HomeBUSINESSStarting A Company: 7 Tips On How Young Entrepreneurs Can Be Successful

Starting A Company: 7 Tips On How Young Entrepreneurs Can Be Successful

After the pandemic-related slump in start-up activity, 2021 promises to be another good start-up year. Company founders get a tailwind primarily from the economic upswing and the recovery of the labor market. However, setting up a company is associated with a whole range of tasks. The following steps enable young entrepreneurs to grasp the most important things – from financial and legal matters to effective growth strategies.

Select The Legal Form Of The Company

In the beginning, there is the decision about the type of company and the corresponding entry with the tax office or in the commercial register. The simplest and most common legal form in Germany is the sole proprietorship. Depending on the business orientation, when a company is founded by two or more partners, either a partnership (natural persons) or a corporation (legal person) can be considered.

The most important partnerships are the civil law partnership , the general partnership , and the limited partnership . The corporations include the limited liability company and the stock corporation. The type of company primarily affects the liability modalities, but also taxes and administrative aspects.

Setting Up A Company: Open A Business Account

The next step is to open a business account. As a sole proprietor, a personal statement is sufficient. But with a piece of separate information, it is easier to separate personal and business income and expenses. It is also essential to determine how future customers will pay the company. To accept cashless payments, the young company needs a payment processor and a payment gateway provider to sell goods online. There are also service providers who do both.

Cash Flow Management

The income must be received on time so that suppliers can be paid and there is money to invest. This task can quickly overwhelm a young entrepreneur. To get a comprehensive overview of the monthly income and expenses, it is advisable to hire a tax advisor. But even the young entrepreneurs themselves should understand the fundamentals of cash flow to ensure that more money is coming in than is being spent. Any financial bottlenecks can also be considered, and cash flow plans can be developed for emergencies – such as extending a loan.

Setting Up A Company: Dealing With OverDue Payments

Late payment by customers or suppliers is one of the main reasons for cash flow problems. However, there are ways to ensure that payments are received on time. Anyone reminding an overdue invoice should state precisely and correctly when they issued the invoice and which payment terms apply. It is also essential to make it clear when the receipt of payment is expected. The believer should always appear friendly but determined and persistent.

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Reports On The Company’s Financial Situation

In the interests of correct bookkeeping, companies must regularly produce reports on their financial development. The three most important financial reports are the balance sheet, the income statement, and the cash flow statement. The latter is particularly relevant for founders and young entrepreneurs. Because the start-up capital is not enough to cover daily expenses, the incoming and outgoing funds must be carefully planned. The accounting modalities are precisely defined by law: The accounting obligation under commercial law is regulated in the Commercial Code .

The tax accounting obligation results from the tax code . Manual cash flow management – for example, with the help of Excel – is time-consuming and error-prone. More and more entrepreneurs are therefore using electronic options. For example, with modern accounting software, transactions can be called up automatically, and income and expenses can be monitored in real-time. Such software is beneficial for founders and young entrepreneurs who often have to master several disciplines simultaneously.

Company Formation: Manage Corporate Taxes Properly

It is also essential to watch income tax, corporation tax, trade tax, and sales tax. Sole proprietorships and partnerships are required to pay income tax. This concerns income from non-self-employed and self-employed work, from trade, agriculture and forestry, and capital assets and leasing. Corporations, on the other hand, pay corporation tax. Here, the taxable income is determined using a particular calculation method from the annual surplus.

Companies must also collect sales tax from the respective customer for every product and service sold and pay it to the tax office. Every company must pay a trade tax. It is collected by the respective municipality or municipality and delivered to the tax office. However, the trade tax paid can be offset against income tax in the tax return.

Expand Your Business With Targeted Measures

Those who know their buyers and their needs can use this information to develop effective sales strategies. Customer feedback, obtained via questionnaires, feedback calls, or social platforms such as LinkedIn and Facebook, is constructive. It also makes sense to inform existing customers about new or improved items that match their previous purchases – ideally with a personalized newsletter. In general, in marketing and sales campaigns, it is vital that customers do not feel annoyed. The aim should be to build solid, long-term partnerships – and not chase after one-off profits.

Sales can be temporarily increased with discounts and special offers. But it is crucial to know which customers generate the most sales. Profit can also be improved with targeted cost-cutting measures. These include negotiations with suppliers about discounts. Founders should consider introducing a subscription model with suitable products and services because it offers clear cash flow advantages. And if you keep an eye on your cash flow cycle using sales reports, you can increase profit margins and react to potential problems early.

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