If you are a small business owner with one to four employees or thinking of starting a small business, five priorities can make or break your business. Understanding how these five keys affect your business will determine your ability to make it through your first year. It might not seem like a good number however small business survival rates are at a “three-decade high of 48.7 percent.” . Here is what you need to know, so you are not one of the 51.3% of first-year business failures.
The primary key to your success is do whatever makes you the most money first. It might sound so simple, yet it is like that first cup of coffee in the morning. Some people might say write a business plan first. If you need a business plan to get you going, write a business plan. For some people, organization is not their strength. You can spend hours planning and organizing, but that is not going to make you money. Whatever you have chosen to do as an income-producing activity, do that first. Do not put it off. Do it first. If you are a painter, paint. If you are a programmer, code. If it is making sales calls, do sales calls first.
Whatever your money-making activity is, do that first.
Even when you become successful, do not forget what got you to success. In years past, I had two clients that had built up a successful retail manufacturing business together. They sold their business for ten million dollars up front and ten million dollars paid over the next ten years. The new business owner bankrupted the company within a year. Why? At that time the one activity that made that business the most money first was collecting its debts. They did not need new sales. Their company had so many orders; they could not keep up. The new owner did not have an organized system of keeping track of who owed them money and collecting their debts. Managing accounts receivables was the most significant money-making activity that business could do, even though other activities made the company money. Collect from their current customers; that is all they needed to do. They did not make that a priority. The new business owner let creditors slide and continued to spend to produce new orders. It did not take long before they were illiquid. Within a year a multi-million-dollar business with hundreds of employees was out of business because they did not follow this first rule. Whatever makes you the most money, do it first.
Start a business bank account
As you start to make money in your new business, you must have somewhere to put the money so opening a business banking account is a priority. If you have it at the same bank or credit union that you have a personal account, that may offer you some convenience. You need an account to deposit the income from your business. Depending on the size of your new business, you may be tempted to use your personal banking account for business too. Having a separate account will help you to keep track of your income and expenses. Many banks have enhanced technology that will help you keep track of how you spend your money. Keep as many details of your expenses as possible. When you file your income taxes, having details of your income and costs will make it much easier to complete.
Learn how to pay your taxes.
That brings me to number three, taxes. Many small businesses are paid as an independent contractor. That means that if you are an individual, you will not get a W-2 but will receive a 1099. And for some businesses, you will not get 1099’s because of the nature of your business, but you may need to issue 1099’s or W-2’s to your employees. For example, if you are a consultant or a vendor, your clients typically will not give you a 1099. So, it is up to you to keep track of your income and estimate your taxes owed at least on a quarterly basis.
One of the most significant challenges that any business owner will have is keeping track of and paying taxes. If you have never paid income taxes directly to the IRS for your business activity, this can be an intimidating job. If you need some help, the IRS has a series of video recordings that can help understand paying taxes from your business. For solo self-employed business owners, the tax system is set up for you to pay your income taxes quarterly. The quarterly tax schedule is a minimum standard for you to operate within. If it is easier for you to pay as you go, which might entail you paying more frequently than quarterly, you can do that too. If you want to pay monthly or even weekly, the IRS will not decline to accept your payments. If you have employees and deduct payroll taxes this may not be an alternative; it may be a requirement. Your goal should be to estimate as close as possible what your overall tax obligation will be. If you are over, you get a refund. If you are under, you get a penalty. If you have an accountant or CPA, you are working with; they will help you. If you want to do it on your own, I highly recommend using a software program like TurboTax for business. This type of software will help you figure you out what your estimated payments should be. The bottom line is to be proactive about doing your taxes. It will not go away, and it will not get more comfortable if you put it off.
Keep track of your expenses.
Be obsessive about keeping track of your expenses. There needs to be an active link between your business banking account, your taxes, and your business. If you use a business debit or credit card keep track of every cost you can. Years ago, a doctor and his wife met with me looking for help in budgeting. I asked how I could best help them. The doctor’s wife explained to me that they knew they needed help because their bank contacted the doctor to tell him he was overdrawn. The doctor explained that he could not be overdrawn, he was billing $30,000 per month! He was following my first rule of doing what made him money first. However, what made him the most money changed because his expenses and spending were higher than his income. You must keep track of your expenses. You must take the responsibility to regularly personally review your expenses and spending.
Buy health insurance
I cannot stress enough that if you are going into business for yourself, that you must have health insurance. Small businesses do not have to provide health insurance to their employees. You may be tempted to pay for employee health insurance too, however surviving your first year is your goal. So, do not over obligate your business. But do not overlook the personal necessity of having health insurance. One health claim could put you out of business.
There is another twist to the need for health insurance. Tax laws might change, however, in 2018, the IRS will decline to accept your return if you do not have a proof of health insurance. So, you are going to need it regardless of your health. Beyond the national debate of if the federal government should make citizens buy health insurance, it is something that you will need at some point in time. I will not deny that some people can go through an extended period without going to the doctor. We are all human, and at some point, in time we will all have our health fail to one degree or another. You need it for your wellbeing, and you need it to be able to file your income tax return.
The path to obtaining health insurance is changing. Small business owners can go directly to health insurance companies or through the federal government’s health insurance exchange system. Research what is available and purchase a plan that fits you, your family and your budget.
If you have personal obligations, do not overlook the need for life insurance. It does not have to be expensive, just enough to cover your necessities. You can find a quote here. At the beginning of your business, you can ignore the need for disability insurance. Make it through a year, build your revenues and then consider protecting your income.
These five priorities are significant. If you master what makes you money and you repeat it every day, you significantly increase your likelihood of sustaining a profitable business. Staying healthy and having health insurance will keep you in business. Keeping current with your income tax obligations will keep you healthy and wealthier in the long run. Beginning a banking relationship and relentlessly keeping track of your expenses will ensure that the money you make, works as hard for you as you work for it.
Kauffman Foundation. (2016). Kauffman index of main street entrepreneurship. Retrieved from http://www.kauffman.org/kauffman-index/reporting/~/media/a5505aae29bd4f8ba0d30f29f47fa576.ashx
 Murry, J. (2017, February 28). Employer’s guide to payroll tax deposits. Retrieved from https://www.thebalance.com/how-and-when-do-i-make-payroll-tax-deposits-398821