EAST LANSING, Mich. th It is possible for budding entrepreneurs to establish a new business in times of economic crisis, says a Michigan State University accounting professor. "There always are challenges in setting up a new business, whether in good times or bad," said Sanjay Gupta, chairperson of the Department of Accounting and Information Systems in the Eli Broad College of Business.
(Media-Newswire.com) - EAST LANSING, Mich. – It is possible for budding entrepreneurs to establish a new business in times of economic crisis, says a Michigan State University accounting professor.
“There always are challenges in setting up a new business, whether in good times or bad,” said Sanjay Gupta, chairperson of the Department of Accounting and Information Systems in the Eli Broad College of Business.
“However, there are some unique challenges budding entrepreneurs face, especially during the current economic downturn,” he said.
New entrepreneurs willing to take a chance may be catalysts in turning around the entire economy, but they need to adhere to sound business principles to succeed.
“As individuals organize a new business venture, there’s always a great deal of enthusiasm and optimism,” Gupta said. “Then reality sets in, and the ‘what ifs’ surface, and you wish you’d listened to the advice of trusted financial advisers, with trusted being the key word here.”
A sound financial plan is just one key element of a solid business plan, Gupta said. Apart from the initial startup costs, new businesses have to take into account the same factors established businesses have to consider, such as recurring and nonrecurring costs, projected cash flow, an anticipated revenue stream, customer base, employee costs, needed technology, and dealer and supplier business relationships.
One question that needs to be asked, he said, is: “Will your customers and dealers be able to pay you on a timely basis, just as you need to pay your bills on time. And what if, with little or no warning, relationships with financial institutions and lenders change?
“A business pitfall to watch out for, especially in tough times, is the disruption to a presumed secure backup credit plan,” he said.
“These days cash is king. Some companies find their fallback credit plan ( like the spare credit card to be used only in case of real emergencies ) is not that stable. Institutions or lenders may have been forced to reduce their available credit flows, and that $100,000 or $500,000 companies thought they had in reserve may now only be half that, or less.”
A partnership with an accountant, financial planner or consultant can help an entrepreneur move through the financial maze.
“When you sit down with your accountant, or financial adviser, he or she will take you through the ‘what ifs’, and all the different scenarios, the best and worst cases, and the many in-between,” he said. “It takes times to gauge the range of possibilities, and determine the building blocks for a successful business.”
When choosing an accountant or financial adviser, look beyond the telephone book, or the Internet, Gupta said. Going with established firms or advisers can make all the difference.
“There are a lot of individuals out there hanging up their shingles as financial experts, and being cautious is the smart way to move forward,” he said. “Make sure you talk to more than one firm or individual, get outside referrals and check out the firm’s or individual’s reputation and credibility. Be sure you employ someone who is familiar with current tax laws, has worked with clients in the same situation and knows how to establish a business plan.
“Investing time and money wisely at the beginning can save new entrepreneur time and money down the road,” he said.
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