In the early summer of 2003 a little girl named Avi started a lemonade stand in
At the core of every business are the functions that make up the back-office. The back-office typically consists of accounting, finance, tax, human resources, and legal functions of almost any business. It should be noted that many businesses choose to outsource their back-office functionalities, but it is necessary to have all of these functions covered nonetheless because you will be the person responsible for these functions during the early stages of your business. This information usually isn't covered in a business plan and even in B-school this topic is not covered in great detail. I will elaborate on each of these topics in a series of future articles.
The bootstrap principle of Right Action Right Time applies to your back-office in the same way as other significant components of your business, such as marketing, product development, and the use of capital. This approach is illustrated by the Bootstrap Map.
The following is a list of back-office functions that could be in place at the various stages of your venture:
- While performing self reflection evaluate your effectiveness at budgeting and managing your personal finances. This often transcends into how the entrepreneur operates the business in the beginning stages.
- Build an understanding of running a business from the ground up while gathering information about the industry your venture will operate in. Read books and periodicals and absorb everything you possibly can.
- It is a good idea to gain real-world business experience pertaining to your venture
- Play with the economics of your idea and evaluate its feasibility and the risks involved
- Quantify your fixed living expenses and calculate the income you need to maintain the lifestyle you choose to live and be happy with before you venture into the
- Get in the habit of budgeting and saving capital to fund the launch of your venture
- Gather financial information regarding the cost of your product or service
- Track expenses pertaining to the beginning stages of your venture
- Establish a price for your product or service based on the cost to build/provide the product/service and a set margin
- Identify laws and regulations required to be complied with pertaining to launching your venture paying attention to the associated costs
- Obtain the necessary licenses and permits to operate your business
- File a DBA for your business name
- Set up business bank accounts separate from you personal finances
- Consider applying for a line of credit
- Obtain your first customer and gather and retain as much information regarding the sales transaction as possible.
- Consider filing your first Schedule C as a sole proprietor when you file your income tax return
- Consider organizational structures based on liability and tax assessments
- Consider hiring a bookkeeper if tracking information becomes a time suck and is not a valuable use of your time, but even more importantly if in the ideation stage you discovered that you don't like doing the data entry for your business
- Hold consultations with attorneys and accountants
- Track all financial data pertaining to the venture either manually or with the aid of an accounting system
- Retain all receipts and business documents in an organized manner
- Sales tax remittance and business licensing
- Track the financial performance of your venture in great detail never losing sight of your cash position
- Determine the best means of compensating yourself from your business venture
- Definitive organizational structure
- Formal payroll, human resources, legal, tax, finance, and accounting functions that are either internally staffed or outsourced
- Accounting systems and formal budgeting and forecasting process
- Investor relations and dividends
- Annual valuations
- Executive Compensation and commissions
- Incorporate great financial detail into the organizations overall business strategy
- Fine tune the information systems behind the infrastructure of your organization
- Continued financial discipline while continuing to fund new creative endeavors
- Control G&A costs and align management interests with strategic goals of the organization
Some businesses are more complex than others. All too many good business ideas fail before they start much like Avi's lemonade stand. The back-office is essential to doing business and using these concepts will save you time, money, and headaches along your entrepreneurial journey.
Note that this list is not "all inclusive." There are an endless number of back-office attributes that can arise in organizations. Some of these actions might come at an earlier stage of your venture, but they will be there throughout the process. There is a basic business framework that all organizations have to comply with, whether you're a publicly traded company or a not-for-profit organization. Don't neglect your finances and don't be afraid of the legal and accounting complexities facing businesses today. Avi later obtained a temporary business permit from the City of
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Rey S. Madolora - Business Solutions Consulting
Specializing and Accounting & Finance solutions for small, medium, large, private, public companies and not-for-profit organizations, Rey has been running his own consulting practice for almost three years while also running his Fine Arts Photography for the past five years. He is a full-time entrepreneur. He is currently involved with his fourth entrepreneurial venture and leads the Bootstrap Back Office Initiative.
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