Any advice for starting your own business?

[pipersmith]

A friend and I are considering opening a business. I am wondering if any of you own your own businesses. Any advice, pitfalls to avoid, how did you find start-up funding? And anything wlse you may wish to share...

Thanks in advance......

 

[mntbiker]

This may sound cold but I am saying it for good reason.

Be very certain of your friend and make sure it is a friendship you can lose. If the business fails it is easy to blame each other.

I had one business that I started alone and another business I started with two other people that we sold to an investment group in England (ended up selling my business to them as part of thedeal). I am also helping my wife start her own business and in the process of starting another business for myself.

Here are a few suggestions - it will be very hard and almost impossible to get funding without being able to show your personal investment and a potentially profitable business. Reputable funding companies will not invest if you can not show them something substantial.

Find a good CPA that specializes in small business startups. Go to the chamber of commerce for a reference if you don't know one. A good CPA will know what banks are lending money and what paperwork you will need to provide them with.

Many of the chambers, especially in larger metropolitan areas will offer a free consulting service for startup business. Take advantage of it. Do as much leg work as you can, what type of competition, demand in the marketplace, business plan etc and take it with you with a list of questions. Many of these people are retired and do it because they enjoy it. They can aslo talk with you about SBA lending.

And the most important thing, make sure you can afford to live without an income for a year or so even better make sure you still have a revenue stream that is seperate from the business. Be prepared to invest your own money.

Good luck.

 

[StretchL]

I Second That.

I Second That.

The advice above is all good. I own my own business and teach a business practices course for photographers at Virginia Commonwealth University. Here are a few pointers, FWIW and IMHO-

1) Be prepared to lose money for the first 5 years;

2) Even after you're established, be prepared for at least 50% of your gross receipts to go straight back out the door for overhead, taxes, insurance, etc., etc., ad infinitum.

3) If you are entering a business with a partner, be very specific, in the start up paperwork that you both sign, about how the business will be dissolved or bought by one partner should either of you decide to get out at any point in the future. How will the company's hard assets, as well as its intellectual property or trade secrets, be assigned a value?

4) What is your business plan? How will you define "success" or "failure"?

5) Work the low APR balance transfer credit cards like you're a card shark playing poker with a bunch of drunken Legionnaires, and DO NOT miss a payment or the interest rate will skyrocket.

6) Forget about time with the spouse and kids for the forseeable future.

That's all I've got to say about that.

 

[bvdr]

My husband has had several businesses and none had been purchased but were started from scratch. Each one was successful. Only one was a joint effect with an old friend. That business is still intact and so is the friendship and we haven't had any ownership in that one now for over 25 years. A 50/50 partnership in my opinion is rarely workable. It needs to be 51/49 at the minimum.

I too want to stress that the majority of businesses need the revenues they generate pumped right back into them. In our early married life we learned to get by on very little so as to not drain the business. In fact, expect to have less income rather than more for quite a while. For a while, our family income was what I made as an RN. Also be very careful not to generate debt on a flush year because there could well be lean years as well.

We have owned and operated our current business for more than 20 years and my husband has been involved in the industry for almost 40 years in one way or another. Our kids grew up with the "business" and would work alongside of us from the time they were little and both sons and their wives still are involved in different aspects. It has been hard work but it has been worth it.

One more thing I want to add: Keep accurate books and pay taxes promptly. There is enough to worry about in a business without having to be fearful of someone scrutinizing corporate records.
Keep everything above board and clean.

 

[davidfortune]

Plan to work all the time.

Plan to lose money for a considerable period of time. Vette your business model and your pro-forma with CPA and any business exec you can get to listen. If you don't have a business model, plan, and pro-forma (with best and worst case projections) then you are not ready to start a business. Plan enough $ to cover your personal expenses (and your partner?s) while covering business losses for a considerable period of time. Nothing like adding to the stress of a new business with the fear that you are going to lose your house.

Form a corporation. Look at the stats on partnerships. Most fail and take the friendship with them. Have a structured plan for dissolution, principal invalidity (what happens if you or your partner get cancer or hit by a car), principal bankruptcy, principal bad acts.

Plan to work ALL the time.

Plan to work ALL the time.

Know what your goals are: Sell the business, Put Management in place and withdraw, work like a dog forever. Make sure your partner's goals are the same.

Funding companies want collateral (especially now - much tighter than it used to be). They know the stats on small business startups (do you?) - 75% fail within five years. They want something they can sieze if you don't pay the loan.

Keep religious sales tax records. You will be audited for sales tax at some point - it is a guarantee.

Make sure you account for your actual expenses: rent, real estat insurance, electricity, workers compensation insurance, liability insurance, federal unemployment, state unemployment, federal income tax, state income tax, state franchise taxes, self-employment taxes, utilities, equipment, uncollected revenue (bad debt), advertising expenses, training expenses, employee turnover.....

Be aware that your boss may be a jerk and require you to work all the time.... Mine does.

Employee will be a hassle. 10% of your customers will be a hassle (90% will be rational reasonable people - don't let the 10% corrupt you).