Have you come up with a killer idea that will make you millions? Do your friends and family rave about your photography/sewing/baking/artistic skills and constantly tell you that you should be getting paid for your talent? Are you thinking it’s time to start your own business?
Starting a business can be an exciting and life-changing adventure. It is not, however, for the faint of heart and it is definitely not for the uninformed. Before you quit your job and order those business cards, there are a few things you need to consider.
First, do your homework.
Know what’s involved in starting a business. There are some rules and legalities that must be followed for you to be a legal business. If you need help learning what you need to know and do to start your own business, there are many free and low-cost resources out there. First, and my favorite, are the Small Business Development Centers, run by the SBA. They give free business advice and many centers offer free and low-cost business development classes. Next is SCORE, who offers free small business mentoring and advice. And finally, the U.S. Chamber of Commerce has a small business center with resources to help entrepreneurs get their business off the ground.
These organizations will do a LOT more than just help you with the legal side of business. They can help you clarify your focus and your business plan, help open your eyes to both the risks and rewards of entrepreneurship and help you with all the questions you don’t even know you need to ask when going into business for yourself.
Pay close attention to the legalities of running a business.
If you are exchanging goods or services for money, you have some legal obligations to attend to. If you’re not planning to be a legal business, don’t even bother. In most states, you are required to register with your state tax board. Different states call it by different names, but it is the entity that is responsible for overseeing the collection of sales tax. This is not an entity you want to run afoul of. Many, many years ago I became acquainted with auditor for California’s State Board of Equalization. One of the first questions he asked me is if I was collecting, remitting and reporting my sales tax properly. Thankfully, my answer was then and still is, yes. He told me he always asked his friends so he could warn them that tax boards have the power to seize your business for non-payment or underpayment of sales tax revenue. And generally, if they have reason to believe you aren’t compliant, they get to shut you down first and THEN investigate.
Don’t fall into the mistaken assumption that if you are only “doing it as a hobby” that you are exempt. Find out the law, before you find out the hard way. And while we’re on legalities, if you are planning to run your business out of your home, make sure you find out whether it’s permitted in your municipality. Some cities allow home businesses, some do not. Some allow signage for home businesses and some do not. And others allow certain types of businesses to be home-based, like a photography studio, but don’t allow others, like a hair salon. There’s nothing that can put crimp in your entrepreneurial dreams quicker than a grumpy neighbor who doesn’t like the extra traffic you’re generating and reports you to your city’s zoning board.
Do you have the necessary insurance for your small business? If you are working from home, call your insurance agent. Every policy does not cover every home business. Do you have sufficient liability insurance to cover the possibility that a client or delivery person might be injured while on your property? Do you have liability insurance to cover the possibility that your product might injure someone? If you are providing a service, do you have professional liability (errors and omissions) insurance? And what about your business equipment? If it’s not insured and it’s stolen or somehow damaged, you could be out of business that fast.
Do you have the commitment and the integrity required to be in business for yourself?
The key to success as an entrepreneur is to be able to consistently deliver a quality product or service in a timely manner that your clients and customers believe to be of value. If you do not have the commitment to follow through on your promises, even when the work may be tedious (and much of what we entrepreneurs do is incredibly tedious) or the integrity to not promise more than you can deliver, self-employment may not be your best choice. I have seen more than a few small business owners who went out of business, and some who even ended up with legal troubles, because they did not act with integrity in their businesses.
And, finally, are you willing to risk failure?
There is a popular mantra that says “failure is not an option” but in the business world, you must recognize and accept that it can happen. Knowing that failure is a possibility and generally not one you want to face can help you plan for the hard realities of the business world. No one goes into business believing they will fail, but the most successful people go into business knowing they can, and making the necessary plans and preparations that will help them avoid failure.
Do you have any questions about starting your own business?
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