Law Office of David A. Kubat

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Common Business Questions & Answers

  1. What is a business plan and why do I need one?
    A business plan precisely defines your business, identifies your goals and serves as your firm's resume. Its basic components include a current and pro-forma balance sheet, an income statement and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make the right decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan package. Additionally, it can tell your sales personnel, suppliers and others about your operations and goals.
  2. What do I need to succeed in a business?
    There are four basics of success in small business;(1) Sound management practices.;(2) Industry experience.;(3) Technical support.;(4) Planning ability. Few people start a business with all of these bases covered. Honestly assess your own experience and skills; then look for partners or key employees to compensate for your deficiencies.
  3. What about advertising?
    How well you plan and execute an advertising program will influence your business growth. Because it is one of the main creators of your business' image, it must be well planned and well budgeted. Money spent on hiring a professional to create an effective advertising strategy is usually money well spent.
  4. How much money do I need to get started?
    Once you have taken care of your building and equipment needs you also must have enough money on hand to cover operating expenses for at least a year. These expenses include your salary as the owner and money to repay your loans. One of the leading causes of business failure is insufficient start-up capital. Consequently, you should work closely with your accountant to estimate your cash flow needs.
  5. What financial statements will I need?
    You should prepare and understand two basic financial statements: (1) the balance sheet, which is a record of assets, liabilities and capital; and (2) the income (profit-and-loss) statement, a summary of your earnings and expenses over a given period of time.
  6. What legal aspects do I need to consider?
    Licenses required, zoning laws and other regulations vary from business to business and from state to state. Your local Small Business Administration (SBA) office and/or chamber of commerce will provide you with general information, but you will need to consult your attorney for advice specific to your enterprise and area. You also must decide about your form of organization (corporation, partnership or sole proprietorship) or tax status (e.g., should you opt for a Subchapter S status?).
  7. What do I do when I'm ready?
    Once you have done the required research – you have a complete business plan; you know where you want to operate; you know how much cash you will need; and you have specific information on employee, vendor and market possibilities. You now may want someone to look over your plans objectively. Contact the business department at a local college for another opinion. A SCORE representative at the Small Business Administration can also review your work and help with the fine-tuning. Then, when you have made the final decision to go ahead, it is time to call the bank and get going.
  8. What should I know about accounting and bookkeeping?
    The importance of keeping adequate records cannot be stressed too much. Without records, you cannot see how well your business is doing and where it is going. At a minimum, records are needed to substantiate: 1. Your tax returns under Federal and State laws, including income tax and Social Security laws, 2. Your request for credit from vendors or a loan from a bank, and 3. Your claims about the business, should you wish to sell it. But most important, you need accurate business records to run your business successfully and to increase your profits.
  9. What do I have to do to get a loan?
    Initially, the lender will ask three questions: (1) how will you use the loan, (2) how much do you need to borrow, and (3) how will you repay the loan? When you apply for the loan, you must provide projected financial statements and a cohesive, clear business plan which supplies the name of the firm, location, production facilities, legal structure and business goals. A clear description of your experience and management capabilities, as well as the expertise of other key personnel, will also be needed. If your loan applications are declined by at least two banks, you may ask the banker to make the loan under SBA's Loan Guarantee Plan or Immediate Participation Plan.
  10. What are the alternatives in financing a business?
    Committing your own funds is often the first financing step. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence for others to invest in your business. You may want to consider a partner for additional financing. Banks are an obvious source of funds. Other loan sources include commercial finance companies, venture capital firms, local development companies and life insurance companies. Trade credit, selling stock and equipment leasing offer alternatives to borrowing. Leasing, for example, can be an advantage because it does not tie up your cash.
  11. Is it better to lease or buy the store (plant) and equipment?
    This is a good question and needs to be considered carefully. Leasing does not tie up your cash; a disadvantage is that the item then has no resale or salvage value since you do not own it. Careful weighing of alternatives and a cost analysis will help you make the best decision.
  12. What kind of security measures must I take?
    Crimes ranging from armed robbery to embezzlement can destroy even the best businesses. You should install a good physical security system. Just as important, you must establish policies and safeguards to ensure awareness and honesty among your personnel. Because computer systems can be used to defraud as well as keep records, you should check into a computer security program. Consider taking seminars on how to spot and deter shoplifting and how to handle cash and merchandise; it is time and money well spent. Finally, careful screening when hiring can be your best ally against crime.
  13. Would a partner(s) make it easier to be successful?
    A business partner does not guarantee success. If you require additional management skills or start-up capital, engaging a partner may be your best decision. Personality and character, as well as ability to give technical or financial assistance determine the ultimate success of a partnership.
  14. Should I hire family members to work for me?
    Frequently, family members of the owner help out in the business. For some small business owners it is a rewarding experience; for others it can cause irreparable damage. Carefully consider their loyalty and respect for you as the owner-manager. Can you keep your family and business decisions separate?
  15. How can I find qualified employees?
    Choose your employees carefully. Decide before hand what you want them to do. Be specific. You may need flexible employees who can shift from task to task as required. Interview and screen applicants with care. Remember, good questions lead to good answers-the more you learn about each applicant's experience and skills, the better prepared you are to make your decision.

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Contact Information

David A. Kubat

2634 Thorndyke Avenue W., Suite 201
Seattle, WA 98199
Phone: 206-545-8394
Toll-Free: 866-654-8160