Starting a business is beneficial for me as well as everyone else, as our high school careers are ending and people are going to be looking for jobs. This is the way I want to live my American dream. I have always been interested in Business and I always wanted to study it more. I am going to go to college for supply chain management and computer science. From this it will lead me to the proper knowledge I need to be able to start a successful business.
The traits and characteristics that help you become a successful entrepreneur are: one’s ability to gather facts and make important decisions, stay motivated through all times of business, good organizational skills, good talking skills, the ability to stick with it and work long days to get the job done especially in the beginning when a lit of work needs to be done, ability to cooperate with many different types of people, being able to hold in emotions and not show the bad side to other workers, confidence in their ability (skills and mindset), being able to admit one’s wrong and seeking help from that problem, being strong or understanding depending on the situation, the ability to mix personal life and business life and most importantly the ability to take risks!
Many people think that starting a business doesn’t have many rewards but actually it has many rewards that always get over looked. The advantages of being an entrepreneur are you are the boss, you don’t have to work for somebody that you don’t like. Every big decision comes through you and all parts of the business like investors, the bank and the IRS all answer to you. This can show off your leadership skills as you are the face of the company. One thing about being an entrepreneur is that you have no limits because of capitalism. You can reach the sky if you want or you can just enjoy your own personal wealth. Working for yourself, you are able to make more money than working for somebody because you can make the decision to change whatever part you want to change.
Some more advantages are that you get to do what you are personally good at and you can show off all the great skills you bring to the table, that before you maybe couldn’t have. You can have the personal touch of promoting and marketing your own company. When an entrepreneur does his job it means something because it is his company and not working for somebody he maybe doesn’t even know and has a personal connection to the job. One of the most rewarding aspects is that you can decide on the location of the business. Maybe you don’t like commuting and you can work right from home or start very close from your house.
Although starting a business has lots of advantages it has a lot of disadvantages too. You are not guaranteed a salary or paycheck. There is always a high financial risk in starting the business. You have to provide the capital at the beginning. In the beginning the money will be so short that you will have to put even more capital into the business and it may cut a lot into your savings and locked away money. It can take a very long time for you to see profit. Some can be from three to five years before a profit is scene and sometimes it is even longer than that. It is all on you, when times are good, this is a good thing. When times are not good then you will have to endure the bad times. Like when looking at two great employes and having to decide which to let go because the company can’t keep them both on the payroll.
Some more disadvantages are you have to keep the moral high and and keep the employes happy and valued. Another big issues with this is keeping the customer happy so they keep coming back and the investors happy because they are a big part of the business. When a lot of work needs to be done, you can see the dreaded 168-hour seven day week. It can cut into many aspects of personal life just so you can get what needs to be done, finished. It has many responsibilities and administrative details which are tedious hours. To cut some of this out, you can hire people if you have the money for it but that leads to training, review of work and still oversee the work they are doing. Every business is effected by the people buying from it. So when times are slow and not moving you can encounter a slow in everything because of the market, industry or economy or even when some competition is intermixed. You need to be able to hold out when a dry patch comes through.
One of the biggest problems with starting a business is that it is done out of impulse and not enough planing goes into it. Some of the most successful entrepreneurs say that if they knew all they were getting into they probably wouldn’t have started the business. Others say they wish they just had thought it through more because they now see the issues they face and they didn’t originally plan on them. So in planning you need to ask the three most important questions. What are your goals? How well do you understand business? and How will running a business impact your life? With the goals, you need to decide what kind of product or good you want to sell. When deciding what type or product or service to sell you don’t want to bring it in to the world before the consumers know they need it. You also don’t want it to be too late and be stuck fighting competition. You need to see when is the right time to do it where it won’t be a flop.
Some more planing that you have to keep in mind is that you need to think about retirement and if you want to be successful and retire or work your whole life and pass it on to your kids. When dealing with understanding business, you just need to be able to understand simple business concepts and how they relate to your business. This includes: bookkeeping, taxes (local and state) paying employees, signing contracts, doing deals, marketing and following laws and regulations. How it will impact your life is the most important. You need to be able to emotionally and financially be able to stick with the company. You want to be able to have a life outside of the job too. If you end up spending too much time at work and not enough with family and health it will come back and hurt the business. You need to be very motivated and take a break and do things that refresh you.
