start right: build your own business. “as a prospective business owner, you are getting ready to...

Start Right: Build Your Own Business


“As a prospective business owner, you are getting ready to begin

the most demanding and rewarding journey of your life.”

– Jeannine Lecy, co-author, “Start Right: Build Your Own Business”

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Chapter 1… Laying the Groundwork for a Strong, Successful Business

“The only time dreams are free is in the beginning.

The dream is free; the journey isn’t.”– John Maxwell, leadership expert,

speaker and best-selling author

• You have an idea for a new business. You desire to be your own boss; in fact, you are passionate about it.

• Starting a business is hard work – harder than you can imagine – but this book will explain the practical steps you need to take.• Above all, you need to believe in yourself and your dream.

Money & Faith in Motion

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• Confidence in yourself and determination to achieve your dream will motivate you to persevere and see your ideas become a real, viable business.


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Write a mission statement• Describe what you hope to achieve

with your small business. How will you know when your business is a success?

• Your mission statement only needs to be a sentence or two, such as: “I will own the most successful restaurant in the state” or “I will provide quality legal services to people who need representation.”


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Write a mission statement• Keep your mission statement in a place where you can see and read it often.

Let it remind you of your dreams, goals and vision for your business.

• As you face challenges, your mission statement can be a tool to help you keep your momentum and stay committed to starting your business. Let your mission statement remind you that you are passionate about what you are doing.


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Research is essential to your success• You can learn more about

the type of business by conducting online searches, reading books at the library, and subscribing to relevant trade magazines.

• Become familiar with businesses in your area that are similar to the one you want to open. Visit them in person.

• Is there a need for your potential business?


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Find out as much as you can about businesses in your area who could be your competitors, such as:

- How many similar businesses already exist?- What products or services do they provide? - What do they charge?- Are they busy, or slow?- What do you like about visiting their business? - What would you do differently?


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• If you plan to start an online business and sell products on a web site, compare other web sites and find out as much

as you can about other web-based businesses that might be your competitors.• If you want to leave your job to start

a similar business, find out if you have signed a non-compete clause, and what it covers.


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• Even if you have not signed a non-compete clause, as a current or former

employee, you cannot take client lists or trade secrets from that business, either while you are working there or after you have left.• You may not send your employer’s clients information about your new business while you are still working for your employer.


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Take notes• As you conduct research and observe other

businesses, you gather a lot of information. You will have questions. Keeping track of your questions and ideas is worth your time. Make careful notes you will understand when you review them later.• Use a journal, or keep digital notes by sending

yourself text messages or e-mails. Organize and store all your notes so you can find them easily when you need them.


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Initiative, passion, willingness to learn • The future success of your business will depend on your initiative and your willingness to be dedicated, devoted and work hard now.• Your passion for your future business will keep you going when you encounter difficulties and setbacks.• Have a willingness to learn what you don’t know. You will stretch yourself beyond what you thought you were capable of – but that’s how you grow and become successful.


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Initiative, passion, willingness to learn • Your skills and reputation aren’t enough

to start and run a business.• Your proficiency will help you build a reputation and can give you an edge over your competition.• Ask as many questions as you can and talk to as many people as possible who can help you learn how to run your business.


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Involve your family • If you have a family, your time with them will be interrupted by the demands of a new business.• Have a family meeting so everyone understands that you will be working 50 to 70 hours a week – maybe more. Acknowledge that your family will make sacrifices, too.


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• Set some rules or boundaries about how your business will affect your family so everyone knows what to expect.

- Which days of the week will you work?- How many hours a week will you work?- Will you work on weekends and holidays?- Can work or clients interrupt family time?- How much of your own or your family’s money

will you put into the business?- How soon do you expect to earn an income?


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Building a business takes time• The idea of starting a new business is exciting,

but don’t let this excitement convince you that you can quit your current job. You will probably need to work at a full- or part-time job while you start your business.

• When you set up a business, you will incur expenses before you ever receive a payment for your product or service. How will you pay your bills? Don’t quit your job unless you have enough savings to support yourself and pay routine business expenses for 12 to 18 months or longer.


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Review

• You must believe in yourself and your dream. Confidence in yourself can help you persevere and reach your goal of opening a business.

• Research the type of business you want to open. Visit similar businesses in your area.

