Should I start a small business?
You should also have a strong drive to succeed even when the hours get long and the decisions difficult. All types of people make it in small business and all types fail. There is no personality type or educational level that qualifies or disqualifies anyone from succeeding in small business.
Hundreds of thousands of people do it every year. It is an individual choice that should be made only after serious study, self-examination, and business advising. Your individual preparation is your key to success. For more information on this topic, find your local SBDC and talk to a business advisor today.
What type of business should I choose to open?
Avoid over-crowded areas of business. Many cities have far too many restaurants, retail stores, auto service centers, etc. for the population. The same is true in many smaller communities. One of the disadvantages of our free enterprise system is that too many business often start.
Study the businesses you think you might like. Satisfy yourself that they will fit your needs. There are so many alternatives available, you shouldn’t be too quick to choose. Understand that there are few inherently bad businesses or few that are inherently good. Just about any business can fail and any can succeed.
Be sure to do a quick feasibility study on any business you pick before making up your mind for certain. Remember, your choice needs to work for YOU, in YOUR situation, in YOUR location, in YOUR market, and given YOUR special set of circumstances. Your circumstance is unique. You should test it as a unique opportunity, unlike any other.
How do I start a small business?
1. What am I going to do?
2. What will it take in money and skills to do it?
3. What will it give me in terms of money and satisfaction?
Get business advising from a Small Business Development Center, S.C.O.R.E., or some other organization that regularly deals with business startups. Set out to learn all you can about your new business BEFORE you make the decision to start it. Learn about the market, your target customers, the competition, pricing practices, typical profit margins, sources of supply, and anything else that will help you fully understand the nature of your new business.
If you can talk to business owners in similar businesses or work as an employee for a time in such a business, do so. Talk to suppliers who sell to your type business. Read trade publications and magazines dealing with your chosen business. Attend seminars that deal with subjects important to your business. If there are franchises doing what you plan to do, study them. Request information about them and talk to franchise owners.
When you have finished your research and feel comfortable that you are doing the right thing, prepare a business plan to outline in detail the start up of your new business. Gather together the money you need and get the equipment, people, and other things you need to start. When all this is in place, start. BUT NOT BEFORE!
How long will it take to start a small business?
Each individual entering this process brings his or her unique set of skills, knowledge, confidence, and time. If you already know a lot, have good skills, feel confident of what you are getting into, and have time to do this work, you can be up and running in short order. If, on the other hand, you lack basic business knowledge, need development of some of your skills, do not feel confident of what you are doing, and/or have limited time to do the research and planning, your time frame will be longer – months or even years.
It is critical that you not allow your enthusiasm or need to hurry to push you into business before you are ready. Premature starts are a common reason for small business failure. You will know when you are ready. It is a gut feel. Don’t go against this gut feeling.
How much money will I need to start?
To estimate the first source of money, make a list of all the things you will need to start your business. This might include equipment, tools, inventory, fixtures, lease costs, office supplies, vehicles, signs, pre-opening advertising, fees and permits, and everything else you can think of. These are often referred to as “start-up” costs. Opposite each of these items, put an estimated cost. If you don’t know the cost, find out. If you have uncertainties, estimate on the high end.
The second source of money, to be used for operating expenses, involves estimating your cash outflow for all the things you will have to pay for after you start your business. This might include such things as rent, utility bills, gas for vehicles, supply replacement, payroll, payroll taxes, advertising, insurance, bookkeeping or legal fees, etc. If you will estimate each of these items for one month, you can multiply the months’ totals by the number of months you think it will take you to reach cash break-even.
When you will reach cash break-even is a judgment call by you based on what you know about your business and like-type businesses. If you are going to err…err on the side of conservatism. It will be far better to have too big a pot of operating money than to run out of operating money.
Where can I get money for a small business?
Personal and business credit cards can provide money for a business, but it comes at a high cost. It is recommended that credit cards be used sparingly and only for short term needs.
Relatives and friends often can provide money. Care is suggested, however, for mixing business with relations and friendships can be risky. It is best to keep these money relationships as business-like as possible and not depend heavily on the personal relationship to make the transaction. Ask: “Would this deal stand up with a non-relative or non-friend?”
Mortgaging personal assets and borrowing against cash value life insurance can also be sources of money.
Local and state government agencies sometimes have money available for new businesses, but it is not common and it is usually restricted to very special circumstances. Nevertheless, it might pay to check around. Business advisors and agencies involved in economic development usually know about these programs.
Can I get a grant?
There are many government grants designed to assist business, but these usually don’t go directly to the business. Instead, they go to agencies and organizations that perform some service for business or benefit business in some way. The Small Business Development Centers throughout the United States operate partly on a grant from the federal government.
The books and late-night television infomercials that tout government grants for business are usually exercises in cleverly misleading entrepreneurship. Read the fine print carefully and “buyer beware.”
Does the North Texas SBDC offer services to existing businesses?
Where do I find information on permits and licenses?
Do I need any special insurance?
1. General liability insurance
2. Personal property, fire, theft insurance
3. Vehicle insurance
4. Business interruption insurance
5. Medical insurance
Talk to an insurance agent about your needs. If you have employees you will need workers’ compensation insurance. You should carry a general business policy, which includes liability and other standard coverage. Your place of business, if you own it, should be insured; and if you rent, you still should have your own coverage, too. Don’t rely on the landlord’s insurance. Depending on your industry, you may need additional types of insurance (for example, food service requires product liability insurance). If you already have insurance coverage, start with your agent. Feel free to get quotes from several agencies, but be sure that you compare coverage as well as price.
Are there resources that will help me once I identify a need for employees?
What do I need to know about safety and health matters?
Does the SBDC make business loans?