One of biggest things to consider is the timing. If you should start your business full or part time. If you end up going full time, some people say it is better to start part time because you can grow gradually and see if it is a good idea or not. “You find out what running a business requires, while limiting your liability if it fails” Philip Holland. This does lead to other problems as you are not able to get to market your business because you are not their. Many people say that you should really look into your market potential. This can make or brake your business right on the spot. You need to think about this before because you could be so caught up in your business that you end up missing it. Another big thing is the financial planning, as you should put enough money away so that you can live on six months to a year worth of money. Making sure that you have clearance in all your family life will help when you do have to spend your long hours at work.
One of the biggest misconceptions of starting a business is that you have to start a business straight from scratch. (Getting your own idea and building the company from that) This actually is a lot more of a risk. You need to consider the customers, marketing to new businesses, hiring employes and getting the cash moving. That is all done without a name for oneself. Some good things are that you can buy an already existing business, starting a franchise, or buying the business opportunity. This whole experience can be a rewarding experience and can take some of the risk out of the equation.
After you have what you are going to sell, you need to find out what your market is. The two main markets that you can sell to are the consumer and business. A consumer is someone that were to sell clothes at a store and you are selling to the consumers. If you are selling office supplies to a business then you would be selling to a business. You can be a mix between the two, but you really want to narrow down your topic to just one market because they are the most successful. This process is called, “creating a niche.” It could be something as little as Walmart selling to “bargain-minded shoppers.” When people don’t narrow down their niche they end up at the “all over the map,” phase and say they do many things and be good at all of them. Falkenstein warns: “Smaller is bigger in business, and smaller is not all over the map; it’s highly focused.”
The Seven steps in creating a niche. The first step is making a wish list. This is just a basic list of who you want to do business with and identify location. The next step is focus, you want to clarify what you are really selling. The next step is describing the customer’s worldview. This is the act of doing business with people. Falkenstein’s rule, “Do unto others as they would do unto themselves.” Take some time to think as a consumer and think see his way of thinking. The fourth stage is synthesizing and you reflect on yourself. IT still takes you where you want to go, somebody else wants it, it’s carefully planned, it’s one-of-a-kind, and it blossoms into something that can keep you going. The fifth step is evaluating, and this is just looking at step four and making sure that it all makes sense and that it is do able. The sixth step is testing, this can be just giving out samples and doing a cheap trial to see if it would work. The seventh step is to go for it! This is just launching the business, and getting everything running. This is the hardest part for most entrepreneurs because you really don’t know how well it will turn out.
Now it is time to make a mission statement. A mission statement is a quick, couple sentences that tells the goals of your business. It tells what your business is all about to customers, employees, suppliers and the community. It says what things you sell, the prices, the quantity, marketplace position, the growth potential, use of technology, and how you treat other people. When picking the words to put into the business you need to make sure that says all the major aspects of your business. You just need to know why you are doing it all, who your customers are going to be, what you want the image of the business to be, what you will sell, the level of service that they provide, roles that the business and employees play, what kind of relationship you will have with suppliers, how do you differ from competitors, and how you will use technology, capital, processes, products, and service to reach the goals.
One of the keys to getting the business moving in the right direction, without doing the proper research your good or service could be sent back just as fast as you put it out. You have to be willing to adapt your product in the process of doing research. Maybe if you find that you can just take a little step in the other direction to do something that hasn’t been done is better than being convinced that you have the right way to do it. “A lot of companies skim over the important background information because they’re so interested in getting their product to market.” said Donna Barson. Market research is a way of getting all the information you can get to solve or avoid potential problems with the market down the road. When looking for information you should look for three different areas. The industries information this is looking at the industry and finding the trends. Making sure it is bringing in money and not slowly failing. The Consumer close-up is when you look at the market and try and find an estimate of how much you are going to sell based on this. This includes calculating how much to own and all other expenses that are being paid and taking it out of how much you project to sell. The third is to do a competition close-up and this is basically a mix between the the first two. You look back and then account for other competitors. Make sure to really account for all and then consider future competition as they will be present too.
