Starting Business Secrets will help you to start your own business successfully.
The
American Dream is, and always will be, to come up with an idea, start a
business and become rich from your own efforts. Based upon this
motivation, thousands of businesses fail each year, due primarily to not
being familiar with the basics involved in running a business.
This
report will enlighten you, and give you a number of suggestions you can
use to better guarantee your chances for success. This report is
written with the warning that any and every business venture contains
certain inherent risks, and any number of alternatives. We do not
espouse that any one way is the right way or that our suggestions are
the only way. On the contrary, we advise that before investing any money
in a business venture, you seek counselling and help from a qualified
accountant and/or attorney.
Just about the first thing you should
consider before deciding to start or purchase a business is the legal
form you'll be operating under. There are basically four choices: sole
proprietorship, partnership, limited partnership, and/or corporation.
Each has a number of advantages and disadvantages. We'll try to enumerate some of them for you.
As
much as anything else, for many people starting a business is a form of
ego-gratification, and they form a corporation for some sort of
prestige gain - just to say, "I own a corporation."
With just a
little bit of observation, you'll find that one of the major causes of
business failures is due to the founder wasting start-up capital on
frills, such as an impressive store- front office, expensive
furnishings, and corporate legal costs.
One of the basic traits
you must develop it you're going to be successful in business, is a
tight hold on your expenditures. In fact, a good rule of thumb is that
anything that does not make money for yo or protect your investment,
should not be purchased at this time. Very definitely, this applies to
the expense of setting up your own corporation.
Unless you have a
partnership and start your business as such, the only real advantage to
forming a corporation would appear to be that a corporate structure will
semi-protect the property you personally own.
As an example, you
own a home and car. You form a corporation to protect these possessions
from business losses. Yet, if you can be found guilty of misusing
corporate funds, your business creditors can pierce the corporate shield
and come after your possessions.
Basically, if you invest
everything you have in your business, as most newcomers do, you don't
usually need a corporation because you have nothing to protect. Your
household possessions, personal belongings, generally your car, and even
a portion of the equity in your home is protected by the homestead
provision of the Federal Bankruptcy Act, and cannot be taken away from
you.
As a sole proprietor or partner of a business you'll be
paying taxes on your overall earnings, much the same as if you were
holding down a salaried or hourly paid job. Whether you do or don't take
out money as a salary will have no bearing on the earnings of your
business and tax return.
The often advertised advantage of
incorporating, that you can manipulate your salary in order to save on
tax dollars, is real because of corporation laws. However, the IRS
frowns on this practice. When your business is successful and making a
lot of money, definitely check with your accountant on the advantages of
incorporating.
As a corporation, you'll be subject to a number of
other drawbacks as well: generally higher state taxes, stricter laws
concerning the operation of your business, more elaborate accounting
procedures, and legal papers that are required just about every time you
make a major move or sign almost any contract. Thus, your legal and
accounting fees will be much higher as a corporation than will those
required for a sole proprietorship type of business.
As a sole
proprietor or partnership, you'll find many areas require the
registration of your business name. The cost however, is minimal,
ranging from $5 to $100. About the best way to find out what laws apply
in your area, is to call your bank and ask if they need a fictitious
name registration card or certificate in order for you to open a
business account.
Selecting a name for your business is quite
important to you and particularly relative to advertising. Your business
name should describe the product or services you offer. Fancy names
such as, Linda's Clipping Service will lose potential "walk-in and
passing" customers to the beauty shop across the street that calls
itself, Patti's Beauty Salon or Jane's Hair Styling Shop.
The
advantage of using your full name in the title of your business, such as
Johnny Jones' Meat Lockers, has the advantage of making credit somewhat
easier to come by - provided you pay your bills on time - but it also
includes the disadvantage of confining your services to a local or at
most, a regional area.
Should you buy, lease, or rent a space for
your business? think twice before you make any decision along these
lines. Most businesses tend to grow quickly or they never get off the
ground.
There are a few exceptions, but only a very few, that tend to grow at a modified rate.
So,
buying a piece of property and setting up your business on or within
that property, obligates you to ownership regardless of what happens to
your business.
Leases are almost always very strong contracts
written by attorneys to the advantage of the property-owner. When you
sign an agreement to pay someone for the use of their space over any
length of time, you're "nailed in" to paying for that space regardless
of what happens to your business.
In the beginning, it's wise to
either get the shortest-term lease possible, or arrange to rent with an
option to lease at a later date. This does not apply to a retail
business, unless your particular business happens to be an untried one.
