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Starting a Business

Owning a business is the dream of many Americans. Starting that business converts your dream into reality. But, there is a gap between your dream and reality that can only be filled with careful planning. As a business owner, you will need to avoid pitfalls to achieve your goals and to build a profitable business.

What business is right for me?
Your best bet is to get into a business where you have the most skill and interest as well as the best growth potential in your local market. Talk to your family, friends and potential customers about your business idea. You may want to consult with family members, local experts and also other business professionals in your area to discuss local market trends to better ensure your success rate.

The pros and cons of owning a business
Owning a small business is not just another job. It’s a totally different lifestyle. You have to ask yourself whether you’re ready for a complete long-term commitment to the success of your business. Just as importantly, you have to ask your partner, if you’re in a relationship, whether he or she is completely committed. Loving what you do is rewarding and it motivates you to keep going even when the road becomes rocky. Your enthusiasm and passion for the business will drive you to be knowledgeable, imaginative and determined.

As a small business owner, you’re going to have less time for your personal life and you’ll probably be using much of what you own as collateral to raise money for the business. If you are willing to make those sacrifices, then let’s move on to some of the advantages and disadvantages of owning your own business.

Top Ten Reasons to Start Up A Business

1. You are your own boss

2. You get to do what you’re interested in.

3. Your firm = your deadlines

4. Get creative

5. It’s not that hard to do

6. It can be very profitable

7. It’s varied

8. You can have a second career

9. Cut the commute

10. The big dream
really can become reality

Pros

Cons

Freedom – Money – Creativity and Independence – Risk Taking
You have the chance to make a lot more money than you can make working for someone else.
You'll be your own boss and make the decisions that are crucial to your business' success or failure.
You may be the boss of other people.
You'll have job security — no one can fire you.
You'll have the chance to put your ideas into practice.
You may participate in every aspect of running a business.
You'll learn more about every aspect of a business and gain experience in a variety of disciplines.
You'll have the chance to work directly with your customers.
You'll be able to benefit the local economy, such as by hiring other people to work for you.
You'll have the personal satisfaction of creating and running a successful business.
You'll be able to work in a field or area that you really enjoy.
You'll have the chance to build real retirement value (for example, by selling the business when you retire).
You'll have the chance to put down roots in a community and to provide a sense of belonging and stability for your family.

Uncertainty – Money
Distractions – Unpleasant Tasks
You may have to take a large financial risk.
You will probably have to work long hours and may have fewer opportunities to take vacations.
You may end up spending a lot of your time attending to the details of running a business and less time on those things you really enjoy.
You may find that your income is not steady and that there are times when you don't have much income coming in at all.
You may have to undertake tasks you find unpleasant, such as firing someone or refusing to hire a friend or relative.
You may have to learn many new disciplines, such as filing and bookkeeping, inventory control, production planning, advertising and promotion, market research, and general management.

The bottom line is this: It is easy to romanticize the idea of becoming an entrepreneur. The smarter move is to consider the pros and the cons very carefully and act accordingly.

Operating a small business from your home
Before you start your home-based business, do a thorough investigation of the zoning laws in your community. Zoning regulations spell out activities permitted and prohibited in specific portions of a city or county. Call your town hall, zoning office, or local library to get a copy of zoning laws. Find out the structure of your local zoning groups. Most areas have Planning, Zoning, and Appeals Boards.

If the home business you are planning conforms to zoning regulations, then all you need to do is keep abreast of new proposals that may affect your situation. It's a good idea to stay in touch with others operating from their homes by joining business organizations or neighborhood groups in case you ever need to band together to propose or oppose new regulations. Maintaining a low profile and friendly relations with your neighbors will result in more support from them should adverse regulations affecting your business ever be proposed. If in doubt, check with your local business license or zoning officials.

