The second TMWYK discussion was led by Shivani D about starting your own small business.  This was an interactive discussion format but I’ve outlined the highlights.  For more detailed information, http://www.SBA.gov is a fantastic resource to help you get started!  Do you have an idea for a business?

Feedback: 

Definition:
– Federal government defines by revenue (average 3 year gross receipts) and the industry
– State and Local governments define by number of employees
– 98% of American businesses are considered a small business

Different structures:
1. Sole proprietorship:
– All in the owner’s name
– Taxed through the individual
– Liability is not covered: can affect personal /private assets
2. Limited Liability Corporation (LLC):
– Protects your personal assests from business assets
– Taxes still through personal taxes through Schedule C form
– Have a managing member, no board or monthly meetings required
3. Franchises:
– Good and bad: have rules of the franchise you must follow
– Need to make enough money to afford the franchise fees and still profit
4. Distribution/broker model:
– Still best to be set up as an LLC for protection because business owner becomes the owner of
the inventory and therefor becomes responsible
– Need to have enough buyers to get the best costs of inventory
5. Blogs as businesses
– None of us at the meeting had personal experience with this. There will be more discussion
about blogs in a future TMWYK.
– Often make money with products, ads, sponsors, Amazon Associates, etc

Know what you’re getting into:
1. Anything entrepreneurial, that you can make money off of, can be a business.
– Ask yourself: Why me? What am I providing that is different? What is my competition?
– Do your research: talk to people, search online and discuss in forums to find out if people are
willing and able to pay for your idea, product, or service
2. Idea is important, but execution is bigger
– Ex: Restaurant industry takes average 4 years to see return
3. Your own business is a 24/7 gig so it’s important to like what you’re doing
4. Know your personality and how that works in this setting
5. At some point, you may have to take a leap of faith and leave your job to focus on the business
– Are you willing and able to do this?
6. Depending on your current employer/industry and business idea, you may need to discuss with your job’s legal department if there are any non-compete or non-disclosures

Steps to take:
1. Secure a name (register with Corporation Commission of AZ or equivalent in your state)
– Doing business as: sole proprietorship doing business under business name
2. IRS to get Employer Identification Number:
– All income is reportable income
– If not using your business or not making money, it’s better to dissolve it because of costs/taxes
3. Have a business plan:
– Roadmap to plan how to get from where you are currently, to where you want to be in X years
– If completing for a loan, may need to follow a specific format for the application
– Know what you need and reasonably appropriate estimate of costs
– Operate with low overhead if possible
– Incubators: shared office space, commercial kitchen space, etc you can rent as needed
rather than have to own your own or have a fixed lease
– Build a team for your topic space:
– Good for long-term relationship
– Experienced mentors in your field
– Counselors at SBA: Small business development centers
– Usually former Fortune 500 experience
– Can help you transition through various stages of your business growth
4. Licensing
– Most businesses, even those run from home, require licensing.
– Costs time and money to get done
– Can be accountable to IRS or any regulating agency
5. Loans
– SBA has guaranty program for loans, but this is difficult for new companies because if default,
no guarantees
– Borrow from willing family, friends, and other investors initially if able
– Microloans: small amounts, look at fees to see if it is worth the cost of loan
– 504 Loan program: for businesses that benefit the community
6. Promoting your business:
– Know your target audience
– Social media network
– Timing is a key factor (interest may be there but poor economy means people won’t spend)
– SBA Counselors can be a good resource because they understand the market
7. Growing:
– Big changing point in business is when you go from single owner/worker to hiring employees.
– It is difficult and a common point of failure for people who don’t learn how to delegate.
– Learn when and where to let go so you don’t stand in the way of your own growth

FREE resources:
1. www.SBA.gov
2. Local resources:
– www.SBA.gov/AZ
– http://www.aps.com/en/business/Pages/home.aspx
– AZ Commerce Authority: http://www.azcommerce.com/
– Greater Phoenix Ecomony Council: http://www.gpec.org/home
3. Mentors:
– SBA Counselors: http://www.sba.gov/content/find-business-mentor
– See also SBA resources for women, minorities, veterans
– www.SCORE.org a non-profit organization dedicated to helping small businesses