Definitely,
you should open a business bank account. In selecting a bank for your
business, scout around and look for one that can, and will help you.
Determine what your banking needs will be, and then via telephone,
interview the managers of the banks in your area. The important
convenient bank to your business location.
A point to remember:
the closer you can make the relationship between you and the bank
manager, the better your chances are going to be for approval on loans
and/or special favors you may need at a later date.
Try to become
acquainted with as many of the bank employees as possible. The better
you know them, the more courtesies they'll be extending especially to
you in the course of your association.
Just as a doctor is a
specialist in his field, and you go to him for medical problems, your
banker is a specialist in his field and you should go to him for your
money problems. In business, you'll have to learn that everyone is an
expert in his own line of work, and in your associations with other
business people, refrain from acting like a "sharpie" and/or pretending
that you know exactly how everything works in someone else's specialty.
You'll
find that very often, different banks specialize in different types of
businesses. As an example, you're sure to find banks that specialize in
real estate transactions, export- import businesses, and even
manufacturing operations only.
What I'm saying here is that if
you're planning to sella fairly expensive item, your customers will
probably need and/or want financing. It will behoove you to select a
bank familiar with your type of product that will afford your customers,
through you, contract financing.
Some of the questions you should ask of your banker include the following:
Is
it necessary to maintain a certain balance in your account before the
bank will approve a loan for you? What qualifications must you have in
order to obtain a line of credit with the bank?
Does the bank limit the number of loans, or types of loans it will approve for small businesses?
What is the bank's policy regarding the size of a check you might deposit that requires holding for collection?
And what about checks less than that amount - will they be immediately credited to your account?
In
almost all types of businesses, it will be to your benefit to set up
with your bank, a method of handling VISA, Master Charge, and regional
credit cards. The important thing here is to ultimately set up your
account in the bank that will service all of these credit transactions
for you - one stop for all your banking needs. In most instances, you'll
find that having the capability to fill orders/make sales via credit
card transactions, will increase your volume of sales appreciatively.
Once
you've made the decision as to which bank is going to handle your
account, you'll need your Social Security Number or your Federal
Employer's Identification Number, your driver's license, the fictitious
name certificate, and if you're requesting a VISA or Master Charge
franchise, you'll also need a financial statement.
For corporations, you'll also need a corporate resolution approving of the opening of your business account.
There
are different policies exercised in just about every state regarding
installation/hook-up charges by the telephone and utility companies.
Some require a deposit, and some don't.
You'll find that a great
number of city business license departments are there solely for the
purpose of collecting another tax. Depending on the type of business
you're asking a license for, the building and zoning people may inspect
your premises for soundness of structure and safety. Generally, you
won't encounter any difficulties - you simply pay your fee to operate
your business in that city, and the clerk types your name onto a city
license certificate.
Relative to sales tax permits and licenses,
each state's rules and regulations very widely. The best thing to do is
call your state offices and ask for information concerning registry and
collection procedures. Many states require an advance deposit or bond,
and you'll find that some wholesalers or manufacturers will not sell to
you at wholesale prices until you can show them your sales tax permit or
number.
Should your business entail selling your products or
services across state lines, in another state, you're not required to
collect taxes except in those where you have offices or stores.
You
may find also that your particular business requires the collection of
Federal Excise Taxes. For information along these lines, check in with
your local office of the Internal Revenue Service.
Some states also require certain businesses to hold state licenses, such as those required in many states for TV Repairmen.
These
are known as "occupational permits" and are most often required of
barbers, hair stylists, real estate people and a number of other
consumer oriented businesses. If you have any doubts, check with your
state offices for a list of those occupations that require licensing.
Any
business doing business in any type of interstate commerce is subject
to federal regulations, usually through the Federal Trade Commission.
This means that any business that shops, sells or advertises in more
than one state is subject to such regulation, and this includes even the
smallest of mail order operations.
Normally, very few business
people ever have and contact with the federal regulatory agencies. The
only exceptions being when there is a question of your operating your
business unethically or illegally.
Any business that sells or
distributes food in any manner almost always requires a county health
department permit. If your business falls into this category, simply
call the county health department and invite them out to your place of
business for an inspection. The fees generally range from about $25,
depending on the size of your business when they first inspect it for
permit approval.
There are also a number of businesses that
require inspection by a fire marshall, and fire department approval.
Generally, these are those that handle flammable materials or attract
large numbers of people, such as a theater. Overall, the local fire
department has to be allowed to inspect your premises whenever they
desire to do so.
