You're ready to start your business. The excitement is real, but so are the questions. Where do you actually begin? What paperwork matters? How do you protect yourself from costly mistakes that sink 80% of new businesses within 18 months?

If you're launching a construction company, contractor business, or any small business in the Des Moines area, this guide walks you through the five critical steps that separate businesses that thrive from those that barely survive. These aren't generic startup tips—these are the foundational elements that Performance Financial implements with every new business client to ensure they start strong and stay profitable.

Why Most New Businesses Fail Before They Even Start

Here's the uncomfortable truth: according to Bloomberg, eight out of ten businesses fail within their first 18 months. That's 80% of new ventures gone before they've barely begun.

The reasons vary, but most failures trace back to preventable mistakes made during the startup phase. Business owners skip critical legal protections, commingle personal and business funds, neglect proper accounting systems, or run out of cash because they didn't manage expenses effectively.

The good news? Every single one of these problems is avoidable when you set up your business correctly from day one.

Step 1: Set Up an LLC to Protect Yourself and Your Business

Why You Need Legal Protection

Operating as a sole proprietor might seem simple, but it leaves your personal assets completely exposed. Every truck, every piece of equipment, your home, your savings—all vulnerable if something goes wrong with a customer, vendor, or employee.

An LLC creates a legal separation between you personally and your business. This liability protection is essential whether you're a custom home builder managing $500,000 projects or an HVAC contractor with multiple crews in the field.

How to Form Your LLC

The process is more straightforward than most business owners realize:

Choose and verify your business name. Visit your state's Secretary of State website to confirm your desired name isn't already taken. If your first choice is unavailable, you can modify it slightly or choose an alternative. For example, if "Smith Construction LLC" is taken, you might use "Smith Building Solutions LLC" or "Smith Enterprises LLC."

Designate a registered agent. For most new businesses, the owner serves as the registered agent. This person receives legal documents and official correspondence on behalf of the company.

File your Certificate of Organization. This document officially creates your LLC with the state. It includes basic information about your business structure, ownership, and purpose.

Create an Operating Agreement. Some states require this document, but even when optional, it's smart to have one. If you're starting the business alone, you can find templates online. However, if you have partners or co-owners, invest in proper legal guidance to structure the agreement correctly. Getting this right on the front end prevents expensive fights and dissolution proceedings later.

Submit to your state and get approved. Once approved, your LLC officially exists and provides the liability protection you need.

Get your EIN from the IRS. Your Employer Identification Number functions like a Social Security number for your business. You'll need this to open bank accounts, hire employees, and file taxes. Apply for free at the IRS website.

Many Des Moines contractors and small business owners work with Performance Financial's business startup services to ensure their entity formation is done correctly and tax-efficiently from the beginning.

Similar firms like Upfront CPA in Orlando and Whyte CPA in Arizona help business owners nationwide with proper LLC formation and entity structuring.

Step 2: Open a Separate Business Bank Account

Why Separate Accounts Are Non-Negotiable

You just created an LLC to protect your personal assets from business liability. Now you need to maintain that protection by keeping business and personal finances completely separate.

Commingling funds—mixing personal and business expenses—is one of the most common and costly mistakes new business owners make. It creates multiple problems:

It destroys your legal protection. If you're using your business account to pay for personal groceries and your personal account to buy job materials, a court can "pierce the corporate veil" and treat your LLC as if it doesn't exist. Your liability protection evaporates.

It creates tax nightmares. When tax time arrives and your CPA asks for financial records, you'll be sorting through thousands of transactions trying to remember which were business and which were personal. You'll miss deductions, waste hours, and potentially face audit risk.

It makes management impossible. How do you know if you're profitable when business and personal money flow through the same accounts? You can't track job costs, manage cash flow, or make informed decisions without clean financial separation.

How to Maintain Clean Financial Records

Opening the business account is simple—bring your EIN and LLC formation documents to any bank. Maintaining the separation requires discipline:

All business expenses run through business accounts. Materials, equipment, insurance, subcontractors, fuel—everything business-related flows through business banking.

All personal expenses stay in personal accounts. Mortgage, groceries, personal vehicle, family expenses—these never touch the business account.

If the business needs more capital, transfer funds properly. Don't pay business expenses from personal funds directly. Instead, transfer money from your personal account to your business account, then pay the expense. This creates a clean paper trail showing capital contributions.

Pay yourself through proper channels. Don't treat the business account as your personal piggy bank. Instead, take regular draws or distributions through your S-Corp structure once you're established.

The construction accounting specialists at Performance Financial help contractors set up proper account structures and maintain the financial separation that protects their businesses. Firms like West CPA Group in St. Louis and Passageway Financial in Minnesota provide similar guidance for contractors in their markets.