This is a very important part of the planning phase. The name of the company is the first impression that somebody sees of your company. You can latterly make a good name for yourself. This should be given as much thought as the product idea you’ve thought of. This is a very hard step because most of the names that you may want to use have already been taken. It is up to you how you decide you want to set up your name. It can be a very crazy far out and even sometimes made up names because it sticks in someones head or it could have something that has to do with what you’re selling and you make your image that way. Both have been proven to be successful. You can get someone to professionally make the name but buying that can be anywhere from $5,000 dollars all the way up to $80,000 dollars. That is a lot of money right up front for something that may not even last. In the end you want a name that will give a great image for your business and be the talk of the town.
When choosing a name you want to keep the following things in mind. Make sure that the name is appealing to you and also to who you are trying to sell to as they are the ones that will be doing all the business with you. Pick a name that has to deal with the persons comfort, or something that brings up a happy mood. Don’t pick something that would be too long or confuse somebody. Don’t put any puns into it. Make sure not to put “INC” after your company, unless obviously it is actually incorporated. Don’t put the word “Enterprises” as this is usually from a rookie.
You want to look into choosing a business structure the hardest because it impacts taxes, paper work and the liability you face and how you can raise money. There are three common types of businesses, sole proprietorship, partnership, and a corporation. One key thing to keep in mind is when you originally start it is easy to switch from one to the other, just by letting the IRS know.
A sole proprietorship is the easiest type of business structure. It is usually just one person who owns and runs the whole business. If you can work alone this is the way to go, the tax cuts that go along with it are really good. The expenses and income for the business show up personally on a personal income tax return. So this means that if it is a losing business, it is able to be made up because of your personal gains on your return. The taxes are very low, you only have to tax earnings once and you are expected to pay the taxes four times a year on the 15th of: April, June, September, and January. Some disadvantages are the personally is solely responsible for all liabilities in the business. All your assets are at risk and they could all be gone to cover debt or a legal claim filed against you. It is hard to get money for the business, as you only have one capital to put into the business you look to banks and other financial sources and it is hard for them to give money to someone that is starting a business as a sole proprietorship. This means that most people have to use all their assets, like savings, home equity or family loans.
Partnership is owned by several individuals, doesn’t mean it can only be two people. They have two branches of partnerships, and they’re general partnerships and limited partnerships. General partnerships manage the company and take all risk and responsibilities for the other partner’s debts and obligations. The limited partnership is both general and limited partners. The general partners own and run the business and take all liability for what they do and the limited partners are basically just investors to get the starting capital higher and don’t have control over any of the other partners or what the business does. Like a sole proprietorship, the taxes are what grab people, and they don’t pay tax on its income but it gets passed through to any profits or losses to the partners. Come tax time they need to file a tax return that says the income and loss to the IRS. It has just about the same types of risk though. The partners take responsibility for all risks, the debts, and law suits that could be because of something that happened at the business. These do take a little bit more legal and accounting services, so it has a little bit higher of a cost, but when you put two or more people’s money. The good out weights the bad.
This is the most expensive and complex system, out of all the other types. This is essentially a board of directors that are separate from the owners. This leads to more taxes and regulations. One of the key features is that it gives protection to the liability of the business owner. This means that if something were to go wrong, the owner’s personal assets wouldn’t be at risk. Corporations are very good at raising money. A corporation can be a public company that sells stock to give it more money and to help pay some of the fees and to make extra money. If someone were to die in the corporation, it could keep going right through it and the business wouldn’t suffer. One of the biggest problems is the higher costs, this is depended by location as all states have different laws and usually require a lawyer to help decide what is best. It requires more accounting and tax preparation services and owners have to pay a double tax on the business’s earnings.
