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The Top Ten FAQs About Starting a Business

Answers to the Top Ten questions of many Entrepreneurial Parents wanting to start their first home business.

© 1997, by Terri Lonier

1. If I want to start a small business, what should I do first?

Starting a small business is like putting together a jigsaw puzzle. You're facing a pile of scattered pieces and it may be a little overwhelming where to begin.

I've found that the best place to start is to figure out the frame, or the border. (Remember looking for those corner pieces and the ones with flat sides?) Begin by taking a look inside yourself: at your talents, abilities, interests, and personal motivations. It's important to be clear about why you want to start a business, and what "success" would mean to you.

For some, it may be matching the income level at a former job. Others may want more control over their work, or time to spend with young children at home. These core values give you the frame into which you can figure out where to place all the other pieces.

2. How do I choose the right business?

Most small businesses are a reflection of the personalities of their owners. Here's a checklist to help you:

  • Make an objective list of your talents and abilities. Ask friends and family what they think you're good at doing.
  • List the activities you enjoyed as a child. This often will point to natural abilities, and can translate into business ideas.
  • How would you spend a "perfect" day? The answers will help you understand your interests and personality.
  • Listen "between the lines" to what your friends and colleagues are saying they want or need. Their comments may inspire you to start a new service.
  • Put on a new pair of "glasses" and see potential business opportunities all around you. Many exciting businesses didn't even exist a few years ago!

Remember, a good idea doesn't automatically translate into a successful business. There must be a market willing to pay for your product or service.

3. Do I need a business degree to start a company?

While many successful small business owners never took a business course in school, all will admit they've learned a lot about business along the way.

These entrepreneurs know that there are two very different abilities needed for business success:

1) You must be skilled in your field; whether it's carpentry, selling, cooking, designing, computer programming, etc.

2) You also must be able to master "the business of running a business." This includes being able to manage time, projects, people, and money.

Fortunately, there are many ways to improve your business skills. Consider:

  • Taking a class at a local community college
  • Subscribing to business magazines
  • Reading business books
  • Checking out the resources offered by the SBA (Small Business Administration) in your area
  • Browsing online business sites (the SBA's site is a great starting point, www.sba.gov)
  • Asking small business owners in your area what they wish they'd known when they started!

4. Do I have to write a business plan?

A business plan is an important document for any size business. Like a road map, it helps you decide where you want to go and the best way to get there.

Unfortunately, business plans have a bad reputation, mostly for being long and boring and incredibly difficult to create. In truth, a business plan for a small company can be as simple as six to eight pages, presenting an overview of your business ideas and strategies.

Here are seven components to include in your simplified business plan:

1. State your purpose
2. Describe the business
3. Define your market
4. Explain your production/delivery process
5. List staff, suppliers, and advisors
6. Chart your timetable
7. Calculate your finances

Keep in mind that a business plan is an "organic" document. Refer to it often, update it as needed (after all, it's on your computer, right?), and use it to chart your progress.

5. What about start-up financing?

It's true, starting a business does take some money. But I've seen very successful businesses launched from back bedrooms, with an ironing board as the desk!

First, be clear about how much money you'll need. (This is where your business plan is crucial.) Most small businesses are started with personal funds from savings, a company buy-out/retirement lump sum, or a loan from family members. Some people take part-time jobs so that they'll have a steady source of income while their business gets going. Be creative in exploring funding sources.

If your business requires greater funding, talk to your banker about options such as a credit line or a home equity loan (if applicable). There are also government programs to assist entrepreneurs. Before lending any money, a banker will want to know how much you'll need, what you'll use it for, and how you'll pay it back.

6. What kind of equipment will I need?

These days, technology enables even one-person businesses to compete with companies many times their size. Here's a list of office equipment found in most small businesses:

  • Computer
  • Printer (many prefer laser printers for the professional image they create for marketing materials, etc.)
  • Fax machine (some entrepreneurs use a fax/modem with their computer, but this requires that your computer be on to send/receive faxes)
  • Seperate telephone line for business number (with voice mail, no call waiting beeps!)
  • Separate telephone line for fax number
  • Internet connection (including e-mail and web browsing capabilities)
  • Photocopier

Some businesses also invest in multifunction machines, such as those that combine a printer, fax, scanner, and copier in one unit.

In addition, your business may require you to invest in other specialized equipment or tools. Be sure to include these purchases in your budget when you're planning your business.

7. Should I start a business in my home, or in a rented office space?

Home-based businesses are the choice of millions of small business owners because they offer low-cost office space, as well as giving you the freedom and flexibility to structure your work days as you want. You can also enjoy what I call "the 10-second commute!"

Some businesses may not be appropriate for home environments, however. If you're operating dangerous equipment or doing things that conflict with residential zoning laws, you'll have to locate your business elsewhere. Also, if you'll have numerous employees, or customers visiting your premises, your neighbors may feel you're violating the residential character of the neighborhood. A discreet check of your local zoning laws is a smart move.

Some small businesses set up shop in "incubators," which are low-cost shared office complexes, often underwritten by government funds. Others swap space for bartered services. And today, some small businesses operate a "virtual" company and have no office space at all, have laptop and phone access, will travel!

8. What about health insurance?

When you're working on your own, there's no such thing as a paid sick day, and health insurance is one of the biggest challenges facing small business owners.

Fortunately, there's power in numbers, and many small business associations have sprung up that offer group health insurance policies. Or, check out the associations in your particular field or profession. Closer to home, your local Chamber of Commerce may offer a group plan.

If you're currently employed, see what options are available to continue your coverage after you leave. Many firms will let you continue paying premiums for a few months until you find another plan.

When shopping for insurance, be sure you compare policies and coverage on an equal basis, including deductibles, maximum coverage limits, or services not covered.

Asking other small business owners in your profession or geographic area is another good way to locate the best health insurance provider for your business.

9. Should I start a business with a friend or family member?

Since starting a business can be a scary proposition, many individuals decide to team up. Partnerships can be a beneficial arrangement. You can divide the work, the costs, the ups, and the downs. You can split the risks and share the success.

Since starting a business can be a scary proposition, many indiStrong partnerships are based on trust and clear communication. The old saying, "Put it in writing," is true! Don't jeopardize your relationship, or your business, by not clearly stating your arrangement.

A written agreement also helps clarify individual strengths, weaknesses, and interests. For example, let the math whiz keep the books, while the gregarious one handles the customers.

Your agreement should also include an exit strategy -- what to do when one or both of you decide you want out. While it may seem grim to think of this in the excitement of starting your company, it can be crucial to the survival of the business later on.

10. What's the biggest mistakes that new business owners make?

In my experience, I've seen three common mistakes:

1) Being too timid (or arrogant!) to ask for help. Reach out and network with other small business owners. You'll be surprised at how similar your challenges are. Ask, ask, ask. This is one area where ignorance is NOT bliss.

2) Underestimating financial needs, particularly cash flow. Cash flow. the amount of money coming in and going out of your firm on a monthly basis, is the oil in the engine of your business machine. Without it, your business will grind to a halt. Be sure you have a solid understanding of the best and worst-case scenarios for your company, and plans on how to handle both.

3) Not realizing that marketing is an ongoing, relentless activity. To grow your business, you must serve ongoing customers while ge


© 1997-2000 Terri Lonier, all rights reserved. The above article is excerpted from Working Solo by Terri Lonier (© 1998, second edition, published by John Wiley & Sons, all rights reserved.). For reprint permission contact Working Solo, Inc. at , or 1 (800) 222-SOLO.

 
 
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