Step 3: Get Customers—Your Business Lifeblood

Why Customer Acquisition Is Priority One

You can have perfect legal structure and flawless accounting, but without customers generating revenue, you don't have a business. You have an expensive hobby that consumes capital.

Getting customers must be your absolute laser focus in the early stages. Everything else—including some of the systems we're discussing—takes second priority to revenue generation.

How to Build Your Customer Base

The specific tactics vary by industry, but the principle remains constant: be willing to do whatever it takes (legally and ethically) to get in front of potential customers.

For construction contractors, this might mean:

• Knocking on doors in neighborhoods where you want to work
• Distributing flyers to homeowners
• Building relationships with real estate agents and property managers
• Setting up Google My Business and running local ads
• Networking at builder associations and trade groups
• Asking every happy customer for referrals

For service businesses, consider:

• Direct outreach to potential clients
• Strategic partnerships with complementary businesses
• Local advertising focused on your target market
• Content marketing that demonstrates expertise
• Speaking at local business groups

The marketing experts at Feedbackwrench specialize in helping contractors and service businesses develop effective digital marketing strategies that consistently generate qualified leads.

Remember: You will spend money in the early stages. Marketing costs, initial equipment purchases, insurance, startup expenses—cash flows out before it flows in. The only way to sustain this is by bringing in customers who replenish that capital. Without sales, you're on a countdown to closure.

Step 4: Set Up Proper Accounting Systems

Why Accounting Matters From Day One

Most business owners view accounting as a necessary evil—something to deal with when tax time arrives. This perspective costs them thousands of dollars and countless opportunities.

Proper accounting isn't about paperwork compliance. It's about having the information you need to make profitable decisions.

What Information You Actually Need

Without good accounting systems, you're flying blind. You might feel busy, you might have money in the bank, but you don't actually know:

• Which jobs or services are profitable
• Where your cash is going
• What you owe to vendors and subcontractors
• What customers owe you
• Whether you're on track for quarterly tax payments
• If you can afford to hire that next employee
• Whether last month was actually profitable or just busy

As one contractor who works with Performance Financial explained: "Being able to look at each project account and see which ones are actually making money has been huge. We found a client that was losing $20 a month—not as a whole, but breaking it down into each individual account showed us exactly where the problem was."

Getting Started With Accounting Systems

Most small businesses starting out use QuickBooks Online, Xero, or FreshBooks. These platforms provide solid foundations for growing businesses and will serve most contractors well for years.

But software alone isn't enough. You need:

Proper setup aligned with your business model. Construction companies need job costing. Service businesses need customer tracking. Retail businesses need inventory management. The chart of accounts, classes, and tracking categories must match how you actually operate.

Consistent transaction recording. Every expense, every invoice, every payment needs to be recorded in the right category and attributed to the right job or customer.

Regular reconciliation. Monthly bank reconciliations ensure your records match reality and catch errors before they compound.

Meaningful reports. Profit and loss statements by job, balance sheets showing your true financial position, cash flow projections—these reports guide decision-making.

Someone who knows what they're doing. Most business owners don't have formal accounting training, and that's fine. But trying to learn accounting while simultaneously launching a business is a recipe for costly mistakes.

Performance Financial's bookkeeping services specialize in construction and contractor accounting, helping business owners implement systems that actually provide useful information. Other quality firms like Golden Tax & Accounting in San Diego and Ayaz Associates in Nevada serve their local markets with similar expertise.

Step 5: Manage Your Expenses Like Your Business Depends on It (Because It Does)

The 80% Failure Rate Comes Down to Cash

Remember that Bloomberg statistic? Eighty percent of businesses fail within 18 months. While there are multiple contributing factors, most failures ultimately come down to one thing: they ran out of money.

Either revenue didn't materialize as quickly as projected, or expenses consumed capital faster than anticipated, or both. The result is the same—the business can't sustain operations and closes.

The Profit First Approach

Traditional accounting teaches "Sales - Expenses = Profit." This formula makes logical sense but psychological disaster. When you calculate profit as what's left over, profit becomes the smallest number and the easiest to eliminate. An unexpected expense comes up? No problem, we'll just accept lower profit this month. A customer pays slowly? That's okay, we'll make it up next quarter. Before long, "profit" is a theoretical concept that never actually appears in your bank account.

The Profit First methodology, created by Mike Michalowicz, flips this formula to "Sales - Profit = Expenses." This behavioral approach forces discipline that protects your business.

