Most authorities on the subject of starting a business seem to agree that the best starting place is to determine your interests, skills and/or experience and then match them to a related business.  For someone who enjoys woodworking, a good choice might be a furniture business.  Similarly, in consideration of people who share the interest in woodworking, one might find related goods or services to be a viable business opportunity. 

If you don’t enjoy what you’re doing, it will be difficult to be very good at it.  But you can’t just choose something you love to do and expect to be successful.  Equally important to consider are market potential, supply and demand, and the level of competition for a particular business in your area.  It is essential that you provide one (or all) of the following:

1.        Something new or different – if what you’re offering is exactly the same as what’s already out there, your customers will have no reason to switch

2.        A better product or customer service than all the similar businesses you’ll be competing with

3.        A product or customer service that fills an existing demand not currently being sufficiently met by other businesses in the area

Regardless of the type of business you choose, it is highly recommended that you have some hands-on experience in the business so you will have a good idea what to expect from your employees, as well as what your employees want or need.

The possibilities for starting a business are, quite literally, endless.  If everything under the sun that you can think of has already been tried, rest assured that there are always new business ideas to be invented or discovered.  If you want it badly enough, do your homework, form an effective plan, and have the drive, ambition and perseverance to see it through, you can have a successful business.

For the most comprehensive list of business types available, go to the U.S. Department of Labor, Occupational Safety & Health Organization (OSHA) website and their Standard Industrial Classification (SIC) System Search  for governmental business codes (http://www.osha.gov/oshstats/sicser.html). By clicking on the alphabetical site index (rather than looking up actual codes), you will access their complete listing of all known business types.  If you don’t have access to the Internet, you should.  But if you don’t, you can also find this information at your local public library.

Let’s assume for a moment that you were genetically engineered to own your own business. Having the right skills and personality traits is only half the battle – if you’re really going to succeed, you must develop both a Business Plan and a Sales Plan. If you don’t have a plan, how will you know when you have succeeded – or failed?   You will need equal warning for knowing when your business is about to require expansion and when it’s time to cut your losses and move on.

Any successful business venture requires a significant amount of research and planning. We recommend that you read everything you can find about the kind of business you’re considering. Check out the competition. Are there other similar businesses in your area? Are they doing well? What can you do to make your business better than the competition? Can the market sustain another business of this type? If there aren’t any similar businesses to study, you’ll need to determine if it will go over well in your area. Will it fill a need? What segment of the population will you target as your primary customers? If there’s not already a demand for this business in your area, can you create a need?

A Business Plan focuses on what your business is, where you want it to go, and measures how well it’s going (and why). It will map out your ideas and put the successful business you envision on paper. A great guide to writing a comprehensive and manageable Business Plan can be found at http://www.business-plan-help.com/.

A Sales Plan will outline where your sales will originate, the volume of sales you expect, and how much is needed. For more information, see http://www.bcentral.ca/archive/marketing_sales/sales_success.asp. These documents will help you create the business, and will give you effective tools for arranging financing. Basically, they’re your business resume.

There’s a wealth of material out there on writing effective business and sales plans (including some pretty good software programs), and the more information you have, the better your business plan will be. To give you some idea and get you started, here are some of the basics of forming a business plan (which can also contain sales plan information).

What a business plan should contain:

v       Business Goal – a brief description of the business as you see it

o         What product or service will your business provide, and what need will it fill?

o         Who are your potential customers, and what will make them choose you?

v       Qualifications – the skills and experience you have for this business

v       Marketing – your plans for promoting the business

o         How will you reach and pique the interest of your customers?

v       Budget – your proposed budget and cash flow plan, usually divided into 3-year, 5-year and long-term strategies

v       Financing – financial needs of the business and potential sources of funds

o         Where do you plan to obtain financing, and how will your business be supported until it begins to generate a profit?

The following are the U.S. Small Business Administration’s guidelines on how to write a successful business plan:

What goes in a business plan? The body can be divided into four distinct sections:

1) Description of the business
2) Marketing
3) Finances
4) Management

Addenda should include an executive summary, supporting documents, and financial projections.