Here are some special pros and cons of the home-based business

Your startup costs will be lower.
Your operating costs will be lower than they would if you were renting space and paying utilities.
Your commute will be shorter.
If your location is unimportant to your business, you can theoretically live anywhere and still operate your business.
You may be more flexible in your schedule if your business can be conducted at your convenience or outside "normal" weekday business hours.
On the other hand, you're much more vulnerable to interruptions from family members, neighbors, and door-to-door salespeople.
You may have trouble attracting qualified employees.
You may be less accessible to suppliers.
You may have an image problem, although with the growing popularity of home businesses, that's less common.

Don’t forget about your professional image
Developing a professional image may be hard if you work out of your home. Projecting a businesslike image is an important part of building credibility with your customers and contributes to your own professional self-image. Design a logo or have one designed; order business cards and stationery. Set regular business hours. Use an answering machine or answering service. If other members of the family also answer the phone, make sure they know what to say. Have a businesslike office or "showroom" if you meet customers face to face. Consider referring to your apartment number as your "suite number" or rent a post office box rather than using your street address. Such practices might improve your chances of doing business with potential customers.

What skills do I need to succeed in starting my own business?
There are a numerous number of skills that you can list here, but the basics are Industry experience, management practices, planning aptitude and technical support. Not everyone will have all of these skills or the experience, but this is where you can recruit employees or partner with others where their talent and experience will compensate for you own deficiencies. Just remember, you will have to motivate yourself to get your business started and continue running—there’s no one else there to tell you what to do or even how to do it.

The roles you will be expected to play…
If you're currently employed, you have first-hand knowledge of what it's like to be an employee. If you think going into business for yourself will mostly mean doing the same thing, but for yourself, you're in for a surprise. Small business owners are responsible for the entire business, which involves a lot more than just providing goods or services. It's likely that all the administrative and managerial duties currently performed by your employer will fall on you.

We've all heard of the beleaguered executive who moans that he's overworked because he has to wear two or three hats at his company. Well, most small business owners would give anything if they had to wear only two or three hats.

Sales taxes and payroll or self-employment taxes will have to be collected and paid. Accounts receivable and accounts payable will arise in almost any business setting. Providing customer service, keeping the appropriate equipment and supplies in stock, as well as tracking and maintaining inventory and work in progress are activities vital to most businesses. As a new small business owner, it's more than likely there'll be no one except you to do them. And you'll be doing these things in addition to the activities that directly relate to providing goods or services to your customers.
Here's a look at some of the roles you can expect to play if own your own business:

Tax collector — if you sell goods at the retail level, you're responsible for collecting a sales tax for various government entities; also, if you have employees, you're responsible for collecting payroll taxes from them.

Manager/boss — if you have employees, you'll be responsible for all of the human resources-related functions, including recruiting, hiring, firing, and keeping track of all the benefits information; you'll be the one filling out all the insurance forms, answering employee questions and complaints, and making the decisions about whether you should change the benefits package you offer your employees.

Sales/marketing/advertising executive — in addition to having to plan your marketing or advertising campaign, you'll have to carry it out; you may write an advertising copy, do some preliminary market research, visit potential customers, and make sure existing customers stay happy; depending upon the type of business you own, you may have to join business groups, attend various breakfasts, lunches, and dinners, and just generally network with anyone who could help your business prosper.

Accountant — even if you have an accountant, you'll have to know a lot about accounting; you'll have to know which records to keep and how to keep them; if you don't have an accountant, you'll also have to prepare all of your tax forms, and you'll have to know how to prepare and interpret all of your own financial statements.

Lawyer — even if you have a lawyer, you'll have to know a lot about the law; if you don't have a lawyer, you'll have to prepare all of your own contracts and other documents and understand all of the employment laws if you have employees or want to hire someone.

Business planner — as you own your business, you'll inevitably want to make changes, perhaps to expand the business or add a new product line; if you want to make a change, it'll be your responsibility to do it; you'll have to plan it and execute it, and you'll have to consider all of the ramifications of your decision.

