Managing a Business: How To Stay On Top Of It All
When it comes to managing a business, there are many aspects you have to deal with beyond just your product or service. Entrepreneurs need to hire and pay employees, plan for taxes, buy equipment and inventory, and prepare for emergencies and — hopefully — future growth.
While all of that can seem overwhelming, you need to just take care of each task as it comes. Follow this summary of the aforementioned key aspects of running a business you need to consider.
Hire your staff
The first step to take before hiring staff is to create a plan for paying your employees. After getting your Employer Identification Number from the Internal Revenue Service and determining whether you need a state or local tax ID, it’s time to decide whether you want to hire contractors or permanent staff. Your choice will affect how you pay taxes.
Independent contractors operate individually or under a separate business name and pay their own taxes. But if your contractors meet certain criteria, the government considers them employees. The Equal Employment Opportunity Commission offers a checklist to help you figure out whether your contractors qualify as employees. If you don’t pay taxes on contractors that should be classified as employees, you’ll have to pay back taxes.
Your employees will each need to complete a W-4 Form and you’ll need to schedule their pay periods. You’ll also want to create a compensation plan that includes holidays, vacation time and other forms of leave. You also are required to provide the following benefits by law:
- Social Security and Medicare taxes contributions
- Workers’ compensation insurance
- Unemployment insurance
- Family and medical leave for private firms with at least 50 full-time employees
- Health insurance for private firms with at least 50 full-time employees
These benefits vary from state to state. For instance, some states might require a certain amount of paid leave and others might require employers to provide short-term disability insurance.
To administer your payroll, you’ll need to either handle it in-house or contract with an external service. With your staff in place and payroll department established, you’ll need to report your payroll on a quarterly and annual basis to the state and federal governments.
Tax and legal considerations
You also need to devise a plan to meet federal state, and local tax obligations — a good place to start is by keeping accounting records for every tax year. The first time you file your business’ taxes, you must choose your tax year.
You can choose to have your tax year overlap with the calendar year to keep it simple. Or, you can select a fiscal year that doesn’t end in December to match your accounting cycle. You also can also opt for a short tax year if your business has operated for less than a full tax year or if you’ve changed your accounting period.
Because tax laws vary, you’ll need to check with your state and local governments to understand what taxes you have to pay. The most common state and local taxes are income and employment taxes, which might vary depending on your business structure and other factors.
For income taxes, sole proprietors report both personal and business income on a single form. However, in a corporate structure, owners have to report their personal and business income separately. For employment taxes, you typically need to pay workers’ compensation insurance, unemployment insurance taxes and temporary disability insurance. The amount you’ll need to withhold on employee income tax will vary by state.
You must also pay federal taxes, also. You typically need to pay five types of taxes, depending on your business structure:
- Income tax
- Self-employment tax
- Estimated tax
- Employer tax
- Excise tax
To determine what rules govern your business’ tax obligations, check with the IRS.
Purchasing inventory, assets and equipment
A part of managing a business is purchasing the assets and equipment you need for your operations. Assets can be intangible or tangible, but you’ll likely be concerned with tangible ones such as property, vehicles and equipment.
Businesses can either lease or purchase equipment. Leasing is the better option if the equipment is too expensive or you need to buy a lot at one time. Although you don’t own your equipment, leasing requires less upfront money, and short-term leases enable you to test new types of equipment before you buy. On the other hand, the lifetime cost of leasing is more expensive than buying.
Purchasing can be more expensive upfront than leasing, but the long-term cost is often less. You can also consider equipment that you purchase an asset, which enables you to claim any depreciation on your taxes.
You can purchase assets and equipment with a loan designed specifically for buying equipment or through a microloan or U.S. Small Business Administration loan. Microloans are smaller loans, typically under $50,000, that business owners often use as working capital. SBA loans typically have higher limits and might be more appropriate if you have expensive equipment needs.
Looking for business funding? Learn more about small business loans here.
Marketing and sales
Marketing is yet another expense that you need to consider. First, you need to create a marketing plan that details how you intend to advertise to sell your products or services. A marketing plan typically includes:
- Target market: This describes your audience, including demographics, market size and related trends.
- Competitive advantage: This details how your product or service is different or better than those of your competitors. That may mean a more robust product, better customer service or lower prices.
- Marketing goals: This include target sales, marketing channels you plan to use and costs of each channel.
- Sales plan: This explains how you plan to sell your product or service, such as retail, wholesale or online.
- Budget: This includes the final anticipated cost of your marketing plan overall and each component.
With your marketing plan established, you also need to decide how to accept payments. Start with creating a business bank account. Explore options for taking the following payments:
- Credit Cards
- Online Payments
It’s smart to prepare for emergencies, both natural and man-made disasters. If your business is affected by a natural disasters, contact FEMA for emergency assistance such as hiring and help with expenses like food and clothing. If you have employees, FEMA can help them secure disaster unemployment assistance. In a federally declared disaster area, your business may also qualify for special temporary tax provisions to help your finances.
You should also take appropriate actions to make sure your business is up to code after a disaster. This may include cleaning up molds and other toxins after flooding before you can resume operations. If any hazardous materials affect the area of your business, the National Response Center and National Pesticide Center can help with cleanup.
Successful businesses often need to upgrade equipment, expand their property or even open new locations. It’s important to prepare early for this growth, set money aside for future expansion and adjust your business plan to reflect these changes.
For instance, if you open new locations, you may want to update your marketing plan to address new target markets and make sure you have adequate funds to advertise the new locations. If you’re interested in building a new facility on your current premises or acquiring an existing competitor, you need to consider whether you have the financial means for your expansion and explore all funding options.
An SBA loan can be used for real estate purchases and buying an existing business. Banks also offer loan options specifically for buying new property. Businesses that are simply upgrading their equipment can look for loans designed for that purpose. In other cases, a business can take advantage of the SBA 7(a) loan program. These loan funds can buy equipment, upgrade existing equipment or even buy a new business, among other purposes.
The bottom line
The hard work continues even after your small business is off the ground. It’s important to fully research each new challenge, so you can choose the best options for your business. As your operations grow, revisit your finances, staffing, business plans and other preparations to make sure they still adequately address your business’s expanding needs. Adjust when necessary; flexibility is the key.