Although the cost of a lawyer can be expensive, it can save you from being in massive debt and law suits. Usually it is recommended to talk to a lawyer before doing anything that may have legal problems. These could be: staying in regulations, negotiating loans, getting trademarks, buying or selling, working on pensions, looking over business forms, buying or selling real estate, looking over contracts, collecting bad debts and even selling things in other states. Some business owners don’t have a lawyer in mind and when something happens they run to the phonebook and call up somebody that has never been heard of because they can’t book somebody that has other obligations. “Almost every business, whatever its size, requires a lawyer’s advice,” says James Blythe Hodge.
An accountant isn’t a necessity, but it can really help keeping an eye on finances and other major costs, and can even help with the start up finances too. This can come in handy because when starting up, it is very easy to overlook the little costs, and you could run into a problem because you have other things to worry about when you are starting up. If you have any questions about what to do at any point, you need an accountant. If you don’t do checks and balances every month, you could be closing your doors before the years over. Accountants are much more reliable then starting up an application on the computer and using that. As they stick through it, they can even become not only your company’s financial partner but even your families planner for kids going to college and other big financial issues. The accountant takes up four main jobs: business advisory services, accounting and record-keeping, tax advice, and auditing. The business advisory is when they learn all about the business and help put together the pieces of the business plan and personal financial plan. The accounting and record-keeping is the most basic one, it is exact what it says. They keep all the records and keep all the books up to date. The give tax help with compliance and planning. This is dealing with all the taxes and also staying within the tax laws. The auditing is used mainly by banks so you can get your loans for money.
To make the business work the funding needs to come from somewhere, but eventually for the business to work you need to have the price you put in the business plan before you can start doing any of the work. The best way is using personal funds and putting the savings forward and other money so that the dream can be a reality. Before going other places for money, most look to see how much individually can be put forward because if you don’t put much into it then it shows investors that you don’t have much faith in it so why should they give you the money and have faith in the business. When deciding how much money you personally put into the business it is good to make a list of all assets. This is to reveal money that was never even scene before or completely forgotten about. You could sell some assets to provide more money. You may find you have investments in different things. These can be used to help you out but if the market goes down, they could in turn hurt you and you have to put more money in. You can get a home equity loan on your house, on the part that you already paid off. You can consider borrowing from your life insurance plan. This can be built up as a ready to go option if things start to run south. This can be a good option because you don’t have to pay off the money you borrow, or the interest that piles up from the loan because if you are to die and need that money to cover costs, they get that money you owe from your other funds. If you are working in a job at the time and are getting a 401K retirement plan, you can take about 50 percent of that on a loan, but be careful because if you do lose that job they want the money fast. That can be as quick as 60 days. You can withdraw from you IRA or individual retirement account. It isn’t a loan so it doesn’t have interest but you need to pay it back within 60 days. If currently employed you can always save from each paycheck or keep the job part-time while you get the job up and running.
You may just find that you can’t personally pull together all the money that is needed for the business. Mike McKeever says, “Most businesses are started with money from four to five different sources.” The next, most commonly used place to go is: friends, relatives and business partners. The best reason to turn to them next is they know you personally. They know if you are the kind of person that could get it done or not be up for the task. Odds are if you are asking them at this stage then you will be trusted. Never give a price tag, they will judge you on how much they feel you’re responsible with. This has a positive side and a negative side. If you do very well you can inturn give the original person more money then you originally said with interest to make it seem very rewarding. If the business doesn’t turn out successful, this is also a problem because it can put your relationship in a very tight situation if you can’t pay the money back. It might in turn ruin the relationship.
If you want to make more money, you’re going to need investors. You have two ways to finance your business by equity financing and debt financing. Debt financing is when you get money in the form of a loan and needs to be paid back. Equity financing, the investor gives you money and in turn you give them part ownership of the company. This money can come from money firms and private investors. The investor could want shares of the stock, or even be incorporated in the management of the company and become a partner. Depending on how much time is spend in the planning could be the deciding factor in what they ask for back from the investment. It is also good to really meet the investor, as he could pull the plug at anytime and kill the whole company.
Debt financing is just getting money in the type of a loan, and later repaying it. You can do this by debt financing, banks, commercial lenders and even put on credit cards. They have many different types of loans, all with different names. This can be super confusing and be the same plan and just have a different name depending on which bank you go to. They have about six main types of loans. They have the line-of-credit loans, installment loans, balloon loans, interim loans, secured and unsecured loans, and letter of credit. These mainly only vary depending on how much the payment will be, who will pay the loan and what type of interest it will be.
