The Pocket Small Business Owner's Guide to Building Your Business

By Kevin Devine

This comprehensive, step-by-step guide walks the reader through everything an aspiring small business owner needs to know before getting started. It’s not as easy as just hanging up an “Open” sign and letting the money roll in! Planning every step of your business and being aware of all the questions, demands, and challenges you will face will make the difference between just opening up shop and actually running a successful business. 
Coming up with a great idea for a business is only the first step. How will you find the start-up funds you need? Have you thought about your market? Do you know how contracts work? How about the difference between an employee and an independent contractor? Are you aware of your competition and the trends in your industry? Do you know how to keep accounts? Do you know what your breakeven point will be? Do you even know what a breakeven point is? If the answer to any of these questions is “no,” then this is the perfect book for you! 

With clear, friendly prose and helpful diagrams and charts, The Pocket Small Business Owner’s Guide to Building Your Business is every prospective entrepreneur’s new best friend.

• Language: English
• Publisher: Allworth
• Release date: May 1, 2012
• ISBN: 9781621532231

Book preview

Introduction

HOW THIS BOOK CAN HELP YOU

For years I have helped people from all walks of life to improve their lives through self-employment. Many of these folks had been laid off or had barriers that prevented them from working full time. Some others were just interested in starting a business and were curious about what they needed to know.

Teaching these program participants, and helping former participants who went on to start businesses, I learned all the little details that business owners need to know. Time and again participants told me, I didn’t know there was so much to know! There is a lot to know, and this book contains much of it. Reading this book will give you a tremendous leg up on getting your business started the right way.

However, this book is not designed to make you an expert in every task you’ll need to accomplish to successfully run your business. As we’ll see, you should be an expert in two things: what it is your business does and how to provide

excellent customer service. Most of the other things you do not need to know in detail, but you should still be familiar with.

It’s like owning and driving a car; you should have an idea of how it works, or at least the good sense to know who to call if something is wrong. You certainly don’t need to know how to change the spark plugs; you can pay someone else to do that.

In the same way, this book presents the basic information you need to know to run a business, describes how to find and use other resources, and helps you to have the common sense to know when things are going wrong.

HOW TO USE THIS BOOK

This book is designed to be a learning tool. Read it carefully and completely. It would be best if you read it from start to finish, as the later chapters assume you know what is in the earlier ones, but this is not essential.

Keeping Track of Your Progress

This book is written so that the information is presented in about the same order as you’ll need to know it as you start your business. For example, we discuss legal business entities near the front, because you should decide that before going much further. You can also pick and choose chapters to get just the information you need.

There is a brief checklist on page 236 of the steps that nearly all businesses will have to complete as they start. Note that you will be in a much better position to complete these tasks after you have completed this book.

Each chapter ends with a section called Nail It Down! This section has practical points you should know, and steps you should take, to start a successful business. Also included are references to additional resources to help you learn more.

Be sure to go through this section carefully when you have finished a chapter to make sure you have a thorough understanding of the topic.

NAIL IT DOWN!

Use the Nail It Down! section to keep track of your progress, or as a review for what you learned in each chapter. To get the most out of this book, follow these suggestions:

  Set aside some time each day to use this book.

  Seek out other resources such as the Small Business Development Center for classes and assistance.

  Track your progress by checking off the steps in the Nail It Down! section.

Chapter One

KNOW YOURSELF AND YOUR BUSINESS

Not everyone is cut out to be self-employed. If running a business was easy, we would all do it! But the fact is that most people who can work choose to work for someone else. About 90 percent of the workforce is employed by a business owned by someone else. Less than

To know whether or not you can be successful in your own business, it pays to have a good handle on why you want to be in business, what your strengths are, and what your business is all about. That way, you will be in a better position to decide whether or not starting a business is right for you.

WHY BE IN BUSINESS?

Why do you want to start a business? Take a second and write down the three main reasons.

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In the years I’ve taught classes to people like you who want to start solo businesses (what I call business run by one, maybe two, people), here are the most common reasons I have heard for wanting to start a business:

•  More free time

•  Financial independence

•  Be my own boss

I’m guessing that at least two of the three reasons you gave match these three. It is true that if you want to be really rich, with the opportunity to have lots of free time and make your own decisions, owning a business is one of the best ways to accomplish these goals.

But because this book is about the things that you need to know before you start a business, here are some things to keep in mind:

•  Most people who own a business work many more hours than those who work for someone else.

•  Many small business owners earn less, sometimes much less, than those who work for someone else. Some will lose so much they declare bankruptcy.

•  You are never your own boss. While you get to decide many details of how your business runs, it is always in the service of your customers, who are your true bosses.