• Take notes; organize them so you can refer to them later.• Initiative, passion and a willingness to learn are key.• Involve your family; set boundaries so your family knows

you’ll devote time to them as well as your business.• Remember that building a business takes time.


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“Whenever you see a successful business, someone once made a courageous decision.”

– Peter F. Drucker, author and management consultant


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Chapter 2 … Writing Your Business Story


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What is a business plan?• Crafting the story of your business

can be an exciting process.• You are moving forward, taking your notes

and turning them into a thoughtful plan that will help you turn your dream into a reality.

• Your business plan doesn’t have to be long, but it should help you clearly explain your business to others.


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• A business plan helps you and others answer basic questions about how your business will operate.

• Pulling your business plan together will motivate you to research the questions you don’t have answers to. It will encourage you to think through your ideas.• Your business plan needs to be in writing and will

evolve as your business grows. Ultimately, your business plan will become the key instrument for communicating your plans to associates, bankers and others who may play a role in your business.


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Describe your business• What is your mission or purpose?• What will you call your business?• What product will you sell or what service will

you provide?• Why is your product or service needed?• How qualified are you to provide this product

or service?• Why will be it be successful? What are the pitfalls?


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Describe your business• What does it take to make the product or provide the service?• What skills or training do you have that others may not?• When will your business open?• Will you rent space or have an office at home?• Who is your backup if you are ill or

have an emergency?• Will you need space to manufacture a product? Will you need a warehouse?


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Describe the market• Are people willing to

pay for your product or service? How much?

• How did you arrive at the cost of your product or service? Will you make

a profit?• Who are your competitors?

What makes you different from them? What makes you better than them?


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Describe the market• Who are your customers? What are their demographics? (Age, income level, education level, etc.)• How will people or businesses who need your product or service hear about you?• Will you have a client base right away?

Are those clients committed to using your product or service?


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Describe your financial plan• How will you pay for your business start-up?

- A second job- Borrow the money- Use savings

• Will others invest in your business? • How long will it take for you to

repay them?


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Describe your financial plan• What do you expect to earn?• How much will it cost to run your business?• What financial alternatives do you have if your business doesn’t generate enough revenue?


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Describe your business management plan • Will you be the

only employee at your business?

• Does your business background or other experience help you in this new business?

• Are you physically suited to this business?• Will you need training or licensing?


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Describe your business management plan • What hours will your business be open?• If you have staff, what are your personnel policies and procedures?• What is your policy regarding

refunds and returns?


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If you want to buy an existing business• Are you hoping to buy a business that is already doing well and gain its income, or are you hoping to buy a business’ client list?• Buying a business can be more expensive than starting from scratch because you are paying for some of the fundamental resources that are already in place.


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If you want to buy an existing business• You will need a business plan. A well-crafted business plan will help you have realistic expectations about that business.• You will need to research the business so you can determine how much it is worth.• The Small Business Administration offers guidelines for anyone who is considering

buying a business. Go to www.sba.smallbusinessplanner/start/

buyabusiness/index.html


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If you want to buy an existing business• You will need to gather as much information

as you can about the overall health of the business. Asking the right questions and thoroughly researching the business can empower you to get the best purchase price so you can buy, and run, a successful business. If the business

you want to buy turns out not to be a good deal, walk away.

• Because you will be asking for a great deal of information, tell the seller you will sign

a confidentiality agreement.


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If you want to buy an existing business• Do you know why the seller is selling the business? Does his or her answer seem reasonable and honest?• Can you verify what the seller is telling about

why the business is for sale? Check with the Better Business Bureau to see if the business has complaints against it.


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If you want to buy an existing business• Ask for the business’ profit and loss statement for the past three years.

Insist on obtaining the business owner’s tax returns for those same three years. Have your accountant compare the profit and loss statements and tax

returns. Both are essential, because figures may have been manipulated on unaudited financial statements.


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If you want to buy an existing business• Ask for a detailed list of all equipment, inventory and supplies being sold with the business. Go into the business and physically inspect everything on the list.• How is the seller determining the price he or she is asking for the equipment, inventory and supplies?• If large equipment and vehicles are included in the cost of the business, always ask for the year, make, model and serial numbers of each. Your accountant will need to put these items on a depreciation schedule for tax purposes.


