It is a wonderful time to be a woman in business. There are many opportunities to grab success by the hand and make an impact on the economy and the future.  According to the National Association of Women Business Owners, 11.6 Million firms are owned by women, generating $1.7 Trillion in sales and employing 9 Million people.[1] In the past 20 years, women-owned businesses have grown 114% compared to the overall national growth rate of 44% for all businesses; women-owned businesses make up 39% of all U.S. firms.[2],[3]

This month, let’s celebrate the strength and resilience of women business owners. October is National Women’s Small Business Month; and October 15–21 is National Business Women’s Week.

If you are dreaming of being your own boss and are ready to be a part of these empowering statistics, let’s talk about how to a start your own business.

Write a business plan

Your first step needs to be writing a business plan. It is the foundation and backbone of your new company. A business plan is like a road-map for you to follow to run and grow your business. It is also a key element for securing funding from investors.[4]

Decide on your business structure

Your business structure, whether a Sole Proprietorship, Partnership, LLC, C Corp, S Corp, or another form, dictates many things about your company including taxes, liability, paperwork to file, and day-to-day operations.[5] You will need to determine your structure before you apply for a Tax ID number and any licenses or permits. Choose your business structure wisely. While you can usually change the structure later, there could be tax implications. Also, you will need to register your business with any local, state and federal agencies.

Think through your funding options

Are you able to take money from your personal and savings accounts to start your business? Determine how much you have available from your own sources, then decide how much you need from elsewhere.  If you can invest some of your own money (a capital contribution) to purchase equipment in the early stages, banks are more likely to grant you a loan as it shows them you have skin in the game.

Debt funding, which is simply borrowing money to be paid back over a period of time with interest, is a simple way to start your business if it is right for you. Types of debt funding including SBA loans, term business loans (similar to traditional bank loans), short-term loans, equipment financing, and a business line of credit.[6]

You may also consider equity financing, especially if you do not want to go into debt right off the bat.  Types of equity financing include angel investors and venture capital. However, a significant drawback of equity financing is that you are sharing ownership with other investors; keep that in mind if you consider this option and want to go solo.

Determining your budget

Once you have your business plan, structure, and funding in place, focus on maintaining a budget that is realistic to your business’s needs. A realistic budget can be the difference between having a successful business and joining the 50 percent of small businesses that fail in the first year.[7] Remember that you will be required to pay for equipment, marketing, possibly staff, and other expenses.  Unanticipated costs occur from time-to-time so overestimate your expenses.

Having a sound budget is crucial when you plan to expand your business.  If you are deciding between hiring employees or relocating your space, you should prioritize your decision based on which option serves your budget best and which one can wait.  Remember, as your business evolves, so will your budget. Take the time to review it consistently.

Meanwhile, ensure you have an emergency fund. Your goal should be to have an emergency fund equal to six months of basic expenses. An emergency fund will make the months where business is slow more sustainable. Additionally, continue to save for your retirement during your start-up months.  Do not lose sight of saving for the long-term.

Consult your financial advisor, legal counsel, and tax professional to discuss the best types of structures, funding, and budgeting for your specific situation.

Claudia Mollerup-Madsen is Vice President and a Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.

[1] Women Business Owner Statistics
[2] THE 2017 STATE OF WOMEN-OWNED BUSINESSES REPORT
[3] THE 2017 STATE OF WOMEN-OWNED BUSINESSES REPORT
[4] Write Your Business Plan – SBA
[5] Choose a Business Structure – SBA
[6] How to Get a Loan to Start a Business: Follow These 4 Steps

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