Bill collector — when customers don't pay, it'll be up to you to collect from them; you'll have to know what you can and can't do when collecting; you'll have to decide how best to collect from them and when to give up.

Market researcher — before you start your business, you'll have to find out who your customers are and where they're located; you may also have to conduct market research at various times during the life of your business, such as when you are considering introducing a new product.

Technology expert — as a small business owner, you will probably come to depend upon your computer; you'll have to fix it when it breaks, install upgrades, and load software; you'll also have to keep up with the newest products and the latest changes in technology.

Clerk/receptionist/typist/secretary — even if you have clerical help, you'll inevitably do some of your filing, some of your typing, some of your mailing, and some of your telephone answering; even if you have someone else, for example, keep track of overdue accounts, you'll have to know how to do it so that you can teach them what to do.

We included this list of the important responsibilities of running a business so you can realistically appraise your chances for success. Obviously, much of your time will be spent on the mechanics of complying with the requirements imposed on you as a business owner. If you're going to succeed, you'll have to do so in the time that remains. Don't make the mistake of underestimating the cost, in hours, of being in business for yourself. A person who spends 40 hours a week focused on his or her work will have to work a lot more hours as a business owner to get in 40 hours of activity directly relating to providing customers goods or services. And during the startup period, you'll probably be the busiest you'll ever be.

How long will it take to start a small business?
Speed is not always best when starting a small business. While many businesses are started within a matter of weeks, some of the best businesses take several months to a year or more to start. The time frame is driven by your commitment and energy, as well as by how much time and effort you put in to research and planning. Whatever your time frame, we recommend that you make time to research and plan your business ahead of time. Even after a business is “started,” it may be some time before the businesses generates a profit. Many startup companies are not profitable in the first couple of years.
It is critical that you not allow your enthusiasm or your desire to get started to push you into business before you are ready. Premature starts are a common reason for small business failure.

Buying an existing business versus starting from scratch…
The advantage of buying an existing business is that it is already established in the market. It has customers and is carrying on business. You avoid the hassle and expense of starting from scratch. The trick is making it fit your desires and capabilities. Is it the kind of business you want? Can you afford it? Can you operate it?

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.

Advantages

Disadvantages

Immediate operation. Operations can start immediately.
Quick cash flow. Existing inventory and receivables can produce quick cash flow.
Existing customers. Customers and suppliers have already been located and relationships with them have been established.
Existing goodwill. Goodwill toward products or services has (presumably) been created.
Easier financing. Financing is easier to obtain because the business has a track record.
Eliminate competition. Buying a business may eliminate a competitor that you would have had had you started from scratch.

Cost. Buying a business is sometimes, but not always, more costly than starting one from scratch
Problems. There may be inherent problems in the business, some of which may not be apparent until after the sale.
Obsolete goods. Inventories and equipment may be obsolete.
Personality conflicts. Your personality may clash with existing managers and employees.
Uncollectible receivables. Bills owed to the business by its customers may be old, stale and ultimately worthless.

Buying an existing business can give you room to change and grow without the hassles of starting from scratch. Another option to look into is buying a franchise. Popular franchises such as McDonald's are probably not within your price range but many less known franchises can be bought relatively cheap and provide you with the support you will need to keep your business growing and productive. Franchises provide administrative services, payroll services, assistance with taxes and red tape as well as advertising materials and campaigns. Purchasing a franchise usually means that you don't get to make up the rules though. Most franchisees are expected to follow strict guidelines and policies. Franchise owners tell you exactly how to manage and operate your business.

Must-Have Books on Starting Your Own Business
Below are the top ten books on starting a small business that our readers consider to be highly informative and useful. Read these books to guide you in starting the business of your dreams: (link to Amazon.com)

Magazines on Starting a Business
Subscribe to the following magazines to keep you conscientious of the developments in the small business market, give you tips on starting and running your business, and read inspirational stories of small entrepreneurs who made it big:

Entrepreneur Magazine
Inc.com
Working Mother
Black Enterprise