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If you want to buy an existing business• Are the building and land for sale, or are

those leased? Can the building be remodeled? Who pays for repairs? Who is responsible for increases in taxes and insurance?• Is the client list for sale? Purchasing a client list

is often referred to as purchasing “blue sky.” If you buy the client list, keep in mind there is no guarantee that the business’ current customers will purchase from you if you own the business.


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If you want to buy an existing business• Insist on a business appraisal. A business appraisal can help you determine the value of the business and may help you avoid paying more than the business is worth when you buy it.• Will you be assuming Accounts Receivable? This is the money that customers currently owe the business. Ask for an aged accounts receivables report. This will show if the accounts are 30, 60, 90 or more days old. Receivables that are more than

60 days old are difficult to collect.


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If you want to buy an existing business• Will you be assuming Accounts Payable? This is the money the business currently owes its vendors. If you are responsible for the payables, what income will you have to pay them with? • Are there any other liabilities that are attached to any equipment, or are there liens against any equipment?• Are there any outstanding taxes that need to be paid? Do you have enough income if you are faced with a tax bill right away?


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If you want to buy an existing business• Ask to see the projected cash flow. What is

the business’ projected income for the next year? Your potential income and

success will depend on the financial health of the business now, as well as new ideas you bring to the business when you run it.• Will the seller help train you? Do you want

the seller’s help? Do you have experience with this type of business?


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If you want to buy an existing business• Review all the business documents with

your accountant.• Have your attorney draw up a contract when you are ready to buy. Have your accountant review it, as well. • If the business includes a building and land

for sale, those should be in a separate contract.• If your accountant or attorney advises you not to sign the contract, take his advice and have him explain why. You must take those recommendations seriously, no matter how much you may want to buy a business.


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What about work-from-home ads?• Research is essential. Check with the Better Business Bureau to see if the company offering work-from-home jobs has complaints against it. • Go to Google.com, type in the company name and

‘scam’ and see what results turn up.• Beware of businesses that want you to reship goods. Often, the goods are stolen.• Don’t send money until you are certain the

company is legitimate.


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Review

• A business plan helps you answer basic questions about how you will run your business. It gives you a

chance to think through your ideas and explain your business to others.• In your plan, describe your business, the market, your

financial plan and your business management plan.• If you want to buy an existing business, you need a business plan and lots of research. If, after doing all the research into a business, it does not turn out

to be a good deal, walk away.• Research can help you avoid work-at-home ad scams.


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“Real success comes in small portions day by day. You need to take pleasure in life’s

daily little treasures. It is the most important thing in measuring success.”

– Denis Waitley, author, motivational speaker and productivity consultant


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Chapter 3 … Getting Your Personal Finances in Order to Help Your Business


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Are you financially ready? • How do you know if you can afford to go

into business for yourself?• The best way to find out is to look at

your personal finances – they will act like a key that can open or close the door to your new business.

• Lenders and prospective investors will view the way you handle your personal finances as the best indicator of how you will handle

your business finances.


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Find the money• Finding the money to open a business can

seem difficult when you are constantly paying for life’s unexpected expenses.

• A written plan, or a budget, will be your lifeline when things get tough.

• A budget will show you exactly where your money is going. A budget is the best tool you have for saving the money you need to start your business.


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A good budget is based on goals• Treat your budget like something that

can help you get what you want.• A good budget is always based on what you want

to accomplish with your money. Let your goal of starting a business inspire you to create a personal budget.• Keeping your goals in mind can help you stick to

a budget. Write a few goals on an index card and put it in your wallet. When you are tempted to spend money, ask yourself:

“Will this purchase help me reach my goal?”


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Know your personal income• Calculate the amount of money you’ll need

to support yourself and your family while you start a business.

• You need to determine your income from any and all sources.

• Figure out your gross income and net income.• Create your budget based on your net income. After deductions, you can

expect to take home 70% to 80% of your gross pay.


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Know your personal income• Create your budget based on income

you know you will receive each month. If you only receive overtime

sporadically, you should not include it in your monthly income. This also holds true for bonuses or commissions that you cannot rely on each month.


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A closer look at budget categories• Fixed expenses do not vary from month to

month (such as rent or mortgage payments).• Flexible expenses vary in amount from month to month (such as clothing and entertainment).• Periodic expenses occur every three or four months, or even less (such as insurance premiums, license tag renewals, car repairs or medical bills).


