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Getting the little things right makes a big difference when starting or purchasing a business. Making changes to your business later can be very expensive, time–consuming and inefficient. I recommend the following items when members visit with me about starting or purchasing a business:

1. Visit with Your Attorney

Should you establish a corporation? Should you establish an LLC? What are your risks if you operate as a sole proprietor? If you are purchasing an existing business, who will draft the documents and close the transaction? A visit with your attorney will help answer all of these questions and more. The credit union cannot offer legal advice so it is crucial that members seek out an attorney to obtain these answers. An attorney will ensure that your business is established properly and in a manner that addresses your potential liabilities to customers, suppliers, employees and the public.

2. Visit with Your Accountant

How will you handle payroll? What tax liabilities will you encounter and how are they paid? Can you afford an employee? What is the best way to purchase a business asset to minimize future tax liability? A visit with an accountant is a crucial part of starting your business. Missing on any of the key financial components of your business can doom it from the start. An unexpected operating expense or tax liability can be an insurmountable obstacle when a business is new and not yet profitable.

3. Write a Thorough Business Plan

Take your business concept along with input from your attorney and accountant and draft a business plan.  A thorough business plan will identify the decision makers for the business and their qualifications, list key customers and major competitors, identify cash contributions from the owners along with operating costs to be covered at startup and it will identify seasonal cash flow shortages and expected borrowing needs. The exercise of writing a business plan focuses the owner’s attention on the most important details of the business and typically leads to additional questions that must be answered by an attorney, accountant or lender.

4. Visit with the South Dakota Small Business Development Center

The South Dakota Small Business Development Center is a valuable and FREE consulting resource for small business owners. The SBDC is an excellent resource for new business owners drafting business plans and cash flow projections. They also assist existing businesses with financial planning needs. We recommend that our members contact a regional office to make an appointment. To find your regional office, visit their website at

5. Be Prepared to Make a Down Payment

Nearly all financial institutions require some amount of “skin in the game” when it comes to business lending.  Typical equity requirements are in the range of 20-50%, depending upon the nature of the business and the collateral securing the loan. Even loans through SBA and other governmental entities will typically have some form of an equity requirement. It may be helpful to discuss your plans with a business loan officer early in the planning process so you can prepare for the required equity contribution.

Starting or buying a business can be an intimidating and complicated process. Following these tips will get you pointed in the right direction and help to avoid many of the common pitfalls that lead to business failure. Please feel free to contact the business lending department if you have questions!