Going It Alone

“I can’t find work so I guess I’ll just go into business for myself” are words that I am hearing more and more often. Hold your horses! It all sounds like a great idea, heaven only knows we need more small businesses, that will be what finally helps pull this country out of our present economical situation. In today’s job market, with many people unable to find work, they are stepping out in faith and starting their own businesses. This can be an exciting adventure which unless thought out thoroughly, can have its’ pitfalls as well.

What Type of Business Will You Start

If so many other people are out of work and those who are working are watching their spending like a hawk, what product or service can you offer them at a reasonable price? Will what you offer be something they need vs. something that they just want? What makes you think they will deal with you over and above another company? Hard questions to ask yourself I know, but ones that must be asked and evaluated.

It will be important to not only consider what your passions are, which will be a driving force to help you through the lean times of getting started, but you also must think long and hard about the type of business you want to start. We hear a lot about niche marketing, it is a buzz word that is used often by those who are setting up Internet businesses. Is this what is truly needed in today’s economy? If you are too “specialized” the need for your services are going to be very limited.

Be sure to put together a business plan, outlining the structure of your organization, the advertising and marketing program, the bookkeeping system, demographics of the customer base and projected sales and income.

Look At Your Customer Base

What can people afford to pay for the services that you will render with your new company? Will the company carry high priced items and services that only a few clients can afford or will you want to appeal to a larger client base? What products and/or services are needed by the majority of people right now?

Investment

Consider how much can you afford to lose not how much you expect to gain. How much can you personally afford to invest in starting your company? Do you have cash on hand or will you have to attempt to borrow funds from a bank or credit union? Right now if you don’t have A-1 credit, the chances of securing funds from a lending institution are slim. Do you really want to use money from your savings account or worse yet, remove funds from a 401K or IRA before maturity to fund this venture? If you are considering these options, think of not what the potential might be to replace those funds quickly, instead think about it as funds to never be regained and replaced. As money lost! Now are you still ready and willing to take that risk?  Invest what you only  can afford to lose.

Your Business Structure

Will you be purchasing products to start your business or will you be utilizing your own personal set of skills to provide services?

Are you planning to be a sole proprietor, a limited partnership or an S Corporation. Consider the advantages and disadvantages to each type of business structure available. Some will give you more personal protection both tax and liability wise than others. Research and then make the decision either on your own or with the assistance of an attorney and a tax adviser. This is one area where making an extremely wise decision is important.

Hidden Initial Expenses

There are numerous expenses that are not often thought about when beginning one’s own business. There is the physical location of the proposed business, the contract arrangements for leasing or purchasing the store front. The cost of deposits for utilities and insurance on the structure, the materials to display merchandise, such as counters, racks and of course a cash register for those sales you are anticipating. Setting up a bookkeeping and inventory system along with a marketing program. This could take months to put into operation before you can even open the doors to the public.

There is also establishing your inventory. Are you going to be paying cash upfront to stock items in your store or perhaps having items drop shipped; what is their return policy on items that don’t sell?

What? Still No Paycheck?

That’s right, be prepared not to pay yourself a pay check for at least six months if not a year. It is going to take that long to get the business established. Mortality rate on new businesses is extremely high. Figures have changed over recent years from stores closing in five years to seven years if they are not making a profit. So don’t expect to come out of the starting gate being able to pay yourself as well as possibly any employees, replenishing merchandise stock and meeting all the expenses of the operation  with monies brought in from sales to customers. It just isn’t going to happen!

Getting Up and Starting Over

As one who ventured out and followed my passion of starting my own business, I feel I can advise you honestly of what some of the upsides and downsides are. Was I successful? Let’s put it this way, it was fun while it lasted and I spent way too much money before I had to acknowledge to myself that this just wasn’t profitable. I thought I had done my homework, started with enough capital, had a good business plan and marketing and advertising program in place. Then disaster struck, something totally outside of my control and sharply business dropped, I lost several good accounts that were the backbone of my business and I eventually had to close up shop. Lesson learned, be prepared for the unthinkable and unforeseen problems that lay ahead. I suffered like many others because of 9/ll, because products I was purchasing came from back East where the Anthrax scare was. Two of my largest accounts were in the housing and real estate sector and there was a major slow down and cut back in that area. Within months, even with heavy advertising to try to develop more accounts, I saw my business caving before my eyes.

Having a Plan B or Plan C If Necessary

So what do you do when the bottom falls out? You consider your options first of all. Have going out of business sales and liquidate the stock, or try to find a buyer for your business as is. Sell your business name and all the stock intact if it is a long established company. Perhaps you have just an Internet business and you can sell just the business name if it has been getting good traffic up until now.

Consolidate your bills, refinance your home and get enough money to cover the outstanding debts you have incurred. Become as debt free as possible so that once again you have breathing room.

Go to work for someone else as you decide what to do about starting over again if you think you want to try another business venture of your own.
Find work that you can do from home to bring in an income.

Decide on another business venture and find investors who will be willing to take a chance on you and back the business; or form a partnership with others and build on the strength of all of your expertise and credit ratings to secure a loan to begin again.

There are plenty of opportunities out there and believe me, I am not trying to discourage you from taking that step venture out on your own. I do want you to be informed and ready for all the challenges that you will be facing.