Is the SBDC the same as the Small Business Administration (SBA)?
Does the SBDC charge for its business advising services?
Does the SBDC offer training courses?
What is a business plan and do I really need one?
The numbers of a business plan are especially important, for they translate the anticipated activities of the business into the language common to all business. If your business plan will be viewed by bankers or other financial types, your income statements, balance sheets and cash flow statements will take center stage. You will use them to paint a picture of your businesses near term financial future.
Yes, you need one. You need one for your own use and you may need one for others: partners, investors, bankers, relatives, employees, etc. They are great tools for analysis and they help in communicating with others. Bankers usually insist on them when considering loan requests. Investors won’t work without them.
Business plans take many forms and can be brief or lengthy, informal or formal, optimistic or pessimistic, and typed or hand written. The important thing is that one exists.
If I can’t find a job, should I start a business?
The differences between self-employment and business ownership are considerable. You don’t need to know near as much to work as a self-employed person as you do to successfully operate a small business. If your primary concern is making a living just for yourself, keep looking for a job or go the self-employed route.
Can I operate a small business from my home?
Thought should be given to your neighbors in making this decision. If your business activity will bother them or be objected to because of noise, odors, parking, or other issues, perhaps you should not do it.
Your personal home situation should also be seriously considered. Can you effectively allocate your time between personal and business matters? Will family members object?
Home based businesses are becoming increasingly popular. For many new business startups, they are a good idea.
Should I buy a franchised business to start?
Usually, the advice is to seriously consider a franchise if you are not very knowledgeable about business and don’t have any experience. A franchise can often get you off to a running start. The franchisor has done some of the market study and other startup work for you. Depending on the franchise, you might be able to buy a turnkey business that will train you and put you in a good position to succeed.
It is smart to consider both a franchise and a startup on your own without the franchise. The franchise will cost you, but you will receive some benefits. Evaluate whether the benefits are worth the costs to you. Also remember that a franchise is often an on-going relationship that is not always easy to break. You are not totally independent and can not always do as you please. The franchisor usually has something to say about how you operate your business.
Research is key. Investigate any franchise thoroughly. Talk with other franchisees. Study the franchise agreement and understand what it says. Get legal or business advising advice. Look hard before you leap, but look. With something like 40 percent of present day retailing done through the franchise method, there must be something very good about it.
Should I buy an existing business to start?
Businesses that are offered for sale are offered for all kinds of reasons. Often the business is in less than good condition. That’s okay if you know it and the price reflects it – and you can fix it. Sometimes the owner is just tired of it and wants to retire. Knowing the real reasons for the sale helps in your evaluation.
Sound financial and business analysis is a key to buying an existing business. The business analysis is to determine if you want to buy it. The financial analysis is to determine how much you should pay for it. It may be a good business, but it costs too much. It may be cheap in price, but a failing business.
Should I incorporate my new business?
What is a sole proprietorship?
What happens if a corporation and a sole proprietorship have the same name?
Must I file a DBA form if I am going to use the name I incorporated under??
Why file and Assumed Name Certificate?
While this filing gives the business no state protection against other businesses or imparts any rights, it is an accepted business practice that gives your business legitimacy and credibility.
Can I use my own name as my business name?
What should I do if the name I want to use is being used by someone else?
How different does my business name need to be?
Picking a name that is similar to one already in use might trigger disputes or lawsuits. This benefits no one. Avoid trouble by picking a name that is unique and different enough not to be confused.
What if I plan to do business in multiple countries?
Should I form a Partnership?
Often, this form of business organization is chosen by people who already have a personal or business relationship – as opposed to two or more people who don’t know one another. Because of this pre-existing relationship, they often do not define the activities and responsibilities of each partner. They deal with this only in general terms, such as, “We will split the profits down the middle and we will each do half of the work.”
This casual approach can lead to trouble. If one of the partners functions in a way unacceptable to the other partner(s), disputes can arise that are argued with “he said that” and “I said this” statements. With no written point of reference, these disputes are difficult to resolve.
To reduce this potential problem, a written partnership agreement laying out the duties and responsibilities of each partner is recommended.
What is a Sub-Chapter S Corporation?
Which form of business organization should I choose?
The best advice is to learn about each form – the advantages and disadvantages – and match your personal situation to those alternatives for the best fit.
Where do I get a tax number?
Do I need any permits?
While not technically a permit, every business should be registered. A corporation is registered with a state agency via papers of incorporation and a sole proprietorship and partnership usually register with a local county courthouse by way of an “assumed name certificate.”
How should I pick a name for my new business?
It is often suggested that a name be chosen by selecting three or four alternatives and testing these on friends, relatives and potential customers. Note the reactions and listen to the feedback. If you want to project a highly personal image, use your name in the business title. If you want a more formal, “business-like” image, don’t use your name.
What is a market analysis?
Any new business startup should do some type of market analysis. The more the better. It does not have to be expensive or sophisticated. It should, however, be thorough enough to provide an understanding of the nature and extent of local customers likely to trade with your business. A common mistake is to assume a market when no market exists – or such a small market exists that sustaining a business based on that market is impossible.
What is a feasibility study?
These studies can be brief or lengthy. They should fit the subject. A feasibility study to answer the question, “Should I buy or lease that piece of equipment?” is less involved than one aimed at answering, “Should I build a new restaurant?” On the question, “Should I start a new business,” the work should be extensive.
What is equity?
Equity also means the same as “net worth,” which is the difference between the assets and liabilities of a business. It is the portion of the assets that the owner would get after all the liabilities were paid.
Equity is one of two sources of capital (money) for a business. The other is debt. Equity comes from the owner and debt comes from others, usually banks or other financing agencies.