What not to do when starting a sole proprietorship

As part of questions from various forums that I think might interest you. Below is a question from a Facebook group where I sometimes post on the topic of financial management and in general.

The mortgage consulting field also includes questions about Funding And financial management. A mortgage is never just a mortgage; it takes into account the borrowers' financial and personal circumstances.

The question interests me because it demonstrates a behavior from which I think we can learn. Bottom line, I don't know what field the business in question will operate in, but I think regardless of the field, the chances of this business surviving beyond the next year or two are slim.

This business owner is making almost every possible mistake before even starting operations:

Lack of responsibility

"Economics isn't taught in school." News flash: Even with a bachelor's degree in economics and a master's degree in business administration, you don't learn how to run a business. So what?

You want to be a business owner, it is your responsibility to invest time and money to acquire the skills necessary to manage a business. It doesn't matter if you are a brilliant lawyer, surgeon, or plumber. If you don't know how to manage a business, you won't succeed in owning one.

"I understand."

Knowledge is acquired proactively from someone who has done what you are asking to do. I don't know where this person "understood" what they understood, but my gut feeling is that they understood it from someone. Not a business owner.

I can't believe that a person who has a business (apart from the insurance agent who receives a commission for opening Study fundwould recommend taking money that is supposed to be used for business and locking it up for six years even before you know anything about The business's cash flow.

Cash flow

Cash flow is the most important thing For a business throughout its years. A business can collapse even if it has sales and profits due to problematic cash flow.

For example, let's say I spent 5,000 shekels on Facebook advertising and got three clients who each paid me 5,000 shekels. Seemingly, everything is fine. 15,000 in revenue, 5,000 in expenses – I have 10,000 shekels for entertainment.

In practice, the customers requested 5 installments, so this month’s revenue is only 3,000 NIS against 5,000 NIS in expenses. But wait, that 5,000 includes VAT, so we need to add 15,000 * 17.1% = 2,550 shekels to the advertising expenses. On top of that, we need to add income tax prepayments of, say, 15% * 15,000 = 750 shekels. In other words, This month I brought in 3000 shekels and spent 5000 advertising + 2550 VAT + 750 Income tax = Minus 5300 shekels.

A few months like this, and even though the business is constantly profitable, it goes bankrupt the moment the bank says it's not willing to increase the credit line.

Excessive focus on taxes

It's very easy to manipulate us and sell us on certain behaviors by offering us a way to "save on taxes." In this case, a business that apparently didn't earn anything and expects modest profits of only about 100,000 shekels a year (which is why it's a *ossek patur*, a VAT-exempt business) meaning it will pay almost no taxes, is taking an action that someone told it would "save it taxes.". News Flash As long as there are no profits, there are no taxes, so if I were to advise a business owner, I would tell him to use the money to bring in customers, and after there are profits, consider how to plan your tax payments to reduce them.

What should one do with the money?

It's not enough to write what not to do. It's worth writing what to do. So first of all, opening a business is a very significant financial matter. We saw earlier how our working assumptions regarding Income and ability to make a living Capabilities may vary. I would put the money in reserve for now. Beyond that, pay attention. Who do you get advice from?. Many business owners think, for example, that an accountant and a business consultant are the same person. This can be true, but it can also certainly be the case that an accountant cannot advise on business matters. The role of an accountant is to save on tax payments. Business development is a completely different matter.

It's worth getting advice from someone whose own business you're impressed with. Doing things you'd want to do and getting results you'd want to get. If, for example, the consultant you are consulting with is a "mos'er p'tor" (a business owner with a relatively low income), then perhaps their results might not justify learning from them.

Don't be fooled, someone who went from weighing 150 kg to 100 kg can absolutely give dietary advice, even though they are overweight. But you can only get advice if the result they achieved is similar to what you want.

Please note that you have no conflict of interest with the advisor you have chosen. For example, if an insurance agent recommended that you start by opening a study fund, that advice is tainted by a conflict of interest. The insurance agent receives a commission from the insurance company for every fund they open. Advice should always come from someone whose interests you fully understand. And you pay his salary, and only you (No further emphasis is possible).