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A closer look at budget categories• Savings belong at the top of your budget. If you don’t put anything in savings, you won’t be able to pay for life’s unexpected expenses. If you don’t save, how will you have money to start your business?


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Your ideal budget• A budget should be personalized to fit you and your family.• In order for your budget to balance, the total of all categories (housing, utilities,

food, etc.) must be equal to or less than your net income.

• A budget should cover all of your expenses and bills each month, and you should

not need to use credit to make up the difference.


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Plug spending leaks• Spending leaks are things you spend money on almost automatically, without thinking. These might include books, newspapers, music, coffee, hobbies and more.• What are your biggest spending leaks, and why? Spending leaks can ruin your budget and sabotage your efforts to reach

your goals.• Decide what action you will take to stop spending leaks. Even small leaks can

add up quickly.


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Track your expenses• If you find yourself running out of money, track your expenses. Keep a small notebook with you and write down everything you spend. This will help you identify spending leaks.• When it comes to your money, you have choices. You can track or expenses, or not. You can make a budget, or not. You can save money to reach your goals,

or not. You will reap the rewards – or consequences – of your choices.


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Money gains value over time• Money saved, not spent, can earn interest and

grow over time. Even small amounts of money can grow to large amounts when your money earns a return.• Setting goals, making a budget and living within your income can enable you

to save money. When your savings earn interest, it is growing, giving you more money to put toward your goal of opening a business.


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Credit• From a financial standpoint, you are your business. Even though, for tax purposes, you must keep your business and personal finances separate, the way you manage your personal finances will affect your business.• That is why, starting now, it is important to either establish or maintain good credit.


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Credit• What is good credit? Good credit means

you make your payments as agreed on or before your due date in full monthly payments.

• Good credit is reflected in your credit score. Most credit scores estimate the risk a company incurs by lending a person

money or providing them with a service.


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Credit• Generally, the higher the score, the less risk

a person represents.• The most commonly used credit score is called the FICO score, based on a calculation created by Fair Isaac and Company. FICO scores range from

300 to 850.• A new credit score, the Vantage Score, was

created in 2006. However, the FICO score is the most commonly used credit score.


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Improving your credit• Obtain a copy of your credit report at www.annualcreditreport.com. You can get a free copy of your credit report every year. You should review your credit report at least once a year and check it

for errors.• You can improve your credit score by:

- Paying your bills on time every month- Paying down your debt- Preventing your debts from going to collection- Not applying for too much debt


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Review

• Are you financially ready to go into business? Find out by getting your personal finances in order.

• The way you handle your personal finances indicates to lenders how you’ll handle your business finances.

• A budget is a tool you can use to achieve your goals. Savings should be at the top of your budget.• Learn to track your expenses and plug spending leaks so

you have more money to put toward your goals.• Establish or maintain good credit. Pay your bills on time,

in full, every month. Check your credit report every year to be sure it is accurate.


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“If you work just for the money, you’ll never make it. But if you love what you are doing,

and always put the customer first, success will be yours.”

– Ray Kroc, founder of the McDonald’s Corporation


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Chapter 4 … Finding the Money to Run a Business


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How much money will you need?• Make a list of business expenses you expect to have. Estimate how much each will cost. For example:

- Lease for office space- Utilities and phone- Supplies- Professional services (attorney, etc.)- Advertising- Inventory


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How much money will you need?• Add your total monthly personal expenses and estimated total monthly business expenses. This is how much money you will need to earn each month. • How much money do you expect that your

business will earn each month? How did you arrive at that number?

How many products or hours of service will you need to provide to earn that much money?


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How much money will you need?• It takes time and effort to build a business, attract customers and make a profit. Realistically calculate the amount of money you will need before you go into business.• When you open your business, your income will not be as steady as a regular paycheck. For those who have always had weekly or biweekly paychecks, adjusting to a fluctuating income can be difficult.


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How much money will you need?• Avoid relying on credit cards to cover your

expenses while you are building your business. This is hazardous.

•A recent study by Monmouth University in New York showed that the morea business increases its credit card

debt, the more likely the business is to close.


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Using your own money• One of the simplest ways to finance your business is to keep your full-time job. You will have consistent income and benefits, and the opportunity to earn extra income as you build your business.• You can also use your savings to finance

your business. If you go into business without a full-time job, be sure you know how much savings you will need to cover all your expenses. Hope for the best, but plan for the worst.


