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3 Elements of a Good BusinessJohn has over 20 years of experience in marketing and recently started to think about opening up his own firm. He met with a business consultant. The consultant asked about his business goals. John said “My financial future depends on this. I will do whatever it takes to make it profitable. I want to make sure that it is a good business.”
“What does that entail?” the consultant asked.
John was not sure.
Many business owners are like John. They do not fully understand what makes of a “good business.” They focus only on making a profit. A business that makes money is not necessarily a good one. A business that is not soundly established can collapse anytime.
To ensure a prolonged success, a “good business” should fully address 3 elements: structure, tax, and credit.
A business’s legal structure is the foundation. There are many different types of entities available. Every business should conduct a thorough analysis of what type of entity it should operate as depending on its industry and characteristics. A properly established business can maximize the benefits of the entity it chooses, limit the liabilities, and solidify asset protection for the owners.
The tax element goes hand-in-hand with the legal structure. Each type of entity is taxed differently. The more money saved on taxes is more money in your pocket. Good business planning should consider the tax consequences when assessing the legal structure.
Business credit is the last piece of the puzzle. A good credit rating for a business gives it endless funding opportunities whenever it needs. This “fund-ability” is a great asset because it enhances the business’s ability to weather crisis, provides opportunity for expansion, and increases the underlying value of it.
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