These facts are not meant to scare you. Rather, they are meant to open your eyes. Keep this in mind if you are considering starting a business: Unless you do it right, starting a business can make your life worse than it is now. You don’t want that. I don’t want that either, which is one reason why I wrote this book.

Starting and running a business isn’t easy. Not only have I run a business myself, I’ve worked in a mom-and-pop business that went belly-up, and I’ve had lots of experience helping others explore their business dreams. If there is anything I have learned, it is that starting a business can either be the best thing you have ever done, or it can ruin your life. The rest of this chapter can help you decide which path is right for you.

HOW TO IMPROVE YOUR ODDS

Too many people who start a business overestimate their ability. They think that because they see others apparently making it without much trouble that they can do it as well. What they don’t realize is that only the success stories make the news. The numerous failures are ignored. But you know many will sink instead of swim.

What might be some ways to help improve your odds of success? Take a second and think about it.

Learn, Learn, Learn

No one gets to be an expert in any field without first learning what there is to know. Your odds of success skyrocket if you first learn about what mistakes to avoid and discover what you need to know to steer clear of failure. For running a business this means reading books, taking classes, and talking to existing business owners.

Practice, Practice, Practice

Second in importance is to practice. For running a business, that means actually working in the industry for someone else before starting your own business, or at least keeping your operation part-time until it can support you.

Get Help

Third, it isn’t cheating to get some help. No small business succeeds without relying on the professional advice and service of others. Most communities have a variety of resources such as Small Business Development Centers (SBDCs; http://www.sba.gov), Senior Corp of Retired Executives offices (SCORE; http://www.score.org), or other nonprofit organizations that offer training and advice to small business owners. Organizations that are supported by the Small Business Administration (SBA; http://www.sba.gov)or other government programs are unbiased and won’t try to sell you anything.

Have a Backup

Finally, it can’t hurt to have a backup plan. In business, this means (and you should commit this phrase to memory) don’t quit your day job! The day job, whether it is a full-time, part-time, or a secondary source of income, can actually make your chance of business success more likely, since it can provide income even when your business is slow.

Sometimes people get really excited about starting a business and can’t wait to get going. This is understandable, and I’ve felt that rush of excitement myself. But as we’ll discuss later, getting ideas is easy; actually doing the work is tough.

Starting a business, like any career, takes time. Keep your day job and take things one step at a time.

YOUR STRENGTHS AND WEAKNESSES

Part of knowing yourself means knowing what it is that you can and cannot do yourself. Running a business makes you feel great; you are establishing your independence and showing the world that you can stand on your own. And yet, even if you could perform all of the tasks that a business requires, you would be foolish to try.

What Can You Handle Yourself?

Here is a partial list of all of the things that every business has to do. Check off those that you think you can handle by yourself:

jpg   Have a product to sell

jpg   Find the market for your product

jpg   Market and sell that product

jpg   Actually perform the work (make the product or provide the service)

jpg   Bookkeeping and accounting (including taxes)

jpg   Manage the business, including yourself

jpg   Manage employees (if you have them)

jpg   Work the computer (if you use one)

Most people realize that they can’t handle all of these responsibilities well enough for their business to succeed. And even if you could, you wouldn’t want to because you won’t have the time.

Getting the Work Done

So what can you do to make sure that all of these tasks get completed? Here are some ideas.

Learn What You Need

First, you could educate yourself, perhaps by taking a course. This is especially true if you don’t need that much help. For example, if you are good with numbers but don’t know anything about bookkeeping, a community-college class might be all you need to handle your own books. Or maybe you have some management experience but aren’t familiar with payroll laws; reading IRS publications may get you on your way.

Get Outside Help

Second, you could have others help you with your weaknesses, either as employees, partners, or business associates. There are advantages and disadvantages to all of these, but it is fairly common for two people to get together who have complementary strengths and weaknesses to form a team that is better than either one alone.

You could also hire out some of this work. In fact, many solo businesses these days are professionals like you who provide bookkeeping, computer, or marketing services to other small businesses.

Get Around the Barrier

Finally, for some of these tasks, you can just arrange your business so that you don’t have to do them at all. This is especially true if you don’t need employees or a computer. Many businesses get by very well without either one.

KNOW YOUR BUSINESS

Have you told anyone about your business idea? If so, what did you say? Were you able to explain it to them quickly, in a few dozen words or less? Or did you have to go on and on because they couldn’t seem to understand what you were getting at?

In this section, you will think about and write out your mission statement, a brief description of your business that outlines what it sells and what it means to you.

Your Business Foundation

Every building needs a foundation. Buildings without foundations are only as secure as the changing environment around them. They are susceptible to wind, storms, and changes in the landscape that buildings with strong foundations can easily resist.

