In this initial series of 2023, we begin to implement ideas into money. You have this great idea and are thinking of going into business to make billions worth of wealth. You are pretty sure that all you need now is a little guidance on how to get started. You will be shocked. Welcome to this home of the chosen few.
Starting a business is never easy, you want to be as prepared as you can possibly be for what may be lurking ahead. First, a little litmus test to check if you are really ready to choose financial freedom.
You must understand that to get things up and running, you will need to dedicate extra time and energy to your business. These longer hours will eat into personal or family time. Are you willing to make that sacrifice?
The second lesson is to equip you to take on loads of emotional ‘painkillers’. In business, you need others. You must, therefore, be willing to seek advice from those who have succeeded in doing what you are working to achieve.
The third lesson is to equip you with inner motivation beyond question. How much do you truly desire this? Are you ready to commit to what you are starting and see it through to the end? It is here that you will find yourself most challenged. My coach told me that if you doubt yourself, then do not get started until you have the confidence to do what is necessary to prevail.
The fourth lesson is to convey the idea in a manner that others can relate to it without any spec of doubt. A business plan helps to achieve this goal especially with financiers and other key partners critical for the success of your business idea.
A business plan is the road map to your final vision. It will help you to focus on exactly what you are trying to accomplish, and how you plan to get there. It represents your ability to visually see your proposed road to success and will enable you to develop confidence in your vision, and woo others to come on board.
The fifth lesson is on the choice of entity that will best represent your business idea on the ground. You must now decide on the type of entity your business will be. Will you be a sole proprietor, a partnership or a limited liability company? This decision is an immensely important one. Seek the knowledge of a professional, especially with expertise in the development of professional entities and also a tax expert.
You will also want to consider the fiscal year of your business. Depending on your circumstances, you may want to use the regular calendar year (Jan to December) as a start and end date, or it may be more beneficial to use different months as start and end dates. These decisions will have an impact on your tax filings at the end of the year, so choosing the most appropriate entity and fiscal year for your situation will both be very important decisions.
The seventh lesson on funding is a lesson for mature students. You need to understand the possible sources of capital that you can tap from to make progress. It is normal to start on a smaller budget and expand as you gain experience.
As a general rule, the bigger the business, the larger the overhead you need to cover. Consider starting out of your home or shared facilities to keep your costs low and expanding only as money allows. Hire rather than buy assets required to support business operations. Also work towards building a good credit rating during this lean phase. When you are later presented with an opportunity in which it makes sense to borrow extra funds to grow your business, financial institutions will be more readily willing to lend it
Lesson eight is on tax compliance, an invitation to honour Caesar. His agents are silent killers of good business ideas of greedy men. Get ready for some hard lessons here. The lack of tax reporting knowledge has cost many businesses unnecessary penalties that almost cripple their business ideas.
Value Added Tax
Personal Identification number, (PIN), now combined with Value Added Tax registration is given to you by the Kenya Revenue Authority for identifying your business for tax reporting purposes. Obtain it before you start off and thereafter make your tax returns before the due date, including nil reports.
The final lesson is on keeping track of your efforts and cementing business relationships, also known as accounting and contracts. You are now ready to begin turning seeds into results. You need to choose the method for keeping accounting records.
There is a wide variety of accounting software available on the market for keeping the books well organised. You will want to do some research here with the help of a very honest partner in accounting and information technology. Purchase a software package that is most appropriate for your business circumstances.
Your business may require that you to enter into contracts. It is important to discuss with a professional before implementing contracts to make sure they meet your requirements for personal and professional protection within the laws of Kenya. Start your business the right way by taking the proper initial steps.
By Patrick Wameyo is a financial literacy coach at Financial Academy and Technologies, and an entrepreneurship coach at The Entrepreneurship Center EA. Email; [email protected]
