Kick-Starting a Business of Your Own
As a child,
It's little wonder that today Stubblefield, 46, is satisfying her entrepreneurial drive after decades of working for large corporations. Three years ago, Stubblefield left the relative safety of her job at
She's not alone. In this strained economy, more and more workers are exiting the once secure realm of corporate jobs--many because of layoffs--and starting their own businesses. Last year, more than 600,000 small firms were started in
1. Find a mentor.
Connect with someone in the field you're entering for guidance. Check out StartupNation.com, a site dedicated to small-business groups, or SCORE (www.score.org), a nonprofit that provides education to entrepreneurs. At SCORE, working and retired executives and business owners donate their time and expertise free of charge in person or online.
2. Do the prep work.
You may have to study marketing, finance, and employment law. Sign up for a community college or certification program to get the necessary skills. You can begin by contacting your town's or county's
Stubblefield's move into the wine trade was a combination of inspiration and market research. "I love fine wines, although I'm not a connoisseur, but there wasn't an upscale wine shop near where I live--an upscale, predominantly African-American section of
3. Write a business plan.
There's no strict model to follow, but in general, a simple plan--which you'll have to submit to get a loan or other financing--should be about 20 pages. Here's what you'll need:
-- An executive summary that explains what your company will do, who the customers will be, why you are qualified to run it, how you'll sell your goods and services, and your financial outlook.
-- A detailed description of the business, its location, who your management team is, and what your staffing requirements are. You'll also need to include information about your industry and competition.
-- A market analysis that targets your customers more specifically, including age, gender, and where they live. The analysis also will describe your sales and promotional strategy to reach them.
-- A realistic forecast of start-up outlays--cost of raw materials, equipment, employee salaries, marketing materials, insurance, utilities, and fees for attorneys and accountants--and how much you expect to sell and to earn.
4. Line up sources of funding.
Here are some ways to find the money to get started:
-- Savings: Most start-ups are funded with personal savings. (This is where a severance package comes in handy.) It's advisable to set aside at least six months of fixed living expenses. Try not to dip into your retirement savings: You'll be subject to withdrawal penalties and income taxes and lose the tax-deferred compounding that could serve you well in retirement.
-- Credit cards: Use plastic with care. It's fairly easy to tap into, but this should be a last option. Most cards have double-digit interest rates, a very high cost of capital to carry on your new company's books.
-- Home equity loans: This is an appealing option because the funds are usually taken as a lump sum that you can pay off over time. In this housing market, though, qualifying for such a loan can be tough. If you have equity in your home and a credit score above 700, it's worth exploring. You may also qualify for a tax deduction on the interest on a loan up to
-- Friends and relatives: Money is often lent interest free or at a low rate. Be sure to put the terms in writing so that there are no misunderstandings about interest and repayment. Be forewarned: Money can wreak havoc on relationships should things not work out as planned.
-- Banks and credit unions: A tight lending environment has made borrowing a struggle. A solid business plan and a shiny credit record are prerequisites. You might try a bank that's familiar with you or your industry, or one that is active in small-business lending.
To find a bank that offers SBA-guaranteed loans, check the "Local Resources" section of the agency's website (www.sba.gov). Keep in mind that a lender will still want you to put up collateral, usually in the form of a real estate asset. Plan to have some capital or equity that you personally put into the business. Lenders want you to have some skin in the game, so to speak.
-- Angel investors and venture capital firms: These individuals and firms invest in exchange for equity or partial ownership. But they are typically overwhelmed by requests for financing and are exceedingly cautious with their funding. Some have a mission. San Franciso-based
5. Purchase health insurance.
Some sources to check for availability are eHealthInsurance.com, Coverageforall.org, and the
6. Hire an accountant.
It's critical to know which business expenses are deductible. Careful record keeping is essential, and having a pro to guide you will come in handy. Go to the source to find what's deductible:
7. Don't neglect retirement savings.
You have two basic ways to set aside pretax savings: a simplified employee pension, or SEP IRA, and an individual 401(k). With a SEP IRA, you can contribute up to 25 percent of your net self-employment income, up to a maximum of
8. Accept what you can't have.
"For my birthday, I'm going to ask my husband for an assistant," Stubblefield says. "The business is constantly on my mind. There are no days off." In truth, that's fine with her. Since she opened the wine shop, Stubblefield and her husband have become co-owners of a restaurant, and she's a joint venture partner in
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