When it is a single person being an entrepreneur, most of the time they will get denied the loans from the banks because they have a very big risk and not too many banks want to take that risk. This is where the U.S. Small Business Administration, or SBA, steps in. The federal government likes to see small businesses become something and with this the SBA comes in handy. They have lower requirements for owner’s equity and collateral than the loans from banks. The SBA usually gives smaller amounts of money and banks would never do that. The way it works, you still have to go to a bank, make sure to pick a SBA approved bank, and apply for the loan. If the bank accepts it then it is sent to the SBA for approval and then it is reviewed by the SBA. They will look at personal: credit history, industry, and the owner’s equity contributions. You need to be willing to make at least a 20 percent equity of the business or it will be rejected. If your business does end up failing the SBA will pay back some of the money. They are willing to provide 2 million dollars or 75 percent of the total loan, which ever is less. They are willing to take some of the blow if your business doesn’t come up as you originally thought it would.
One of the main parts of being in business is that you can negotiate everything. All business is done through negotiation. It is a very good skill to have as everything happens through it. If it is as simple as making a sale all the way up to merging companies, there is going to be negotiation. Negotiating is fighting for your side and to get the best deal you possibly can. It has three main types of negotiating: know your bargaining position, know how the other side perceives its position, and assess your bargaining style. Knowing your bargaining position, every argument has two sides. One side is much inferior to the other side and you need to know which side you are on. You are going to know how the other side perceives its position, you need to do some thinking as to how both sides would see the issue and that can lead to better arguments and points to bring up. The last is just personally assessing yourself. This is done by just thinking if you are passive or really aggressive, doesn’t really matter which you are, as long you can use it to your advantage.
Somebody may know how to build the perfect product or provide a perfect service but without advertising nobody knows that they are there and in turn, no sales are made. Advertising is such a vital role in the growth and development of a business, that without it nothing happens. To make a proper advertisement, one needs to get a snapshot of the current situation of the company called a situation analysis. This is essentially what your company does and what makes it better than the competition. The next step is describing your target audience. This is just so you are making sure that you are advertising to the people that you want to buy your service or product. The third step is writing down what you personally want to get out of the commercial, like raise in 20% sales each quarter. The fourth step is to develop an advertising strategy. Don’t mess with success. “Once you find and advertising idea that works for you, stick with it. Repetition is key to getting your message across.” The last step is very important, as you need to sit down and figure out how much you want to spend on advertising. Their is always money for advertising though. If you are just starting up, then you can use the funds from loans, family, or personal means. Or if you’re well into your business you can use funds that are surpluses or personal pay.
For my application, I decided to write a business plan. This is usually the most effective way to promote your business. A study for AT&T showed that only 42 percent of small-business owners went through the process of making a formal business plan. Of those 69 percent of the people said that it was what led them to such great numbers. One of the main reasons that business plans are needed are to get money for a loan or other sources, but the real reason that people make them are to say and meet the goals of the business. It helps avoid many types of failures that were not fully thought through. This allows for you to see the errors and correct them before it is too late and you waist money on something that could have been avoided. A business plan is really a guide that sets goals for yourself, the strategies you’ll use to achieve those goals, the structure of your business, the amount of money you’ll need upfront and keep going till you break even. A business plan has seven main parts: executive summary, business description, market strategies, competitive analysis, design and development plan, operations and management plan, and financial factors.
I learned so much about starting a business and how to go through the everyday operations of being a boss of the company. The most shocking was that after going through the income statement and the later pieces to the business I started, I saw so much that needed to be accounted for and not looked at. I thought I had the best idea ever for my business but when it came down to the numbers, I really didn’t have it. Online stores and services are so popular today because they are so cheap and not much risk. I now know where I am headed from this project. It didn’t lead me to a huge youth center but instead it took me to a small online store. Business will never go away and I will never have to worry about missing out on an opportunity because it will always be waiting.
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