Although there is no single formula for developing a business plan, some elements are common to all business plans. They are summarized in the following outline:

Elements of a Business Plan

1. Cover sheet 

2. Statement of purpose 

3. Table of contents 

                I. The Business 

               A. Description of business 

               B. Marketing 

               C. Competition 

               D. Operating procedures 

               E. Personnel 

               F. Business insurance 

               II. Financial Data 

               A. Loan applications 

               B. Capital equipment and supply list 

               C. Balance sheet 

               D. Breakeven analysis 

               E. Pro-forma income projections (profit & loss statements) 

               Three-year summary 

               Detail by month, first year 

               Detail by quarters, second and third years 

               Assumptions upon which projections were based 

               F. Pro-forma cash flow 

          III. Supporting Documents 

               Tax returns of principals for last three years Personal financial

               statement (all banks have these forms) 

               For franchised businesses, a copy of franchise contract and all  

               supporting documents provided by the franchisor 

               Copy of proposed lease or purchase agreement for building space                

               Copy of licenses and other legal documents 

               Copy of resumes of all principals 

               Copies of letters of intent from suppliers, etc. 

One of the best ways to learn about writing a business plan is to study the plans of established businesses in your industry.  To review examples of real business plans, go to http://www.sba.gov/cgi-bin/byebye.pl?TO=http://www.bplan.com/samples/sba.cfm. See the SBA’s Startup Guide (http://www.sba.gov/starting_business/startup/guide2.html#bplan http://www.sba.gov/starting_business/startup/guide2.html#bplan), or Business Plan Workshops (http://www.sba.gov/cgi-bin/byebye.pl?TO=http://www.smallbizlending.com/resources/workshop/sba.htm.

Starting a business from scratch provides the most flexibility to an entrepreneur, allowing the ability to create a business to any desired specifications, and to control every aspect of the business, such as product or service positioning, branding, marketing, location, vendors and employee base. This option works best for someone with a specific business idea who has the experience to carry it through.

One of the biggest challenges for a start-up business is financing. If the business will require a significant amount of initial capital, funding must be obtained (see Forming a Plan). Although starting a business from scratch generally involves the greatest risk, the potential rewards are generally the greatest as well.

The PROS of starting a business from scratch include:

·  it’s a good option if you have a specific or unique business idea

·  control of all decisions

·  higher potential return on investment

The CONS of starting a business from scratch include:

·  potential difficulty in obtaining financing

·  an untested idea

·  control of all decision – can be difficult  for the inexperienced

Clearly, building a business from the ground up has it’s advantages and disadvantages.  If you’re offering something that has never been offered before, at least in your area, you will have no choice but to start from scratch (and perform an in-depth market analysis).  But there are other options, as well: buying an existing business or buying a franchise.

There are several plusses that go along with buying an existing business.  The following is an excerpt from the Small Business Association (SBA) Online Women’s Business Center website (http://www.onlinewbc.gov/docs/starting/buy.html):

The PROS of buying an existing business include:

·           Time savings and reduced risk. Buying a business will reduce your overall risk by eliminating many of the tasks associated with starting a business from scratch. For instance, when you buy an established business, operational practices, supplier relationships, distribution channels, and key personnel have already been established thereby saving you time and money.

·           Easier planning. Since you are buying a business with an existing cash flow, it will be much easier for you to project how much you will make in the future.

Like everything else, there are also some negatives associated with buying an existing business, as continued on the SBA Online WBC website:

The CONS of buying an existing business include:

·           Reduced reward. With reduced risk comes reduced reward. Available cash flow will be burdened by the debt you must incur to buy the business.

·           Possible problems. Always make certain that you are not inheriting any problems when you buy a business. Ask why the seller is selling. Has the company declined in revenue? If so, why? Are there personal reasons why it is necessary to sell the business now (i.e., divorce, health, etc.) What marketplace changes may be affecting the business in the near future?

Frequently, buying an existing business means less financial risk than starting a new business since there are already established supplier relationships and a customer base.  Ask the current owner to provide you with projected financial statements. Balance sheets, income statements, cash-flow statements, and tax returns for the past three years are all key indicators of a business's health.

Nevertheless, before buying an existing business, you should do extensive research to determine the existing company's history and financial health. If you do decide to purchase, you can choose to buy just the company and company name, free and clear of debts, or  the entire business "as is", which would include all existing assets and debts.

And last but not least, there’s the third option –  the one that “splits the middle”, if you will –  to purchase a franchise.  This option provides a nice compromise between starting a business from scratch and purchasing an existing one.  Franchisors establish set businesses plan for their franchisees, offering standard guidelines for new business owners.  Franchisors also provide training and operational support, to varying degrees.