You may also run into a requirement for an air
and/or water pollution control permit. These specifically apply to any
business that burns anything, discharges anything into the sewers or
waterways, or use any gas-producing product, such as a paint sprayer.
Without
a doubt, you'll need to check on local regulations relating to
advertising display signs. Each city or township makes its own rules and
then enforces those rules according to its own thinking -check before
you contract to have a sign made for your business.
The design and
placement of your sign is very important to your business -
specifically to retail establishments - but let me remind you that your
business sign is usually the first thing a potential customer sees and
as such, it should catch his eye and leave an impression that lasts. It
would be a good idea to ride around your town and take a look at the
signs that catch your eye, and try to determine the impression of the
business that sign leaves on you. This is a basic learning formula for
determining the design, size and placement of your business sign.
Some
of the other things to consider before opening for business - If you
intend to employ one or more employees, you'll be required to deduct
Federal Income Taxes, and Social Security payments from their checks.
This will involve your filing for a Federal Tax Number and necessitates
contact with your local IRS Office.
Most states have "unemployment
taxes" which will have to be deducted from the paychecks of any
employees you hire. And there are a number of states that have income
taxes - disability insurance - and any number of other taxes. Again, the
best thing to do is check with your local office of the IRS. And above
all else, don't forget to ask for the rules of the minimum wage law, and
comply.
When your business grows to the point of needing
additional help, don't be afraid to look for and hire the help you need.
when you're ready to hire someone, simply run an ad in your local paper
and/or register your needs with the local office of your state's
employment service. Businesses either grow or die, and those that grow
eventually need more people in order to continue growing.
When
that time comes, hire the additional people you need, and your business
will continue growing. If you don't, for whatever reason, you'll find
yourself married to your business and your business growth stymied.
Regardless
of how small your business is when you begin, never walk in with the
thought in mind that it's something to keep you busy. Anyone with an
attitude of that kind is a fool. You begin and make a business
successful in order to realize financial freedom. Establish your
business. Put it on its feet, and then hire other people to do the work
for you. And those businesses that require an operations manager, or
someone to run a phase of the business you're too busy to handle, hire
the person needed or the business will surely suffer.
To protect
the investment of your business, you need business insurance. If you've
never had any experience with business insurance, simply look under the
heading of "business insurance" in your phone directory. Ask for bids
from several different companies or agents...Primarily, you should have a
policy that gives you general liability, fire, workmen's compensation,
business interruption, and vehicle coverage. You amy also want coverage
against possible losses related to burglary, robbery, Life &
Accident, Key Man, and Fidelity Bonds.
As the sole proprietor of a
business, you won't be paid as an employee, so there will be no income
tax deducted from whatever you withdraw from the company's earnings.
What you'll have to do is a gain check with the IRS Office for a Tax
Guide For Small Businesses Handbook, and probably end up filing an
estimated tax return on a quarterly basis.
The minute you open
your doors for business, you'll have to spend some time engaged in the
work of bookkeeping. Exactly how, and using what forms, you keep books,
should be on the recommendations of a good tax counselor...The same
holds true for your overall business and/or payroll accounting system.
Look for an experienced CPA that knows the accounting problems to your
particular kind of business, and solicit his advise/counseling.
If
your business is going to involve the possible purchase or lease of
operating equipment, again seek the help of your tax counselor for the
most advantageous method of obtaining the needed equipment.
Basically,
arranging for your suppliers to give you materials on credit will
depend upon your honesty and personal financial statement. The best way
is usually a personal visit to the person with the power to approve or
disapprove of credit at the company where you want to set up a credit
account. Show him your financial statement, and explain your prospects
for success. Then assure him that you've always honored all of your
obligations, and that if ever there's a question or problem, you'd like
for him to call you at home. And of course, give him your home phone
number.
We won't go into the exigencies of advertising your
products, services or business here, but there is something along these
lines you should always keep in mind. The best kind of advertising your
business can receive is that you don't really pay for - publicity.
When
something unusual happens to you, your business, or your employees -
that's news, so be sure to tell the news media in your area about it.
The
most important ingredient of your eventual success will be the
soundness of the planning you did before you started your business. Any
number of bad things can really throw your business into a tailspin, but
it you've done your homework well - really set up a detailed business
plan before starting - your losses or setbacks will be minimal. Success
takes planning, and within this report, you've got a basic
checklist...The rest is up to you...Good luck, and may your life
overflow with success in all that you undertake from this moment
forward.