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Using other people’s money• You may have a friend or relative who is willing

to loan you money. Have your attorney draft a loan agreement so you both know the terms of the loan and when it needs to be repaid.

• You may want to take on a partner. Have your attorney help you set up the partnership, and put it in writing. The written agreement needs to state in detail what each partner’s responsibilities will be, and how each partner will be paid.


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Using other people’s money• You may want to get a loan from a financial institution. A lender will want to see your financial statements for you personally and for your business.• A lender will want to see your business plan and projections of your business income. You will need a start-up budget to estimate costs involved in starting your business.• Before signing any loan document, have

your attorney review it.


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SBA and CDFI loans • The Small Business Administration, or SBA, is an independent agency of the federal government that helps Americans start, build or expand businesses. One of their services is to guarantee loans. The guarantee is to the bank or credit union making the loan to you. • Loans may be available to you through Community

Development Financial Institutions, or CDFIs. CDFIs are certified to provide financial help to individuals. Many of these services are

geared to people who have lower incomes.


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Investors• You may know someone who wants to be

an investor in your company. He or she may be willing to invest for a return on his or her money.• If having investors is an option

you want to consider, consult with your attorney. Your attorney will write the contract for the investor – how and when the investor will be repaid, how much input the investor has in your business, and other details.

• Selling stock in your company is another option you might want to consider.


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Which option is right for you?• Now, you have a better idea of what kind of financing might be available to help you start your business. •By determining what your personal and business expenses will be, you have a better idea of how much money you need your business to earn, and how much you might need to borrow.


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Review

• How much money will you need to go into business? You will need enough to cover your personal

expenses and your estimated business expenses. • You may want to consider a loan from a friend or relative, or a loan from a financial institution.

You may want to take on a business partner, or an investor.

• Whatever option you choose, have your attorney write contracts so that all parties involved know their responsibilities, including when they will be paid or repaid for their investment in your business.


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“Your biggest break can come from never quitting. Being at the right place

at the right time can only happen when you keep moving to the next opportunity.”

– Arthur Pine, publisher and author


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Chapter 5 … Finding the Right Advice: People and Businesses Who Can Help You


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Advisors who can help you• The advice of the right professionals can help you

build your business correctly and keep it running smoothly, and in accordance with all the laws that might affect you.• You will need to talk to an attorney,

an accountant, a lender, and an insurance agent to start.• The advice of these professionals is critical

to the success of your business. Good professional advice early on could prevent costly problems later.


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Advisors who can help you• When choosing an accountant, an attorney and other professional advisors, talk to several before selecting one. Take your business plan with you. Ask lots of questions. Take notes and keep them in a place you can refer

to them later. Choose to work with professionals who answer your questions and with whom you feel comfortable. You will spend a lot of time with them.


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Contact an attorney• Find an attorney who is experienced in working with small businesses. Start by asking your family, friends, co-workers and people you know who are in business if they can recommend an attorney.• An attorney’s advice is essential to help determine the best type of business structure for you.• Once your attorney has helped you understand the type of business structure that is best for you, you can learn how that structure will affect taxes, laws and regulations that affect your business, and the types of licenses you might need.


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Types of business structures• Sole proprietorship – you own and control the business. You, the owner, assume full liability. You are responsible for all business decisions.• Partnership – involves two or more people and is formed to carry on a business for profit.

A partnership requires a legal agreement to be drawn up by your attorney.• A LLC or Limited Liability Corporation is a blend of a partnership and a corporation.• A C Corporation is a basic type of corporation.• An S Corporation is a corporation that has elected to have a special tax status.


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Contact an attorney• Ask your attorney whether you will need trademarks, copyrights, patents and licenses.• Your attorney can also file an application with the IRS for your Employer Identification Number, or EIN. An EIN is required for all partnerships and corporations. An EIN is required prior

to opening a business checking account.


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Contact a certified public accountant• A CPA will help you set up the financial records for

your business. Having accurate, up-to-date financial records is essential to running a successful business and avoiding problems with the IRS.• A CPA acts as a small-business advisor in a

wide range of financial matters. Have your CPA review your business finances at least three times a year. He or she can see details in your finances you might overlook and may make suggestions to improve your business.


