Ready for Business: 12 Steps to Success

1. Write down your “WHY”

Why are you a business owner? Why do you do what do? What drives you when times get tough? It’s important to know why you want to be a midwife/chiropractor/homeopath/etc, and why you want to be in business for yourself, so that you can be focused and reach your goals.

“People don’t buy what you do. They buy why you do it.” – Simon Sinek

2. Begin with the end in mind

“To begin with the end in mind means to start with a clear understanding of your destination. It means to know where you’re going so that you better understand where you are now and so that the steps you take are always in the right direction.” – Stephen Covey, The 7 Habits of Highly Effective People

3. Set some goals

Where do you want to be a year from today? What do you want your practice to look like? How will your life/family look different? What is your life/work balance? How much do you want to work every week/month/year? What changes do you want to see in yourself a year from now?
Write a work goal, a family goal, and a personal goal. For each of those goals, write down at least three steps you will take in the next day, week, and month to achieve them.
Then act fast! You don’t need to be perfect before you get started with your business.

4. Think about your USP (Unique Selling Proposition)

Why should people choose your practice over any other?
I know that most healthcare businesses are mainly referral-based, but it is good to have a sentence description of what you do that is descriptive and interesting. If you are at a party and someone asks “What do you do?” You could answer “I’m a midwife” or “I walk mothers through their pregnancy and birth in the comfort and safety of their own homes”. Or instead of “I’m a chiropractor” you could answer: “I help people find relief from pain and increase their mobility through natural methods”.
Which answer is more intriguing and memorable? You want people to remember you, so that when they have a friend in the future who says “I’m thinking about trying a midwife/chiropractor…” they will think of you.

As a healthcare professional, you are in the business of taking care of people and helping them achieve health and wholeness. But you are also a business person trying to make a living! One is much more exciting than the other, but if you want your business to succeed, you do have to spend time on the business aspect as well as the patient care aspect.

5. Business Entity

Even if you’re just planning to operate as “Jane Smith, Chiropractor”, it is good to have a structure to your business. Either as a Sole Proprietor or an LLC. How you apply for those depends on your state. If you’re located in Arizona, you will find this website to be very helpful: http://www.azcommerce.com/programs/small-business-services

A sole proprietor is someone who owns a business and is personally responsible for all of the business debts. The disadvantage to a sole proprietorship is that the owner can be held personally liable, and might have to pay bad debts and judgements from lawsuits out of their own pocket.

An LLC separates your personal assets from your business’ assets, although you still report the income and loss from the LLC on your personal income tax return. In most states forming an LLC is relatively easy, though the cost varies greatly from state to state.

Forming an LLC (Limited Liability Company) is the one I would recommend, though you should check with an attorney for legal advice regarding your business.

An LLC is nice because it separates your personal finances from your business finances. In the unlikely event that someone sues you, they don’t have access to your personal finances (except in certain cases of negligence or wrongdoing).

If you want to use a different name than your own or than your LLC name, you can file for a Doing Business As (DBA) name. If you are a Sole Proprietor, you will need to register a DBA if you want to do business under anything other than your real name. If you are an LLC, if you want to do business under a name that is different than your existing LLC name, you’ll also need to register a DBA.

Note: Different states have different rules regarding DBA names. Be sure to check into the rules in your state.
Find more information here: https://www.sba.gov/starting-business/choose-register-your-business/register-your-business-name

6. Get a tax ID number

You don’t want your personal social security number on everything. It’s better to have a specific number (your EIN – Employer Identification Number) for the business. It’s quick and easy on the IRS website.
https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
It is an easy form to fill out. When you get to the confirmation page, you’ll have the option of selecting if you want your completed application mailed to your address or just get it online. I recommend that you choose the online option to save time. BUT BE SURE to download the PDF and also print it off for your records, because if you leave that page it will no longer be available to you, and you won’t be receiving any of the documentation in the mail.
If you are selling any goods (retail), you will probably also need a sales tax ID # from the IRS.
In Arizona it is called a Transaction Privilege Tax (TPT). You can check out this website to find out if you need one.
https://www.azdor.gov/TransactionPrivilegeTax(TPT)/DoINeedALicense.aspx

7. Get a bank account for your business

It’s best practice to keep your personal and business finances separate, and use funds from your business account only for your business. You’ll know right away how much has been spent in setting up your business, how much you’ve made, and you won’t accidentally spend money on groceries that should have gone for the electric bill or your website.
Pat Flynn at smartpassiveincome.com outlines 5 reasons why it is a good idea to have a business bank account.

