LAST week, we started our management discussion by looking at the “Business Structure for Sustainable Growth”. Today, we will continue from where we stopped.
MOTIVATION FOR STARTING A BUSINESS
In your current business ask yourself, what value are you creating? The business you intend to start, ask yourself, what value will I create with this business.
It is more critical to answer these questions before thinking of the type of structure or form the business would take.
Money is one of the benefits your business stands to gain. When you create value, the value will attract so many things among which is money.
Creating value means solving a problem. Therefore, in your business, you need to know the what, how, when, for whom of the problem you intend to solve.
What – The nature of your business, what business are you into?
How – What are the strategies you would employ to solving the problem?
When – This will entail where your business is sited, how will your business be accessed and
For whom – This involves; who are your customers?
Do you know why you need to create value? Value is what sustains your business/organization, not money.
Value breeds standards, customers’ loyalty, and brand integrity. If money is your priority when the money is not forth coming, you will be frustrated and you will likely drop the business. “If your only goal is to make as much money off other people as fast as you can, eventually you will make business decisions for the wrong reasons and ultimately hurt your reputation and growth potential”.
Successful entrepreneurs are rarely motivated solely by money; they achieve wealth because they believe in what they are doing and inject personal core values into how they build a business.
Wealth is their reward; not their god. Your passion and confidence will get other people – customers and investors – excited about the business and you will have an easier time establishing your business’ credibility. Every successful business person has a strong faith to excel.
CHOOSING THE RIGHT BUSINESS STRUCTURE
The right business structure for a business is dependent on several factors that can change or evolve. The right business structure is only right for a given circumstance and therefore should be reviewed regularly to ensure it remains optimal. Choosing the best business structure is very important as that will determine:
The tax you are liable to pay
The level of asset protection afforded
Ongoing costs and
Potentially the size of the client who will buy from you.
CHARACTERISTICS OF A GOOD BUSINESS STRUCTURE
Accommodating changing circumstances with minimum consequences
Provision of adequate asset protection for the owners of the business
Minimisation of costs, in particular, tax
Facilitates efficient distribution of profits
Therefore, choosing the right form of business will depend on;
The amount of your earnings and deductions
Tax planning to avoid paying too much self-employment tax
Liability exposure from your product, services, or location
Whether you have a partner or investor in the business
Where you live and conducting the business
Business goals and marketing plans and
The administrative costs and demands of setting up certain entities
Taking cognizance of the above will enable you to choose the best business structure. You might decide to set up a sole proprietor form of business which is the most common form of business, likely very small, has unlimited liability therefore people can sue the owner for business and personal assets and raising money/additional capital for this form of business is usually not as easy as other forms of business.
Other forms of business include:
Partnership: This form of business has more than one owner, not a separate legal unit like a corporation, has unlimited liability therefore, people can sue each partner for business and personal assets, and it entails having Partnership agreements – management roles, splitting.
To be continued next week.
Sunday Ade Bello is a multi-talented and an analytically inspired management trainer, writer and examiner. He is the CEO of WorkLife Training Professionals, Lagos.