to run, who we're to serve, how we're to get from Point A to Point B.
(For more info on Operating Agreements, see http://community2.business.gov/t5/Business-Law-Advisor/Operating-Agreements-The-Basics/ba-p/6275)
2. Business Plan
Though I was hesitant to create a Business Plan for Gnosis Arts, I did it anyway. Like many entrepreneurs, I just jumped right in, put up a website, and started promoting my wares without really thinking about things like finances and markets and risks and opportunities, etc. And it was OK. I think sometimes it's better to just start and try and learn and fail and make mistakes. Experience has been the best teacher, for me at least.
But now, 2+ years into it, it became necessary to really firm up our Business Plan. I mean, I already knew what it was, essentially, as I eat, drink and sleep it and it's all in my head. But as my big Sis, a smart business manager herself, always tells me, 'It's better to take things out of your head and put them down on paper where you can see 'em.'
A Business Plan also tells you your reason for being, i.e., your business' Vision Statement. It helps you describe your Mission, Objectives and Goals. It forces you to think about how your business will become solvent (i.e., pay its bills, from its own revenues, as opposed to from your personal savings account! ha!). It's just good for planning in general. The big thing to keep in mind is: it's a work in progress. Don't stress over it. It will never be perfect. And 'just put it on paper.' Also helpful is to have a lawyer, accountant or mentor review it and give feedback.
3. Income Statement
Along with the other two, definitely creating an Income Statement is fundamental. You have to know what money is coming in, and what money is going out. (An Income Statement is also called a Profit/Loss Statement). Everything depends on it: proper tax reporting; knowing where to trim the fat; and where to beef up the bones; managing Cash Flow; etc.
(For a good read on Income Statements, see en.wikipedia.org/wiki/Income_statement)
4. Managing Cash Flow
Another bedrock skill. When I first began Gnosis Arts, I had no clue about cash flow management. (I didn't even know what it was). But few things will make or break your business' success than negligence of your cash flow. If you want overdrawn accounts and bounced checks to be the norm: the neglect to learn how to manage Cash Flow.
5. Having A Business Account
You always hear seasoned business owners say: 'Get ONE account that will be your business account, and do all your transactions from that ONE account.'
Trust me. Do it. It'll save you some major headaches down the road and if you plan on growing your business you'll have to do it anyways. It's easier to do it up front than (like I did) after a year into things!
6. Terms of Service/Use Agreements
These are extremely important. I talk more about why on our writing blog. Terms of Service agreements help reduce fiscal waste and communicate expectations to clients as well as staff. In my opinion they are a must.
These are just a few of the fundamentals I've picked up. You, I'm sure, will have others to add. The important thing for me is to keep an open mind, be open to correction and always keep learning. Hope your business keeps growing as you continue learning as well.
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