You can obtain a small business by taking it over from a family member or purchasing an existing business, or by creating a first time startup business.
But, in order to be successful, you must have some beginning small business startup tips.
The first time startup business is one you startup completely from scratch, no clients, no office space, no employees, no funding. But, you have enough education and experience in the field that makes you feel as though you could pull off a successful business venture in the next 3-5 years.
It takes at least that much time for a small business to grow to a decent amount of profitability. I have compiled a list of small business tips for you to get started.
With a brand new business, you are starting up everything for the first time in order for the business to get up and running. The totally new business is by far the most rewarding, but also the most risky of business ventures.
The failure rate of new start up business is very high, because most people don’t know the 500 small business startup tips you should know before starting.
They go into business with a hope and a prayer instead of; 1) Knowledge of the field, 2) Knowledge of running a business, including, city, state, and federal regulations, 3) Extensive experience working in the field 4)Business accounting principles 5) Plenty of money to last before you are profitable 6) Have the ability to deal only with facts
If you are diligent and take things slowly it could work out. But you must be patient, and willing to work concentrated long hours to get started.
Also included in a new startup venture are these small business startup tips:
Obtaining A Mentor
1. Talk to many, many people who are already in the field to get the big picture. Ask them to be completely honest when they answer your questions. Tell them you need to know all of the good and bad about the business. If you don’t know anyone in the field you may not be ready.
Get the Experience First
2. Preferably, you should have worked in the field for a few years to see if it is a viable business. Your experience in your chosen field should be deep and through, no guessing games. The amount of time and money that goes into a small business is too demanding to be a guess game. If you fail the recovery could take years, if not decades.
Research is Essential
3. Do research, lots of research about the field. Find out if regulatory agencies are getting a lot of complaints about the type of business you are considering. There is research everywhere now. You can do small business research at the small business website or sba.gov. Go to your trade association or professional website.
Know Quality Financing
4. Be careful about financing, if you can’t get a bank loan for the business that may be a hint that you are high risk, and may have a high rate of failure. There are many predatory places of financing.
Most of these offer high-interest loans or balloon payment loans. It is best to wait until you raise your credit score, save substantial down payment, and have a high grasp of business techniques.
Venture Capital Funding
5. Consider venture capital funding for the business. This is very difficult, but possible. You should have a mentor who can guide you through the process. There is a complicated web of business plans and contacts within the industry that you need to access.
6. Consider starting out as a non-profit venture and getting a grant to run your business. Be careful, you could be jailed if you can’t account for every single penny of the money within your business. Running a non-profit also includes first getting a 5013C. Hiring a grant writer to write grants for your non-profit business is a good idea. Writing a grant takes skill and experience.
The Right Accountant
7. You must have a close relationship with a good CPA (Accountant), and a good bank, and a good business attorney. Your knowledge of small business accounting should be through, so you can choose a competant accountant. The wrong or missing accounting could damage your business for life.
8. You must understand the different types of business leases there are, and that you could loose all of your personal property (home etc.), if you default on a business lease. Research the types of leases, they are: 1) Net, 2) Net, Net, 3) Net, Net, Net.
Many people sign Net-Net-Net leases with a 5 or 10 year commitment without knowing what it means. Business leases is an area that causes many small businesses to fail, understanding a lease is complicated.
Obtain a good real estate attorney to advise you on the different types of leases and negotiate one you can afford as a new business. You may consider starting with a month-to-month lease if you are using your own money, instead of bank financing, and you don’t have to do leasehold improvements.
Your Bank Loan Tied to Your Lease
If you have a 5 or 10 year loan, or if you expensive leasehold improvements and you are on a month to month rental. You could be asked to leave any time. The best way to start a small business is from home if that is
possible. Running a business from home also posses many risk.
There are also leases on business equipment. These are especially tricky, no all the ins and outs before you consider one.
I have signed two 5-year leases with a previous business I owned, I feel this makes me fairly competant to discuss business leases.
Your Small Business Ideas
Whether or not you are successful in business appears to be closely correlated with your type of business. The U.S. Census Business Dynamics database plotted a five-year survival rate of several industries since 2005.
The research showed the success of rates of industries from construction to mining with a success rate between 36% to 51%.
Then there are those who operate businesses that do not make a substantial profit. They are working long hours and spending most of the money that comes into the business on overhead; rent, supplies, salaries, advertising and marketing.
These people did not do their homework to find out the demand and cost of the business. For some of these people demand is low, and the cost is too high; but some just don’t know how to find their interested market.