1. The Business Deduction Rule: The law says only businesses can deduct business expenses. Let me say that again: Only businesses can deduct business expenses. If you have a business that runs out of your personal bank account, you’re going to have a very hard time convincing the government that you are indeed running a business. To them, it might just look like a hobby.
2. Tax Time Woes: When you file taxes for yourself and for your business, all of the transactions for each must be separated. If you don’t have separate accounts, going though each transaction is going to suck big time.
3. The Audit Trail: Note that it’s not a requirement to have a separate bank account for you and your business. The only thing that is required is that “all records be accurate, complete, permanent and show a clear record of income and deductions.” If you’re audited, your separate business statement and record provides a “clear audit trail” and will make your life much much easier.
4. Missed Deductions: With a giant bank account with both business and personal transactions, it’s going to be very easy to miss deductions that you can write off. Messiness equals wasted time and money.
5. Lack of Professionalism: If you were doing business with someone and they paid you with a personal check, you’d think they were a little unprofessional, or not even a real company – right?

You can find her original article here. It’s well worth the read.
There are many options out there when it comes to business checking accounts. Some are fully online, some have fees connected to them, others are free if minimum transaction requirements are met.
Here is a list of free business checking accounts, though I haven’t used any of them so can’t vouch that the information is accurate!
I personally use a small, local bank for my business account. My business checking is free and I enjoy supporting a local business. (If you’re in Arizona, the bank I use is Gateway Bank in Mesa: gcbaz.com)

8. Use a bookkeeping system that makes sense to you

There are so many great resources today that are easy to use and do a lot of the work for you. Have someone knowledgeable set it up for you and teach you the basics, or hire a bookkeeper to manage it for you.

Any money paid to a great bookkeeper is a good business investment, because they will save you money in the long run through keeping your organized, finding areas where you are losing money, helping you budget, and tracking tax deductions.

It’s important to know what money you have, where you’re spending it, and to be organized when tax season comes around.
At a minimum, keep all receipts and write everything down!
Some of the best options are:

Xero Bookkeeping/Accounting Software – $30/month

Wave Bookkeeping/Accounting Software – Free!

QuickBooks Self-Employed – $10/month (includes mileage tracking)

9. Pay yourself through an “owner’s draw”

This is basically a transfer of money from your business account to your personal checking account. Since you are your own boss, instead of getting a paycheck you will use an owner’s draw. This can be once a month, once a week, every other week, or other time period. It’s good to try keep it a consistent amount, both for your personal budgeting and for bookkeeping purposes. Make sure to leave at least 25-30% in your business bank account for taxes, and also leave some in your account for future business purchases, ongoing training, monthly expenses, and saving for future growth.

10. Make sure you understand how to properly report your income

Yes, taxes are a drag, but it’s a part of life. Find someone who can explain how to record a bartering transaction (Legally it’s supposed to be recorded as income!) and get a good accountant to do your taxes for you.
If you ever worked for someone before, you were a W2 employee and automatically had taxes withheld from your paycheck and at year’s end. You usually owed a little bit or got a refund. Now you are an independant contractor, a 1099 employee. No taxes are withheld from your paycheck. You need to set some aside each month to be ready for taxes. You will also probably have to start paying estimated taxes each quarter.
You may want to go ahead and do your own taxes, but I strongly recommend using a good CPA at least the first year to get your business off to a good start.

