MBA2679 How To Set Up a Business for Success

0:28So you validated your business idea.

0:33Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday to help you start, grow, and scale your business. Before we jump in, can I get 30 seconds of your time? We love guiding you on your business journey, and we want to help even more people build their dream businesses and lives. So if you could hit the follow button on this podcast app, it would be greatly appreciated. It's completely free and it helps us out more than you know. Thanks. Before we jump into the steps, let me make this crystal clear.

1:10Do not get bogged down in setting up your business or doing anything I'm talking about today before validating your idea. This is a mistake I see all the time. You don't need a fancy website. You don't need a business name registration or logo before you've sold at least five to 10 paying customers. You need proof that people are willing to give you the money for what you offer. Then get legit. In most jurisdictions, you can do this. You can make some money without a business just to validate. Now, of course, speak to your lawyer or accountant, but you can claim that as a personal income. And then once you have the ball rolling, you know that you have something on your hands, then you can start building that separate entity.

1:52This episode is for that moment after that, when you have the clear signal that you have a valid product, you have validated your idea, which means people have paid you money for what you're offering. And of course, this goes without saying, but I'm going to say it anyway, this is not legal or financial advice. This is for educational purposes only. Be smart and speak to a lawyer and an accountant about your situation. So now it's time to build that foundation. Here are the exact steps to set up a business for success, especially if you're just starting out and you just validated your idea. People have paid you some money for what you offer.

2:29Now it's time to set up your business. Step one, choose a business structure. You want to pick a legal structure that suits your needs and your goals. For most solo entrepreneurs, the options usually are these. Solar trader. This is also known as sole proprietor. It's simple. It's cheap, no legal separation between you and the business, but I don't actually recommend it because you want to separate yourself from business as a business entity. There's a lot of advantages to that, but I got to give you all the options. Next, company or LLC. A little bit more complex, not crazy, but just a little bit more paperwork, but it offers liability protection and better tax options, which is great, which means you're saving money.

3:09And lastly, partnership. If someone's going into business with you, someone else is going to have to have a shareholder's agreement. And that is pretty standard. And you can get that done pretty easily. Now, my advice is to speak to a lawyer or an accountant to set this up for you and to explain these options for you. Now, depending on where you are in the world, sometimes a lawyer could do this as an accountant. My recommendation is actually go to a co-working space, go to a WeWork, go to a co-working space, a startup space, because there's lots of them there. and they're happy to do sort of like a set fee or a low hourly rate because they work with a lot of startups that don't have much money.

3:44So just even if you go to an event or if you take a day pass or a week pass at one of these coworking spaces, you can get to know who's working there, ask around, is there a lawyer here? Usually there's like an indexed or a Rolodex, I should say, online or in a Slack channel where you can post an inquiry and say, hey, I'm looking to set up my business. Who can help me out? You're going to get a ton of DMs. The cost of this is going to be different in every part of the world. You have the cost of the advice from the lawyer that's setting it up. And then there's also the cost of just setting up your business.

4:17Like for example, in Australia, a PTY LTD, a company costs around$500 or less to get up and running. And it's done in one day online. Not that complicated. Step two, you want to register your business name. You want to make sure your business name is official. In the US, you can register a DBA doing business as or set it up during your LLC filing. In Australia, where I'm based, you can register your business name with ASICs. And of course, you could check with your local account or your lawyer how this is done. It just allows you to use the name as your business. You also want to check the domain name availability and social handles at the same time.

4:57So try to find the domain name. It might be hard to get the.com, but get another extension, .net,.co,.ai, if you're an AI or software,.app. And of course, secure the name of your business as much as you can with the social media platforms out there. Step three, apply for an ABN or EIN. What is this? This is your tax identifier. It's a business identifier for tax purposes. For example, in the U.S., you apply for EIN. It's called an employer identification number. It's also free. You could just do it online. In Australia, you could apply an ABN, Australian business number. I'm giving you examples in different countries like Australia and the U.S.

5:38just because we know that the demographics of our audience are those places, but we know we have listeners from all around the world. So, of course, there's going to be the equivalent in Europe. There's going to be the equivalent in Indonesia. It's going to be the equivalent in Japan. So you could take a look, but you know now that you need to have a number that identifies you for tax purposes. Because, again, you need to see this as a separate entity. We'll talk more about this, but your business is its own person. It's its own entity, and you've got to start thinking this way. It's separate from you.

6:08It's its own thing. And you're going to need this number, of course, for invoices, for tax, for opening up a bank account. Again, when you open up a bank account, like just for yourself, there's some sort of identifying number, even if your license number or your government ID number that identifies you at the bank. Now, when you're opening a bank account for your business, how do you identify this entity? Well, this number. This reinforces this idea that you are not your business. Your business is its own thing. You're building your own asset outside of yourself. This is what's magical about business because it's not you.