The incentive for franchisors to aid their franchisees is that they receive royalty fees, based on the profitability of the franchisee.  Franchisors may also provide help in the way of assessments of existing franchises to help promote operational improvement.  Conversely, the formulaic nature of franchise businesses can hamper the way a franchisee is allowed to run the business.

The PROS of buying a franchise include:

·  step-by-step guidelines

·  training and professional guidance

·  financing may be available through the franchisor

·  information from other franchises

The CONS of buying a franchise include:

·  Operational boundaries

·  Limited industry choices

·  Royalty fees

As a general rule, the startup costs for a home-based business are significantly lower than other businesses.  Additionally, you can save a lot on day-to-day operating costs and take certain deductions on your income taxes. 

If location isn’t important to your business, you can operate virtually anywhere – and being at home means you won’t have to commute, which alone could save you a bunch of time and money.  Your hours can probably be pretty flexible if you’re working at home, but you also have to worry about family interruptions and the siren call of the sofa and television.

Some suppliers may have difficulty delivering to your home, and if you’re dealing with inventory of any kind you could easily run out of space.  Some potential employees will be turned off by the idea of working for you at your home, and there is still some lingering negativity in popular opinion of home-based businesses.

There is a growing trend in the U.S. for home-based businesses.  If you think this sounds like just the thing for you, here’s a quick list of some of the different types of home-based businesses:

The legal requirements for starting a business vary from city to city and from state to state. The following is a checklist of the most common small business requirements, from the U.S. Small Business Administration’s Small Business Startup Kit
(http://www.sba.gov/starting/regulations-html):

q         Business License – If the business is located within an incorporated city limits, a license must be obtained from the city; if outside the city limits, then from the county.

  

q         Certificate of Occupancy – If you are planning to occupy a new or used building for a new business, you may have to apply for a Certificate of Occupancy from the city or county zoning department.

  

q         Fictitious Business Name – A business that uses a name other than the owner’s must register the fictitious name with the county Clerk’s Office as required by the Trade Name Registration Act. This does not apply to corporations doing business under their corporate name or to those practicing any profession under a partnership name.

q         Tax License – Generally, a state sales tax permit is required if goods or taxable services are sold within a state or goods or taxable services are purchased for use in the state from vendors that do not have sales or use tax permits. A sales tax permit can be obtained from your state’s Comptroller’s Office.

A word of caution: If you are buying an existing business, the inventory of an existing business, or the name and goodwill of an existing business, you can avoid also buying an unexpected state tax bill by getting a “Certificate of No Tax Due” for the business from the Comptroller.

Check with your city, county and state government offices to find out specifically what you will need to do or apply for. A comprehensive listing of and links to each state’s local and regional business resources can be found on the Business Nation website (http://www.businessnation.com/localinfo/).

Another legal requirement of starting your own business is selecting a Form of Business, or form of legal structure, to use. The most common forms of business are the sole proprietorship, corporation, S corporation and Limited Liability Company. Each type provides different organizational options for applicable personal situations affecting taxes and liability. Following are some of the basic characteristics of each of these structures, but you should seek professional legal and accounting assistance when choosing the type of setup for your business.

Sole Proprietorship

-           the simplest form of business organization to start and maintain

-           unlimited personal liability

-           pay income taxes on overall earnings (not as an employee)

-           income and expenses of the business are filed on your own tax return

-           liable for social security taxes

-           much fewer accounting and legal hassles

-           you are your own boss and keep 100% of the profit

(See IRS Publication 334, Tax Guide for Small Business, http://www.irs.gov/pub/irs-pdf/p334.pdf. )

Partnership

-           each person contributes money, property, labor and/or skill

-           personal liability is shared (but so are profits)

-           requires a Partnership Agreement outlining buy-out and dispute settlement rules

-           must file an annual information return to report income, deductions, gains, losses, etc.,  and each partner includes his/her share of the partnership’s items on his/her tax return

-           may need to register the business name

(see IRS Publication 541, Partnerships, http://www.irs.gov/pub/irs-pdf/p541.pdf )

Corporation

Becoming an employer comes with its own set of rules and regulations, which are becoming more and more strict. In addition to the laws concerning Federal Income Tax, Social Security, unemployment/state income tax and minimum wage, there are a growing number of laws concerning human resources, including a list of questions that employers are prohibited by law to ask, particularly when interviewing. 

