Declare Your Independence: Found an Independent Business
Starting your own business is the American way. According to the Small Business Administration, there are 23 million small businesses in the U.S., providing more than half of all jobs. If you want to join the ranks of independent businesses, here are some tips for getting started.
Independent Businesses Come in Different Shapes & Sizes
Jean Card, National Federation of Independent Business’s vice president of media and communications, says, “most independently held businesses are very small; nearly three-quarters of NFIB members have fewer than 10 employees.” For example, the local hairdresser or parts manufacturer may be privately owned businesses, and these companies are legally structured in a number of different ways. An important first step is to consult an attorney and accountant to select a structure that supports your own business’s financial, tax and growth requirements.
Financial Considerations
One of the biggest, and scariest, considerations is cash to fund the start-up period and ongoing operations for your new business. Do you have enough money to pay rent or buy fixtures, furniture and inventory? Even if you’re a home-based enterprise, your bank account must be flush enough to cover living and business expenses while your company grows. Make sure to develop personal and business budgets so you can accurately assess what you have and what you need.
“I've seen first-time business owners completely blindsided by the actual expenses of running an independent business,” notes Lisa Drake, a small business CPA and accounting professor in San Jose, CA. “Find an appropriate model to study and, to the best of your ability, discover the true costs involved.”
Portland, OR-based Brent Mason ran the numbers before founding GoLocalNW, a consultancy serving small enterprises. “I created a spreadsheet to project what I needed as far as revenue and profit, and I spoke with my CPA,” he says. “If you can’t make it work on paper, it’s called ‘wishful thinking.’ Revisit some of your assumptions or look into a different type of business.”
Independent Business Planning
Make sure to tackle financial and other critical considerations for your independent business with a plan. Develop a business plan, a business concept statement or a business model canvas to communicate your business idea and its value. The form is less important than the substance, notes Alana Muller, president of Kauffman FastTrac, a trainer for aspiring and current entrepreneurs.
“Ask yourself, ‘What problem am I solving?’ And, ‘Is my idea commercially viable and will it generate enough revenue to be sustainable?’” she suggests. “Successful entrepreneurs consider and implement sales and marketing plans, convert prospects into customers, locate and acquire financial capital, build solid, effective management teams, and they ably manage risk.”
One example of good planning and execution to manage risk was when Jill DuPont, owner of Out of the Box and Beach Box in Greenwich, CT, “found a loft space with low rent on the main street’s highest-trafficked block, and created a tight expense budget and stuck to it,” she recalls. “I also took out a credit line for more than I ever thought I’d need.” Further, she carefully defined her target customer, created a realistic monthly sales plan and established how much inventory she needed to achieve it.
Though creating a plan and vetting the financials may not be the most fun part of owning an independent business, they are critical components of success. “Decisions are made based on an emotional state,” says Lori Marcoux, executive coach and leadership consultant with Extraordinary Learning in Seattle, WA. “Sift through all the emotions entangled in the decision-making process and confirm which direction is the most rational decision.”
With this advice, creating the right steps for your business will hopefully be an easier, more manageable process going forward.