6:44That means you can build it and then you could sell it one day and it becomes somebody else's asset. It's kind of like owning a house or a car, right? But it makes you money instead of costing you money, right? So that's the beauty of business is that it's its own entity. Step four, set up your business bank account. This is quite simple in most places in the world. Now, I know it could be quite complicated in some other areas, but in most, you know, I would say business friendly countries, this is going to be quite simple. And also, if you have difficulty, there's options online as well. There's a lot of banks online that will be open to allowing you to open up a bank account with your information.

7:30So the whole point of this step is not to mix your business with your personal finances. Just remember that your business finances need to be separate, okay? Because again, it's its own entity. You're filing your own taxes with that business. That business has its own expenses and owns costs and own revenue, right? It's its own person. So it has to be separate from your bank account. So you wanna open up a bank account under your business name. This keeps your account clean. It simplifies things on tax time. It makes your business look more professional, of course, because when you invoice your customers, they're gonna see that they're gonna pay a business, not you directly.

8:05and of course, this makes it super simple for you when it comes to, at the end of the day, looking at your P &L, looking at your profits, your loss, your costs, your revenue. Now, you're gonna go to the bank and you're just gonna ask, I wanna open up a business bank account, okay? And that's pretty standard. Now, they're gonna give you like a bank account, a checking account with a debit card, maybe it's a savings account. I would recommend asking for three things. One, a debit account, which is also called a checking account in some places. You also want a savings account so that maybe something that can accrue some interest.

8:39And if you have like an abundance of revenue, you could put some in the savings so that you're making some money. And then third, a credit card if available that is under the business name. Now, this is not to run up a bill. You want to make sure that this is kind of a safety mechanism when you're buying products or services or supplies. You're using a credit card so that if anything happens, fraud, somebody hacks your card, there's recourse. It's not that easy to get your money back with a debit card. Step five, accounting and bookkeeping. Even if you're not making big money yet, you need to track every dollar.

9:15And here are some options I recommend. You want to use software like Xero or QuickBooks or Wave. These are great pieces of software to easily do your bookkeeping and accounting. It kind of does a lot of things automatically. We use Xero. I absolutely love it. super simple. You want to hire a bookkeeper or an accountant, even part-time if you can. A bookkeeper actually is not going to cost it that much if you're starting out, but they're going to be able to reconcile everything and make things easier for you come tax time. And when I say accountant, you can just pay your accountant for the work they do.

9:48So for example, you're going to need your accountant to help you file taxes and make sure that you're saving money in every way you can. And that's just a one-time thing that happens every year. And you can negotiate that with the account. Again, I recommend joining a co-worker space just for the networking and getting to know who has an account. A lot of accounting firms have bookkeeping services, which are pretty inexpensive. It could be$50,$100,$200 a month, and they'll make sure that all your bookkeeping is reconciled. When I say reconciled, basically it just means that every time you pay for something, every time a revenue comes in, the bookkeeper has notes on what that is, right?

10:22Oh, you bought a flight for a conference. Oh, this is a ticket for the conference. Oh, this is a hotel. This is actually office supplies, right? You got to be able to reconcile all these expenses so that you can know where the money's going as well as when it comes to tax time, things are clean. Same thing with revenue. Where did this money come from? Was this a sale? Was this a product? Was this a consulting? Does this happen in your country, outside your country? All that kind of stuff. Now, I got to be honest with you. I didn't have a bookkeeper when I first got started. I did all the bookkeeping myself.

10:54It was very time consuming. I actually waited too long to get a bookkeeper. I should have got one a lot earlier when I realized it's actually not that expensive and how much time I was saving. So my recommendation is if you can get a part-time bookkeeper, usually if you have an accountant that's going to help you, and they're going to be more than happy to help you set things up and help you with filing for your business taxes, they have a bookkeeping service and you can see what the price is. And then from there, you can see hey do I have enough incoming and outgoing expenses where it's taking too much of my time to do the reconciling that I'll hire somebody part-time regardless of what you do you want to keep a monthly spreadsheet and keep things lean have a p &l sheet where you have everything so you are on top of your finances and your cash flow if you don't have a p &l sheet you can use our template we create a template for our community you can just go to 100mba.net slash templates.

11:51And you can download all our templates, including our P &L sheet template. Now, here's a pro tip. I talked about software like Xero. And a lot of the software, like I mentioned, is automated, where you could just connect your bank account to Xero. And you can automate all the, you know, tracking of expenses. And then once you kind of reconcile it once, say, okay, this expense is a marketing expense, it will recognize that. And every time you, pay that vendor or you pay that expense, it will reconcile it automatically. So that saves you a lot of time. Step six, set up invoicing and payments. You want to make it easy for people to pay you.

12:29This is especially important if you're in the services, if you're doing consulting, you can use something like Stripe or Square for card payments, Wise for international payments, Wise is a great option. And of course, Zero FreshBooks for invoices. They can create invoices in those apps. The easier you make it for people to pay you, the more likely you're going to get paid. It's that simple. And you want to make sure they pay you on time. And these invoices have a deadline and it makes it easy for them to pay via credit card or whatever they want to pay with. So if you want a kind of simple solution that can get going, Stripe is a good option.