11. Track the miles you drive for your business

Use an app, like MileageIQ, to track your mileage to clients homes or any time you are driving for work. Since you are your own boss, you might choose not to be reimbursed for those miles, but they can be recorded as a business expense which helps decrease your taxes. And even if some of your trips don’t feel like work, because you get to sit and visit with a pregnant mom who becomes a good friend, they are considered work related because you are doing them for your job. Might as well claim the tax deduction! Just make sure to keep good records, because mileage is something that the IRS notices when deciding to do an audit.
These are some of the top-rated apps, though I haven’t personally tried them.

Stride Drive for iPhone – Free!

Mile IQ – Free under 40 rides per month

TripLog – Basic features free

12. Know some top tax write-offs

For all of these, make sure to have clear and accurate documentation. There are several apps out there that allow you to snap a picture of a receipt and have it automatically upload. Foreceipt, Smart Receipts, Shoeboxed Receipts, Receipts by Wave (if you are using Wave as your bookkeeping software), OneReceipt, or Receipts are all options worth looking into.

a) We already talked about mileage. You can’t deduct regular commute mileage, but you sure can deduct travel to and from a client’s home for business purposes. You can either keep a log of the miles driven and multiply them by the deduction rate, or you can deduct actual cost (including maintenance and gas) and figure out what percentage of the time the car was used for business purposes. This way is a little more work to figure out, and you have to be sure you’re doing it right to avoid an audit. You can’t do both types of deductions at the same time. You need to choose one. I recommend using an app to track your miles driven and use the IRS deduction rate at the end of the year. http://www.winspearlaw.com/mileage-deductions-vulnerable-to-irs-audits

b) You can also deduct expenses for a home office (Though personally I wouldn’t do this one – because the rules can be tricky. Your toddler might not be able to cross the threshold of your office, because that would make it “home” space. It’s easier to avoid the confusion. The difference isn’t that great anyway). You can also deduct cell phone expenses, if you use your phone for a lot of business calls. Again, this one gets tricky because you want to make sure you get the numbers right. And you have to pay a lot of attention to how often you use it for business. If you have a phone only for business, that can obviously be a business expense and deduction.

c) You can also deduct meals and entertainment, if the expense furthered your business in some way. Taking a potential client out to lunch, bringing food to a potential referral partner, or treating a doula to coffee to get to know her before you recommend her to a client would all be tax write-offs. Some meals are only a 50% write-off however – so read up on them to make sure you’re taking the right amount!

d) Travel is another one. If you go to a convention for further training and networking, you can deduct reasonable travel expenses.

e) There are also deductions for rental property and interest on money borrowed for business activities.

f) You can even deduct what you pay for insurance if it is for your business/profession, and can deduct purchases of computer software in certain instances.

g) Education, learning and professional development activities, courses, workshops, seminars, etc can all be deductible if related directly to your business. One thing you can’t deduct is the initial training to start your business. So classes you took to become a professional are not deductible. Ongoing training in a specific area would be deductible.

All these deductions can add up to hefty savings! You do need to keep careful records, but if you use apps and tools designed to make life easier, it won’t be a chore.

With all of these, please consult your accountant to make sure that the deductions you want to take are legal, accurate, and that you aren’t missing any. I am not an expert on tax laws – I just want to get you thinking about deductions you might be missing in your business.

And, finally, my disclaimer:

All the content you read or watch on my website, firstdollarbookkeeping.com, or in any of my other written works, is just a reflection of my personal experiences as a bookkeeper and business owner. I am not a lawyer, accountant, or trained financial advisor. I’m simply trying to make your job a little easier as I share my knowledge and experience. I cannot guarantee anything and will not be held liable for any of the information I post on my website or other writings. Please remember that what I write and comment about is from my own experience and personal opinion, though I do try to be well informed in that opinion! As always, you should think critically about everything you read, form your own personal opinions, and then act based on your own well-thought-out conclusions.

May your business prosper and may you help bring health and healing to many.

– Liz Tonneson

Want more information about bookkeeping and your business? Download my FREE PDF guide: Simple Bookkeeping Steps