RISMEDIA, March 24, 2009-If you’ve ever found yourself saying: “I should start my own business,” you’re not alone. Most Americans say they have at least considered starting their own business, or have actually done so at least once in their life.
According to a new survey by FindLaw.com (http://www.findlaw.com), a popular website providing legal information, 61% of Americans have either started or thought about starting a small business, 30% of Americans say they have started at least one small business and an additional 31% of Americans have thought about starting their own business at some point in their lives.
Small businesses (defined as 500 or fewer employees) are an important part of the economy, generating a significant portion of new jobs and employ about half of all U.S. workers and have generated more than half of the new jobs created annually over the last decade, according to the Small Business Administration.
“Owning your own business is a dream that many people have and that many people act upon,” said Stephanie Rahlfs, an attorney and editor at FindLaw.com. “Even in difficult economic times, people often take advantage of opportunities to start a business where they see unmet needs, a chance to turn a personal passion or interest into a business, or because they want to have more control and responsibility over their work life.
“Starting a business involves many legal and regulatory requirements, including state and local licensing and registration, taxation, zoning, intellectual property and financing,” cautions Rahlfs. “Knowing what the requirements are, what information you’ll need, and where to find good advice and help are essential. Research has found that businesses that make it through the first four years have a much better chance of lasting long-term.”
If you are thinking about starting your own small business, follow these suggestions to help get your business off the ground and keep it going for the long haul:
1. Save up as much money as possible before starting. All too often, people go into business without any savings, exclusively using loan money from friends or banks. They except to be able to start paying the loans back right away with their profits. What these business owners don’t realize is that it can take months or years to make a profit.
2. Start on a shoestring. Think small. Don’t rent premises if you can work somewhere else, and don’t hire employees until you can keep them busy. People who start their small business on the cheap, often in a garage, den, or some other scavenged space, and create their first goods or services with more sweat than cash, have the luxury of making their inevitable rookie mistakes on a small scale.
3. Protect your personal assets. When you go into business for yourself, you are usually personally liable for all judgments and debts that the business incurs. This includes business loans, taxes, money owed to suppliers and landlords, and any judgments against the business as a result of a lawsuit. If you don’t protect yourself, a creditor can go after your personal assets, such as your car and your house, to pay for these debts.
4. Understand how – and if – you will make a profit. You should be able to state in just a few sentences how your business plans to make a substantial profit. For starters, you need to know your costs: how much you’ll spend purchasing inventory, paying the rent, compensating any employees, and covering what is likely to be a surprisingly long list of other costs. Then you can figure out exactly how much you need to sell each month, for how many dollars, to cover those expenses and have an adequate profit besides. These numbers are all you need to create a “break-even analysis.”
5. Make a business plan. Understanding your profit numbers and creating a break-even analysis is the first step in making a business plan. For most small companies, the key portions of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection. Creating a business plan allows you to determine what your projected start-up costs are (how much money you’ll need to save) and what you marketing strategies are (how you’ll reach customers to make sales). If you can’t make the numbers work on paper, you won’t be able to make them work in real life.
6. Get and keep a competitive edge. Building a competitive edge into the fabric of your business is important to long-term success. Some ways to get this edge are by knowing more than your competitors, making a product that is hard or impossible to imitate, being able to produce or distribute your product more efficiently, having a better location, or offering superior customer service.
7. Put all agreements in writing. The laws of your state require you to put some contracts and agreements in writing: Contracts that will last longer than a year, contracts that involve the sale of goods worth $500 or more, contracts that transfer the ownership of copyrights or real estate.
8. Hire and keep good people. Your goal should be to hire and retain truly excellent employees – not just reasonably competent ones. A highly competent and truly enthusiastic employee is at least two and sometimes even three times as valuable as a person of average skills.
9. Pay attention to the legal status of your workers. When you hire workers as independent contractors, make sure they shouldn’t really be taxed as employees. The IRS can impose substantial penalties against you for not withholding taxes and paying taxes for a worker who is really an employee.
10. Pay your bills early and your taxes on time. In the real world, where a reputation for keeping one’s word is a hugely important asset, a good strategy is to pay your bills up front or pay them early. You gain trust, build a positive credit profile, and have a built-in safety net if things go badly.
For more information, visit http://www.findlaw.com.
