The Pandemic, the New Motivator to Start Your Own Business

“What is my life’s purpose?”…“What makes me happy?”… “I really want to go out on my own”… “I really like this new lifestyle of working from home”. These are the questions and statements that were in so many people’s minds over and over in the pandemic. If anything, the pandemic of COVID-19 has taught us to slow down, re-prioritize what is important to us, and to appreciate the one short life we have. It has forced us to get out of auto-pilot mode and to really think about the life we want to curate and manifest. So many corporate people have been furloughed or laid off, but also, there are those who have been lucky enough to keep their jobs and work from home. While they have been some of the fortunate ones, they have also been forced to face whether they are even fulfilled in their jobs. I have been approached by so many of these folks who want to start a side hustle or a new gig altogether. The biggest question I get is, “How do I even start”?

I certainly did not start out pretty, wrapped up in a box and bow. I personally pulled a Jerry McGuire with my one big client and if I must confess, I had no idea what I was doing, except I was really good at accounting, so whatever I did, I had my money in tip top shape every step of the way. I also knew that I had a marketable service. So both of those gave me a head start. Make sure you have a marketable idea that will sell and make sure you have your financial house in order before you jump all in!

Here is my “Top 10” of where to get started in setting yourself up for success in the financial facet of your business:

1. Get a good financial software.
• Quickbooks offers a desktop version and on online version. The desktop version is more robust and can be hosted through a cloud service like a remote desktop. For folks starting out, I typically recommend the online version. It is inexpensive and with it being web-based, you can access it anywhere and have your accountant access it as well.
• Please….no ‘shoebox receipts’ or spreadsheets. How will you ever feel legitimate or know what your true profit or loss is?
• There are many new financial software programs on the market, but a lot of them are incomplete, so make sure you do your research on these and consult with an accountant before subscribing to one.
• A lot of these other software packages come from Canada, New Zealand, or Australia and don’t understand what we need in the U.S.

1. Invest in a good business attorney
• You can form your own LLC, sure. But, if you have partners, you need an operating agreement. And, to be honest, most folks have no idea what the terminology is on the Secretary of State filings so if you mess up it can cause more heartache. If you forget one word or make a tiny error, they will send this back to you until you get it right. This will hold up starting your business. A business attorney can help you decide what you need, as well as the type of insurance you will need to protect yourself.
• I suggest becoming an LLC regardless of having partners or not. It adds a layer of legal protection separate of your personal assets, but an attorney can explain more.
2. Get an Employer Identification Number with the IRS
• This separates your personal SSN from your business. Make it a separate entity.
• If you are a solo owner, you can still file a Schedule C on your personal 1040 Fed Income Tax Return as a single member LLC but you will not use your SSN as identification. This creates a more arm’s length situation between you and your business.
3. Outsource your bookkeeping
• Most folks claim to be bookkeepers but they are really just glorified data entry specialists. Anyone can download bank and credit card transactions and code them. But, ask them if know what debits and credits are? Do they know how the Balance Sheet and Income Statement work together? Do they know how to do journal entries. The question to ask: Do you know double-entry bookkeeping? If the answer is NO, make sure you find someone who is qualified or you will be paying for mediocre data and headaches later.
4. Open a business checking account
• Do not comingle your accounts. Sure, everyone mixes personal with business. But as a steadfast rule, don’t do it with your checkbook. When you first get started of course there will be some of that, but open a separate account as soon as possible.
• Write yourself distribution checks and then pay your personal bills out of your personal account. Or, if you are a S-Corp, you will be required to pay yourself payroll, which will keep things separate as well.
5. Learn how to read financial statements
• A great quick read is “Managing By The Numbers” by Chuck Kremer
• You need to know where you stand at all times with your cash position and your checkbook is not going to give you the full picture.
• You do not need to be a CPA or an accountant to learn how to read financials, but knowing the basics will empower you when you talk to investors, bankers, your CPA, etc.
6. Create a Chart of Accounts that works for you for your accounting software
• Think about the services or products you are offering. How do you want to see that on your income statement? Do you want to break out your revenue lines? Do you want detailed expenses?
• Now there is such thing as Paralysis by Analysis, so don’t get too detailed. Consult with a good CPA who specializes in financial statement set up.
7. Be ok with debt.
• If you’re lucky enough to self-fund your company that is awesome. However, reality is that most folks cannot do that. Sometimes you have to use a credit card, a loan, or a line of credit. Or some combination. You want to stay away from the high interest bearing debt, but I started with a line of credit from a local credit union. If you are a new business, most likely you will have to personally guarantee institutional debt but it is worth it if you can find one that offers low interest rates.
8. Get a will and a life insurance policy
• Not only do you want to protect the baby you are building but you want to make sure your loved ones are taken care of. Self explanatory. Get a good Estate Planning Attorney.
9. Plan ahead for tax time.
• December is way too late. Have your tax CPA review your financials at minimum mid year, but best practice would be quarterly. Make sure that this CPA is also doing your personal taxes so he has a 360 view of your entire financial situation.
• You may need to increase your W2 Salary or pay in estimated taxes. There are also many other factors to help reduce tax liability.