While you’re investigating the local and regional legal requirements for starting your business, you can obtain federal and regional information on hiring and firing employees from the same resources. Always read resumes carefully and check all references. It’s also a good idea to have applicants sign waivers so you can have background checks performed.

Employers are required by law to withhold the following from the wages of employees: federal income taxes, state income taxes (where applicable), and FICA (Social Security) Insurance. Businesses having one or more employees for 20 weeks in a calendar year or paying $1,500 or more gross wages in a calendar year must pay unemployment insurance tax. These taxes are paid to the state – to get the figures for your state, see the Small Business Association State Home Pages website (http://www.sba.gov/world/states.html).  

All businesses are subject to federal minimum wage, overtime and child labor laws. Information on these and related federal laws may be obtained from the U.S. Department of Labor, Wage and Hour Division (http://www.dol.gov).  All businesses with employees must comply with state and federal regulations regarding the protection of employees.  For information on labor laws, work force availability, prevailing wages, unemployment insurance, unionization, benefits packages and employment services, you can visit both the Small Business Association’s website (state - http://sba.gov/world/states.html)  or the  or the U.S. Department of Labor’s website (federal - http://www.dol.gov)).

For more information and employer guidelines, visit the  Equal Employment Opportunity Commission (http://www.eeoc.gov/), Federal Labor Relations Authority (http://www.flra.gov/), Social Security Administration (http://www.ssa.gov/) or Small Business Administration (http://www.sba.gov/).  There is also some good information on how to write comprehensive and effective job descriptions, recruiting, interviewing, and choosing employees vs. contractors on the U.S. Small Business Association website (http://www.sba.gov/managing/growth/employees.html).

Sales tax permit and license laws vary as widely as other business laws and regulations. Each state collects sales and use tax (percent) that applies to virtually every tangible item sold (retail). Businesses must have a sales tax number before opening.  How to obtain this number, the sales tax rate in your state, and information on collecting, reporting and remitting sales tax (usually on a monthly basis) can be obtained from the Small Business Administration (http://www.sba.gov/world/states).

The name you choose for your business will have significant impact on the degree of success you can expect, and should therefore be approached seriously and given a great deal of thought. ‘Cutesy’ names that seem catchy and hip will fall flat if your customers can’t tell what you’re selling. They also project less professionalism.

Also consider where the name will appear in the phone book. Businesses often tack “AAA” in front of their names – they’re not only alluding to the quality of their services, they’re guaranteeing themselves to always be listed first! We’re not suggesting that you use this example – it’s a bit overdone – but you get the idea.

You will need to constantly seek and acquire new clients and customers. The most valuable means of accomplishing this is quite often word-of-mouth. Most people are much quicker to pass on an unfavorable experience than a favorable one – it’s just human nature. The only way to insure that your reputation remains spotless is to do your best to provide the utmost in quality and service, and make doing business with you so enjoyable that your customers will want to share the experience with everyone they know.

Customer service is an excellent means whereby to improve your competitive edge.  It is a key strategy for securing your market position by building market share through winning and maintaining the loyalty of customers.  Getting customers and keeping them are the only parts of your business which create revenue.  All other activities create costs.

Improving your customer service means addressing the priorities of the customer, rather than your own. Some important factors to consider when analyzing the level of your customer service:

• Are you selling your product in the way your customer wants to buy?

• Are your systems and procedures designed for the convenience of the organization or the customer?

• Is every employee aware of your organization's customer service values and company strategy?

• Are your employees equipped with the necessary knowledge, resources and skills to provide excellent customer service?

Additionally, essential maintenance of a successful business involves:

1. efficiency
2. professionalism
3. reputation
4. track record
5. recommendation / referrals
6. maintain communication with clients

Finally, some other things to consider to make your business a continued success:

• Consider offering little “extras”, like seasonal or periodic promotions
• Take advantage of Monday holidays and keep your business open – people often shop and take care of other business on those days!
• Have good security, inventory controls and
• Be organized – keep immaculate records of all transactions
• When your business grows to the point that you can no longer handle it comfortably on your own, don’t hesitate to hire the help you need
• Stay in touch with business trends – read the newspaper every day, especially the advertisements; don’t be afraid to change!
• Never stop learning and improving

As with nearly everything, it’s a very good idea to do a lot of research before starting your own business.  Here are some helpful Internet sites: