When Starting a Business
Going into business
for yourself may seem like an overwhelming task. However, millions of
others have done it. Many have been successful while others have failed.
There are no guarantees, but here are some of the issues you should consider.
Do you have the
psychological make-up to handle a start-up?
The process of starting, building, growing and managing a business is
hard work. It can be somewhat frightening. There are always unexpected
issues and concerns that arise. Most successful entrepreneurs have an
innate ability to accept and manage risks. They also usually exhibit a
passion that provides the incentive to go extra mile (or to make that
next presentation) that may be needed.
You should also consider
the affect that starting a business may have on your lifestyle and your
family. Long hours, constant distractions and sacrifices can put strains
on your mind and body as well as those around you.
What type of business
Hundreds of thousands of ventures are started each year in all lines of
business. Starting a business from scratch, buying an existing business
or entering into a franchise arrangement all present opportunities and
potential pitfalls. Be sure to do your homework. Consider the current
and potential markets for whatever business you are considering. Examine
the strengths and weaknesses of competitors. The Internet and trade associations
can be great sources of valuable information. You may be surprised what
you can find readily available.
Find a line of business
that matches your skills, experience and interests. If you are considering
starting a personal service business, it can be nice to start off with
at least one existing customer. Whatever type of business it is, be sure
you like it. If you are successful, you may spend many years or several
decades in that business. There are few things worse than not liking your
If you are looking
at an existing business or franchise, investigate them thoroughly. Have
a professional look at the financial statements and any contracts you
may be signing.
Are you going alone
or should you have a partner?
This can be one of the most challenging issues you face. Running the business
yourself gives you the opportunity to make all the decisions, but you
must live with the results. A partner can bring skills, experience and
capital, however you should be confident that you work with that person
for an extended period of time.
If you choose to have
a partner, you may also want to discuss how your partnership can be ended.
While everyone has good intentions at the beginning, things can and often
do change. Having a buy/sell agreement or a contractual agreement may
avoid difficulties and hard feelings later.
Where will you
get the financing you need?
Starting and growing a business takes money. Consider the funds you may
need for office space, equipment, inventory, marketing and working capital.
You should also remember that not all customers pay quickly. One of the
most common causes of business failures is inadequate capital.
Arranging that needed
capital should be undertaken early in the startup process. Once the business
is operational, you will probably want to focus on running it and not
have to constantly be looking for funds. Be sure to speak with your financial
institution about what they may be looking for before they would be willing
to lend to a new business. You may also want to explore a loan through
the Small Business Administration. The SBA programs offer a number of
types of loans, but can be time consuming and frustrating.
The final observation
on needed capital is to consider setting a limit on how much you are willing
to risk or lose before shutting the business down and accepting failure.
While this may be difficult to consider when starting out, having a contingency
plan for failure is prudent.
What are some of
the other legal, financial and tax issues to be considered?
After addressing all the other aspects, these will probably seem easy.
You need to choose a business form (sole proprietorship, partnership,
corporation, sub-chapter S corporation, limited liability company). While
this may sound complicated, it is much easier to decide upon than the
issues discussed above. Each business form has attractions and drawbacks.
Your attorney can be very helpful in evaluating the options and drafting
any documents you need.
Your personal financial
and tax situations may also change when you become a business owner. You
may lose the predictability of a monthly paycheck and the other benefits
found with a larger company. You may have to pay for your medical insurance
and fund your retirement account.
The entrepreneurial spirit is alive and well in America. As you consider
your future, remember that being in business for yourself can be risky
as well as rewarding. Taking some key steps early in the process, hard
work, a good idea, using sound business practices and maybe a little luck
can make all the difference.