June 12, 2013, 6:03 am

4 Must Do Steps Prior To Starting Your Own Business

by: The Financial Blogger    Category: Business,Project $1500
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Two weeks ago, I announced that we were going to start a daycare at home. Since my wife has a a lot of experience in this field and we were looking to increase our income, starting our own business at home was the next logical step. Back in 2009, I finished what I called Project $1,500. This project goal was to generate an additional $1,500 to enable my wife to quit her day job and stay at home. Today, we are starting a new $1,500 project in order to pay off our debts faster and reach financial freedom at a young age.

 

Most of you have wanted to start a business at one point or another in your life. This article is a list of To Do’s we have identified prior to starting our daycare at home. It can be applied to any kind of business.

 

#1 Think About ALL the Possible Impacts on Your Life

 

Starting a business is fun, exciting and inspiring. But it also changes your life from the moment you step out of bed till you finish your day. This is why it is so important to write down you existing schedule and compare it to your future schedule. Don’t fall in the classic pitfall of “I can handle that” as your experience as an entrepreneur might not be as magical as you think.

 

For example, the fact that my wife opens a daycare at home will affect our weekly schedule.

-          I’ll have to take care of our two oldest kids from 7 to 7:30 am until they leave for school.

-          Lunches and dishes need to be done the night before, not the morning of.

-          Groceries and other chores will have to be done during evenings or on the weekend.

-          We will need to hire a cleaning lady to compensate for the fact that my wife can’t clean the house during the day anymore.

-          Vacation schedule must be fixed and determined in advance.

-          Our oldest kids will have to stay at school for an extra hour (until 4:30pm) and will do their homework there.

 

As you can see, there is a big advantage in our budget, but having a daycare won’t be an ideal situation either. We will have to adapt to our new life.

 

#2 Define Your Structure and How You Will Make Money

 

People often want to throw themselves into the entrepreneurship adventure without thinking. They are only excited about becoming their own boss and making money. This is not quite what is going to happen at first. It is important to determine how you will work and how much you can make.

 

For example, we have determined that the daycare will be opened from 7am till 5pm (with extra options to come at 6:30am and finish at 5:30pm). There will be 5 kids (plus our toddler) charged at $25/day to make $2,500 per month. There will be room for 1 kid part time (2-3 days) possible also. Assuming we spend $1,000 to run the daycare, we would make $1,500 in profit. The $1,000 includes the following:

 

-          Food

-          New toys / activities / equipments, etc.

-          Cleaning lady

-          Taxes

-          Insurance

-          Etc.

 

With such a budget, I’m expecting to be making the $1,500 without any surprises. So we know exactly what to expect in terms of revenues and expenses. Don’t forget to budget the taxes… they will come at the end of the year regardless if you have set money aside or not!

 

Along with our budgets, we also created several documents explaining how the daycare will work. It is important to provide such information to the parents prior to signing-up with you. We also made a list of things we needed to do prior to opening the daycare (furniture required, toys, facilities (we had to paint), etc). It’s important to have a clear and clean work environment in order to be productive.

 

If your business structure is complex, I suggest you do a complete marketing & financial plan where you identify where you are at and where you will be in 1, 3 and 5 years.

 

#3 Register Your Business – Open a Bank Account

 

Now that you know what the business will look like and the implications required by all members of the family, you are now ready for the first practical step of starting your business at home: registering your business. You can either incorporate it or register your business as being self employed.

 

If you don’t have multiple sources of income or don’t plan to make substantial revenues with your business, there is no point of creating a corporation. However, it is important to register your business name to make sure it doesn’t exist and open a business bank account. This makes your transactions and tax planning easier.

 

#4 Insurance, Insurance and… Insurance

 

I’ve seen so many people neglect their insurance coverage that it is scary. For any kind of business, you have to consider your protection… before operating! In our case, responsibility insurance for a daycare is definitely a must.

 

At one point, if we were to depend on this source of income, disability insurance would also be very important. This enables the owner to receive money while he/she can’t operate his business. Nobody is protected against an event that would jeopardize your ability to work for a short period of time. Three months is not that much to recover, but if you don’t make a penny during this period, you may pile-up some bigger problems.

 

4 Big Steps and You Haven’t Started Yet

 

As you can see, I’ve highlighted only four things you must do before starting a company and you are already stuck with a few weeks of work before making your first dollar.

 

I think one can surely succeed without completing these steps, but it will be a rocky road! What I like about our daycare project is the plan can’t really fail. On the other hand, this is not something you can scale; the goal here is to create a money making machine generating enough so we can use this money to do other things with it.

 

Oh and… good news! We already have 3 spots booked and we haven’t started to promote the business. Never underestimate the power of the word of mouth!

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Comments

I agree. You can;t just jump into starting a business just because you think it’s a good idea. You need to do your market research, conduct some feasibility plan, and you really need to prepare for it.

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