How Profit First Works for New Businesses

The system creates separate bank accounts for different purposes:

Income Account: All revenue lands here first

Profit Account: A predetermined percentage (start small, even 1-5%) transfers here immediately. This money is untouchable for operations—it's your reward for taking entrepreneurial risk.

Owner's Compensation Account: Your salary comes from here on a regular schedule

Tax Account: Money for quarterly estimated taxes and year-end tax obligations accumulates here

Operating Expenses Account: What's left over funds business operations

The beauty of this system is behavioral. When you only have a limited amount in your operating expenses account, you naturally become more thoughtful about spending. You ask harder questions before making purchases. You negotiate better terms with vendors. You find creative solutions instead of throwing money at problems.

For construction contractors specifically, this approach prevents the common pattern of:

• Landing a big job
• Buying new equipment or a truck with the revenue
• Having cash flow problems when the next project starts
• Scrambling to cover payroll or materials
• Taking on unprofitable work just to maintain cash flow

Firms like TJD Tax Services in Chicago and Charter CCA in Atlanta help business owners implement cash management systems that ensure profitability from the start.

Managing Expenses Without Profit First

Even without implementing the full Profit First system, you must ruthlessly manage expenses in your startup phase.

Question every purchase. Do you actually need that piece of equipment now, or can you rent it for this project? Does the business need a new truck, or would a quality used vehicle serve just as well? Can you operate from home for another year instead of leasing office space?

Negotiate payment terms. Your vendors want your business. Don't accept standard net-30 terms if you can negotiate net-60. Ask for early payment discounts if you have the cash to take advantage of them.

Track everything. Know exactly where money is going. Review expenses weekly. Challenge purchases that don't directly contribute to revenue generation or legal/regulatory requirements.

Build cash reserves. Your goal should be to accumulate 3-6 months of operating expenses in reserves. This cushion protects you during seasonal slowdowns, market disruptions, or unexpected problems.

The tax reduction planning services at Performance Financial help Des Moines business owners not only minimize taxes but also structure their finances for sustained profitability and growth.

What Happens After You Launch

These five steps create the foundation for a sustainable business. But launching is just the beginning.

As your business grows, you'll need:

Strategic tax planning. The S-Corporation election can save contractors and service business owners $10,000-$30,000 annually in self-employment taxes once profits reach certain thresholds.

Job costing systems. Construction contractors specifically need sophisticated cost tracking to understand project profitability and improve estimating accuracy over time.

Financial analysis and CFO guidance. As revenue scales, you need someone who can translate financial data into actionable business strategy.

Succession planning. Most contractors eventually want to sell their business, but buyers pay premium multiples only for companies with systems, processes, and predictable revenue—not businesses entirely dependent on the owner.

Getting Expert Help From the Start

You don't have to figure all this out alone. Yes, you can form an LLC yourself, open a bank account yourself, buy accounting software yourself, and implement expense management yourself.

But should you?

Every hour you spend researching LLC formation is an hour not spent getting customers. Every mistake in your bookkeeping setup creates cleanup work later. Every tax strategy you miss costs real money.

The most successful business owners Performance Financial works with understand that expert guidance pays for itself many times over through avoided mistakes, tax savings, and better decision-making.

Whether you're launching a construction company, remodeling business, HVAC company, or any service business in the Des Moines, Iowa area, getting specialized accounting and tax support from the beginning positions you for sustainable profitability.

Similar specialized firms serve other markets:

• Upfront CPA serves contractors in Orlando
• West CPA Group works with St. Louis construction companies
• Ramos Accounting helps Fort Lauderdale contractors
• ZAG/Z Accounting partners with Pennsylvania construction firms

The common thread? All these firms specialize in working with business owners who want to build valuable, profitable companies—not just create jobs for themselves.

Your Next Step: Book a Tax & Accounting Analysis

Starting a business is exciting and terrifying in equal measure. You're taking real risk, investing real capital, and betting on your ability to build something valuable.

Don't leave success to chance. Get the foundation right from day one.

Performance Financial offers Tax & Accounting Analysis consultations for Des Moines area business owners who want expert guidance on entity structure, tax strategy, accounting systems, and financial management. We specialize in working with construction contractors, builders, and service businesses throughout Iowa and the Midwest.

During this consultation, we'll:

• Review your current business structure (or help you choose the right one)
• Identify immediate tax-saving opportunities
• Design an accounting system that provides useful information
• Create a financial management framework for sustained profitability
• Answer your specific questions about launching and growing your business

Stop flying blind. Stop wondering if you're doing things correctly. Stop leaving money on the table through missed strategies and preventable mistakes.

Book your Tax & Accounting Analysis today and launch your business the right way.

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