13:03And then Wise if you're helping people internationally because it allows them to pay with their local currency. Step seven, business insurance. This is optional, but depending on what you do, insurance may be worth getting early. If you're by yourself doing your business online, you have no employees and you don't have physical space and you don't do live events, maybe this is something that you could do later on. Again, speak to your lawyer. But the point I'm making here is if you do anything in person, if you have any teammates or consultants, you may want to consider this because business insurance will cover you for public liability, for professional indemnity, people saying things that are not true, product liability, cyber insurance, if you're storing customer data, you want to start with a basic policy and grow as you need it.

13:50This is actually not as expensive as you may think. For example, I just got a quote here for business insurance for$30 a month. So it's not super expensive. And it's more of those pieces of mine. I know that a lot of people don't love insurance, but it's kind of a good backup plan just in case, even if you're not legally required to have it, business insurance can give you peace of mind and help you appear more professional, especially if you're running events or pop-up events, if you're creating content that could be legally problematic. Like, for example, if you have a personal finance channel and people take your advice and then they go bankrupt and they're like, oh, I did what you said and I went bankrupt.

14:32And obviously, it's not your fault. They probably did something else. But my point here is that you might get into a legal situation and these insurances help you with that. Now, I don't wish that on anybody, but you have to understand as you build a business, you need to think about the future. Again, maybe you can't afford this right now in the beginning. You don't have a lot of clients, but it's something to consider. And lastly, you may want to get insurance to protect intellectual property. Now, in my opinion, most intellectual property is kind of hard to defend, right, in terms of people using it, stealing it, whatever.

15:07But if you have some really serious intellectual property, something scientific, something that's medical, something that's worth a patent, something like that, you may want to get insurance for that. Step eight, set up a simple website so when people Google you, they can find you, okay? You don't need to spend$10 ,000. You just need a clean, even single-page site. You can use tools like Webflow, Squarespace, or even just a simple WordPress template. And on the site, you just want to explain who you help, what you offer, why it's valuable, and a way to contact or buy what you have. Pretty simple.

15:42Number nine, set up a business email and an online presence. Highly recommend this over early on. Don't use your personal Gmail for customer interactions. You want a domain name-based email. So for example, my domain is 100mba.net. And if there's a George working in my company, it would be george at 100mba.net. This is easily set up with your domain with Google Workspace or with Zoho Mail. I use Google because I love all the tools that come with it, like G Drive and Sheets and Docs and all that stuff. You also want to set up your social handles, even if you don't use them now. You want to claim them right now, like online real estate.

16:20So go to TikTok, go to Instagram, go to YouTube, go to Facebook, all the social profiles you'd like to use. Even if you're not thinking about using them, just secure your handle, secure your username so that way it's easy to find with your brand name. Step 10, start tracking your metrics from day one, your revenue, your expenses, your leads, your conversion rates, all the important metrics that allow you to track the success of your business. If you want our P &L template, again, just go to 100mba.net slash template, download all our templates right there. This will help you stay focused. It'll make it easy to make a decision with data and spot problems early.

17:00And that's pretty much it. Setting up a business doesn't have to be expensive or complicated, but it does need to be intentional. Okay. So just to recap, you want to wait until you have five to 10 sales validating that people are going to pay for what you have. Okay, then go and register and get some finances in order and make it easy for you to scale. Speak to a lawyer, speak to an accountant to set you up properly. You're building the foundation of something great. Do it right. Don't procrastinate. Get this done. So there you have it. Before I go, I want to leave you with this. I'll admit this stuff is boring.

17:34Okay, it's not fun. It's not interesting. It's not like the thing that you're looking forward to doing. It's not the reason why you started a business, right? But it's got to get done. And it's going to save you a lot of headaches and time and energy and all that kind of stuff in the future. So what I recommend you do is take the money you made from the sales, that first five to 10 sales, and invest some of it into getting some help. Get a part-time per hour, per project lawyer and accountant to help you with these things. You could sit down and say, I want to do this. I want to set up my business.

18:05I want to set up my bank account. I want to do all this stuff. I want to make sure I have bookkeeping. I want to make sure I have the software. And they'll sit down and say, okay, This is how much it's going to cost you. This is how much time it's going to take. And get some help because it's going to make it easier for you to just get this done, okay? By getting help, you're getting the experts to work on it for you. They're going to just give it to you on a silver platter, get you to sign some papers, and you're good to go. That's what I recommend. And I recommend it because it's going to get you to get it done.

18:32That's why. I don't want you to put this off. If you found today's episode helpful and you want more practical business lessons to help you start, grow, and scale your business, the best thing you could do is subscribe to this podcast. Hit subscribe or follow on your favorite podcast app, the one that you're using right now, whether it's Apple or Spotify, or wherever you listen to podcasts. By hitting subscribe, you get our next episode automatically, and it's the best way to support the show. It's absolutely free, and it's a way for you to commit to growing your business. And now that you've subscribed, I'll check you in the next episode.

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