Your business should have a strong foundation. For many businesses, that foundation can be a mission statement. Mission statements are brief descriptions of your business that define, in very broad terms, what your business is all about and what you want to get out of it.

Often solo business owners will get so caught up in the day-to-day running of their businesses that they have a hard time seeing the forest for the trees. They have difficulty making decisions because they can’t isolate the important issues. Mission statements give you a way of seeing the big picture, helping you decide what your business should be.

Mission statements reflect you and your values. They provide a way for you to put into words what your business is about. That way, when things get hectic and decisions need to be made, you can examine your mission statement, and reflect on what road you should take.

Mission statements are written by you and for you. They are primarily intended to be used within your business, not shared with customers. That means that mission statements do not include slogans or marketing hype. But they must take into account who your customers are, because your customers are your business.

Mission statements can be difficult to write because they ask you to think about the big picture, to envision the broad goals that most of us simply are not used to thinking about. You

have to establish the groundwork for your business before you can build. The mission statement will be your foundation.

What Is My Business All About?

What I would like you to do now is write down exactly what your business idea is, as briefly as you can. Mention these things:

•  What you sell (products or services)

•  Who your primary customers will be

•  Where you will be located

•  What sets your business apart

•  What values are important to you

If you have trouble explaining your idea, chances are it is because:

•  Your idea really is complex and it takes a lot of words to describe it, or

•  you are having trouble describing your business in an efficient way, or

•  you really are not sure what your business idea is.

If you think you are simply having trouble describing your business, try it again. See if you can reduce the number of words in your description. Write out your description and give it to someone else to see if they understand it.

If your only problem was actually finding the words to describe your business, we can solve that. The bigger problem is that, if you can’t explain what your business is all about, maybe you don’t really know.

The Thirty-Word Rule

How long should your mission statement be? One rule of thumb is that you should be able to give a thorough description in thirty words or less. You might want to try writing down your business description again, using fewer but more expressive words.

If you are still having problems, it is probably because you really don’t know what your business idea is. Your dream is still too vague to put into words, kind of like an image that is still too fuzzy to draw on paper. An excellent way for you to help solidify your business idea would be to just read through this book. Then, once you have an idea of what you’ll need to know, you can come back to this chapter and start again.

You Have to Know, Really Know, Your Business

Your mission statement is designed to give you the big picture, the in a nutshell purpose and goal for your business. But it is only a starting point. It really isn’t good enough to have a vague idea, to have some general notions, about your business. A mission statement is an excellent starting place, but if you want to be successful you have to be more specific.

To really plan a successful business you’ll have to be able to answer some of the nitty-gritty questions about the details of running your business (writing a business plan will force you to confront these questions). Someone who has only dreamed of starting a business can write a mission statement, but only someone who is serious and has spent a lot of time thinking about his or her idea can write a complete business description.

Let’s go back to our house-construction example. Let’s say that the mission statement for our house was, To have a bright, open house that is energy efficient and built to last. It sounds like a nice house, but where do the doors go? How large will the garage be? How many bedrooms?

As you can see, the mission statement doesn’t do much to answer the detailed questions—the what, where, and how questions that any builder would need to have answered to construct the house.

In the same way, having a general business idea in mind isn’t bad for your initial planning, but you must narrow down your idea if you want to save time and money. This book will provide the fundamental knowledge you need to help clarify your business idea. Completing the Nail It Down! sections will help make your ideas concrete, and writing a business plan will finish the job.

CAN YOUR BUSINESS STAND ON ITS OWN?

You’ve had a chance to think about how your particular strengths and weaknesses match up with the demands of your business idea. Now let’s see if you can leverage your strengths into business success.

A little earlier I identified eight essential business tasks that all business owners must complete. To simplify things a little we can combine those tasks into three fundamental elements. These three elements are:

•  The product or the work

•  Sales and marketing

•  Management (of yourself, your employees, and money)

Think about it this way. Your business is like a three-legged stool. These three elements form the legs upon which your business success stands. If any one of them is weak or fails, the whole business falls to the ground. It doesn’t really matter if your product is the best in the market, or your quality is unequaled. If you can’t manage the business, or market successfully and find customers, you will not succeed. A stool cannot stand on one or two legs.

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Your business success depends upon the support of all three essential elements

Your Strengths Will Support You . . .

Most people who start a small business come into the business because they have a special expertise or knowledge that they can sell. In nearly every business, doing the work is the easy part, because that’s what brings the owner to the business in the first place.

But Your Weaknesses Will Defeat You

Most solo businesses that fail do so because the owner neglected their weaknesses, not their strengths. In my time helping others start their businesses, I have yet to see one fail because the owner couldn’t do the work. It was always due to a lack of sales, marketing, or a failure to manage themselves, their employees, or their money.

In the