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- iHaveNet.com: Small Business Guide
Thomas P. Farley
Whether you're unemployed, underemployed, fearful of a layoff or just bored with your job, at some point you've probably thought about starting your own business. And like most people, you've probably been held back by a host of concerns: whether your idea is good enough, how to get funding, whether you can live without vacation and medical benefits, whether you even have the chops. Now, there's one more worry to add to the mix: whether it's crazy to start a business in the wake of a recession.
Here's the good news. First, all entrepreneurs face those same fears on the road to building a company. Second, many Fortune 500 corporations, including Procter & Gamble, IBM, General Motors and FedEx, were founded during a period of economic uncertainty.
"If you launch your business during a difficult time, you know what you can do on a lean basis," says James King, state director of New York's Small Business Development Center. Then once the economy starts to bounce back, he says, you'll be well-positioned to succeed.
We asked King and Rex Hammock, founder of SmallBusiness.com and CEO of the custom media and marketing firm Hammock Inc. -- based in Nashville, Tenn. -- what it really takes to stop working for the man and become your own boss.
Tip No. 1: Seek input.
For starters, you should run your business concept past a few impartial observers before pouring your whole self into it. "Family and friends are not going to give you an honest answer," says King. And even if it is a great idea, you must remain open to the possibility that your better mousetrap simply might not catch on. If that turns out to be the case, adds King, be prepared to adjust and compensate.
Tip No. 2: Check yourself.
Feeling ready? Put yourself to the test. This online quiz, created by the Small Business Administration, will help you ascertain whether you truly have the drive, perseverance and skill set you'll need to see your business succeed. Even if you don't, the SBA offers tips on how to build those credentials. Take advantage of this advice before diving in.
Tip No. 3: Go it alone.
The simplest approach is a start-up with you as the sole employee. Says Hammock: "For consultants, contractors or freelancers, the opportunities are many. Companies are using contracted services to fill in gaps in their workforce." Being an independent contractor often means you call your own shots and name your hours and fees. The downside is loss of vacation and medical benefits -- though there are ways around that. For medical coverage, seek out programs offered through industry member organizations or groups such as the Freelancers Union. You may have to forego vacations for a while, but once you have a solid client base, you should be able to afford a few weeks of unpaid leave.
Tip No. 4: Find financing.
Less simple, though not impossible, is the path for capital-intensive startups. Hammock warns that these are tough times for getting a loan. "Banks are requiring more personal guarantees and financial collateral than I've seen in my nearly 30 years of owning small businesses," he says. But King claims it's still doable. "The money is available," he argues. "You just have to prove the case for it."
How? Get your ducks in a row by putting together a solid business plan. If you've never written one and need direction, avail yourself of the largely free assistance of organizations such as the Small Business Development Center (or SBDC, which maintains help offices in every state in the U.S.). The better prepared you are, says King, the more likely it is that the major financial institutions will work with you.
Another prospective source of financing is credit unions, which picked up much of the small-business lending slack when big banks put on the brakes in the aftermath of the global financial meltdown. Depending on the amount of funding needed for your venture, you can also seek economic support from friends and family, from so-called angel investors or from venture capital firms.
Finally, King advises that you raise or borrow enough money to provide your fledgling company with adequate cushion funding. It may take you longer to turn a profit than you expect, and you don't want to be left penniless mere months in.
Tip No. 5: Don't super-size.
Once you've hung your shingle, avoid the temptation to grow too quickly. This is particularly true for companies that start making money sooner than expected. "Say you open a restaurant and it quickly becomes a hot spot," posits King. Before you know it, you're excitedly adding seating and staff. But chances are good that you're merely experiencing a new-restaurant bump, and that customer traffic will soon come back down to earth. "If you misjudge that," warns King, "it can be a disaster for your business."
Tip No. 6: Beware of the competition.
When you do start to grow, competitors will likely appear where none existed before. "Someone else is going to try to replicate your success," says King. He recommends going back to your business plan and adjusting it to respond to the new conditions. This will help you stay a step ahead of any changes that could affect your bottom line.
Tip No. 7: Focus on the right components.
The smaller you are, the more you'll be building your new company's reputation on the basis of two essential factors: quality and service. "Trying to compete in an arena where price is the only factor in your clients' purchasing decisions is a train wreck waiting to happen," says Hammock. "If you can help a customer or client be better at something they want to be better at, you've cracked the formula for long-term success." In other words, make your clients look good, and you'll look good too. And if that prospect doesn't have you thinking about punching in your current job's time card for the final time, nothing will.
Available on Amazon.com: Job Searching with Social Media For Dummies
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
How to Start Your Own Business and Become an Entrepreneur
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