Business ownership: Startup challenges and opportunities
ARTICLE | February 08, 2023
Authored by RSM US LLP
Startup challenges and opportunities
You’re refining your idea and modeling your business. As you invest in your product, you’re probably losing sleep over cash considerations. How much do you need? What’s your burn rate? Which type of financing will work best? While you’re elbow-deep in those issues, be sure you’re also asking yourself these critical questions.
Questions and answers:
Q: Is my business strategy rock-solid?
Be sure you have a deep understanding of your market and have specific strategies to address the critical issues of what your competition looks like, how you’ll define and differentiate yourself in the market, and what your specific plans are to scale. Make sure you have all your t’s crossed and your i’s dotted but don’t delay launch unnecessarily to chase perfection.
Q: Do I have all essential skill sets covered?
As an entrepreneur, it’s impossible to be good at everything. Early on, be brutally honest with yourself in determining the internal functions with which you need help. Acknowledging where you have skills gaps goes a long way toward building a solid company foundation from the beginning.
Q: What tax structure or entity type works best?
It’s never too early to think about your company’s value at exit because you will begin creating this at inception. To that end, think through your entity type options and what those will look like at exit: family transition, franchise, or an outright third-party sale. After all, starting a company with the intent of selling within 10 years looks very different from starting one that you, and possibly your family, will own and run for decades. Thinking about this early on can help prevent wrong turns along the way.
Best practices for owners of growth stage businesses
People, process, and technology
Protect your personal wealth. For business owners who have already accumulated significant wealth, consider starting your new business in a trust for your heirs’ benefit.
This will allow the value to grow outside of your estate and protect the wealth that you have already generated from what is usually a riskier investment.
Look for research and development credits. Research can often be a large component of startup. Certain R&D expenditures may be eligible for a tax credit. While the credit is often related to income generation, there are exceptions and elections that can provide a benefit to organizations that are not yet profitable.
How do entrepreneurs address the various lifecycle stages of business ownership?
Owning a business takes a certain confidence and grit. All owners are different, but all face similar challenges. Our business ownership lifecycle ebook shares insights gleaned from helping business owners face these challenges head on.
Contact us at one of our locations or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2023-02-08.
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