Importance of a good business structure

Most Los Angeles and Southern California business owners and entrepreneurs start their businesses as
sole practitioners, or perhaps two or three individuals starting a partnership. During these early stages of the
company’s development, proper infrastructure might not be too important things are less formal and the
owner or owners are often able to run things on kind of a “seat of the pants” basis.
As the company grows, however, establishing a formal infrastructure becomes more important.
When a company reaches the ten employee level, it needs to make sure that proper financial and operational
infrastructure is in place if it wants to be successful and progress to the next level of growth.
Financial Statements and Forecasts
A key component of your financial and operational infrastructure is your financial statements, which consist
of the cash flow statement, balance sheet and profit and loss statement (or P&L). These should be prepared
by a trained accountant or CPA and be in accordance with generally accepted accounting principles (or
GAAP). Financial forecasts are another important component of your financial infrastructure.
There are many potential pitfalls to not having a sound infrastructure in place as your company grows:
1.It will be difficult, if not impossible, to recruit venture capitalists, angels and other investors.
2.Ditto when it comes to obtaining a bank loan.
3.You and your managers will become frustrated with the inability to get answers to your questions
about the company’s financial condition.
4.The company’s cash flow will suffer and you may be unable to pay obligations on time.
5.Internal control problems may arise, possibly leading to fraud and embezzlement.
6.Financial management will be impacted, likely leading to wasted funds.
7.Your accountant or CPA will not have the timely financial data needed to accurately compile your tax
8.It will be difficult to generate the cost accounting and schedules needed for break even analysis to
assist you with gauging profitability.

Thinking of starting a business – Call Robert J Russell – sales coach 972.292.8967


About robertjrussellcompanies

International Real Estate Agent * Insurance Broker * Radio Talk Show Host * Public Speaker * find out about me - visit
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