Here are some questions you can ask yourself before you think about starting a business, you will also get several small business ideas and tips.
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1. IS IT TIME TO START A BUSINESS YET?
If you have worked in every department of a small business as an employee and understand how every single department works, then you may possess this one very important factor for success in your own small business.
If you have managed to master the skill of managing money, from small to large amounts, you posses a skill that will help you manage a business.
If you have worked in an industry long enough to understand what works in that industry to make profits and what does not, then you have acquired another skill that makes a small businessperson successful.
If you understand the team concept, and that you will have more success working with a team of people than alone – this is yet another skill you possess.
If you have ever done an analysis of business services or products needed in your area or on the internet, you possess a crucial ingredient for business success. Many businesses start up and fail because the market has been saturated with the product or service they sell or they don’t understand how to bring this market into their business.
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2. DO YOU PLAN TO BUY A BUSINESS OR START ONE OF YOUR OWN?
Both starting your own business and buying a business carry risk. In starting your own small business you need to have the qualities above and understand small business in general. The main issue is that it takes awhile to build a small business. You have to find customers and build the customer base. The hours are long and concentrated.
When it comes to buying a business, you have to understand how to evaluate the business. If it is a franchise-this is a type of leased business; questions to ask, Is it profitable? –the costs are extremely high with franchises. If it is a privately owned business, do I have an attorney and accountant that can do “do diligence” on the business, they must engage the following small business ideas to facts;
- Properly priced,
- There are no liens or encumbrances,
- There are no pending lawsuits against the business.
- There are no disagreements with prior business partners
When you buy a business, you need to spend money on a forensic accountant to determine if the business has produced what they are claiming. It is wise to spend money on an investigator and attorney to find out if the business is clear of any wrongdoing. If you don’t have the funds for this, or don’t feel it is necessary, you could end up with a worthless business, it has happened to many before you.
3. DO I UNDERSTAND THE COST OF SMALL BUSINESS?
One of the most difficult concepts for beginners in business to understand is cost. Some businesses have cost of 90% of business income and some have cost of 50% of business income. No matter what your business, you will have overhead cost. Businesses go bankrupt all of the time. One major reason is that the cost becomes more than the business income.
The following costs are important to understand before you buy or start a small business. These small business ideas should be thoroughly researched before you start thinking about business.
- The rent or lease cost and terms of both.
- The cost of equipment for the business.
- The cost of supplies used and ordered for the business.
- The cost of producing the product or service, (materials, time, labor).
- The cost of the employees: average salaries, employee taxes, employee benefits
- Independent contractors cost
The cost of insurances for the business (product liability, injury liability on premises, workman’s comp, health, malpractice insurance etc.)
4. HAS THE NEED FOR THE SERVICE OR PRODUCT BEEN ESTABLISHED?
Has the market been consumed with small businesses of your same type?
If you are starting a new business, have you tested the need for your product by starting to sell it and building customers at a flea market, out of your home, or small office. If you increase your sells over time and get repeat customers and a growing customer base, this is one sign the product is in demand.
Have you tested different price points with your business product to see what sells the most, and you still get a profit of at least 20%. This is low, but at least it is a profit.
Purchasing a business works best when you have worked in that business, You have the opportunity to see the need, you see the profitability, and you understand the product.
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5. HOW DO I REACH MY CUSTOMERS?
Advertising is very expensive. Marketing is very difficult, and can be expensive. Marketing tends to be more
effective than advertising because if done right it is more believable.
Studying advertising and marketing effectiveness is crucial. You can spend too much if you are not educated about both. The marketing of your small business ideas are more cost effective than advertising.
6. DO YOU UNDERSTAND THE MOST IMPORTANT PERSON IN YOUR SMALL BUSINESS
THE CUSTOMER IS KING, has been, and will always be the most important phrase you will ever hear.
If customers don’t get the product or service they are paying for, they will leave. If your business has little or no customers, it is a hobby. In some cases it is a very expensive hobby.
The next most important people in the business are the employees. Well trained and well appreciated employees are worth their weight in gold. They are a part of the team that will help you to achieve success.
As you can see there is a lot to think about before you think about seriously starting a small business. The research, development and previous experience will help you decide if the rigor of your own small business is something, you can do successfully. The most important person in your business will implement your small business ideas successfully.
7. WORK, WORK, WORK AND BE REALISTIC ABOUT EVERYTHING
Do your research, seek out advice from successful people, put in the hours, and listen when you get advice. Before you start a business you MUST understand budgets. Use the “Course For Fantastic Finances” to get started.
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