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Contact a financial institution• You need to develop a relationship

with a financial institution. You will want a business checking account. You mightalso want a loan from a financial institution.

• These questions can help you find the right one: - What services are offered for

small businesses? - Will I have to maintain a set amount of money in

my business accounts? - What kind of customer support is offered?- What information must I provide before I apply for

a business loan?


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Contact an insurance agent• Look for an insurance agent who has expertise

in the type of business you want to start.• Ask what types of coverage he or she would recommend, and why. Have your insurance agent suggest coverage to protect your business against various hazards.• A small-business liability policy is important as you start your business. You want protection against potential problems in the future. You might also need workers compensation, employee dishonesty insurance, bonding insurance, property insurance, vehicle coverage and homeowners insurance.


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Register the name of your business• Protecting the name of your business is important.

Registering the name of your business prevents someone else from starting a business under the same name.• You need to register the name of your business with your state. Have a backup name in mind, in case someone else already has the name you have chosen.• If you provide services in other states, you may want to register your business name in

those states.


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Contact city, county and state agencies• When setting up your business, you need to

follow all city, county and state laws. Make sure you can legally run in a business in the location you want.

Find out what types of licenses you need.• If you are operating a business out of your

home, there may be special permits needed from your city or county.


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Contact the Department of Revenue• When you open a business, you probably need a sales tax license, which you can get from your State Department of Revenue. There are few exceptions to

this rule.• The Department of Revenue in your state can help you determine which taxes you will need to collect and/or pay.• Always pay your taxes on time; the Department of Revenue can shut down your business quickly if you don’t.


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Contact the Department of Health• Depending on the type of business you want to open, the Department of Health might regulate your business.• You might need to take special training classes through your state or a certified provider. • Health inspectors can go through your facility at any time during business hours, after they present their identification. Some states require monthly, quarterly and/or annual inspections to qualify you for your annual license renewals.


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Contact the Department of Labor• If you will have employees right away, you will need to contact the Department of Labor to see what the requirements for you and your business will be. • You will have to learn about regulations including state labor laws. You will need to know about health and safety standards. • It is especially important to understand the difference between a contractor and an employee. See IRS Publication 1779 for

more information.


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Find a location for your business• A good location should be

easy for your customers to find, and it should fit your budget. It should also be easy for your staff and customers to access, and provide a sense of security.

• Contact a real estate broker and explain your needs and requirements.


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Find a location for your business• Decide whether you want to rent or buy a facility. Do you need a high-traffic location, or will an out-of-the-way office work?• If you plan to rent, don’t be afraid to negotiate with the landlord. Have your attorney review the lease and any other legal documents before you sign them.• How and where will you get business mail?• Ask your city about signage laws.• If you will run a home-based business, find out what city or county laws will affect you.


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Advice from family and friends• Family and friends are often willing to tell you what they think about your business. Keep in mind that an opinion

is not based on facts.• For advice to be helpful to your business, the person advising you needs to understand your situation and your business.• If your instincts are telling you not to follow

someone’s advice, don’t ignore your feelings.


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Chapter 4

Review

• You need professional advisors to help you run a successful business. • When selecting professionals to work with, ask lots of questions and work with professionals who will best serve your needs. • Contact the appropriate government departments in your state to be sure you are properly licensed and following all the laws that apply to you and your business.


Chapter 1


Chapter 5

“You can either modify your dreams or magnify your skills.”

– Jim Rohn, entrepreneur, business philosopher, author and

personal development expert


Chapter 2

Chapter 6 … Understanding Your Business Finances


Chapter 6

Your business finances• To run your business effectively, you need to know how to manage your business finances, which takes time, skill and diligence. •You also need to understand the basics of your business bookkeeping so that you always know how your business is doing and can spot problems if they arise.


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Chapter 6

Keep business finances separate• If you mix your personal and business finances in one account, you have no concrete way of knowing if your business is making or losing money.• Keeping business and personal finances separate is important for tax purposes.

You could face tax consequences if you combine them.


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Chapter 6

Managing a business checking account• Opening a business checking account is an essential part of keeping your business and personal finances separate.• You will deposit all the money you make from your business into this account. All purchases you make for your business should be paid from this account.• You will use the information from your business checking account and business credit card statements so you know what your

business income and expenses are.


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Chapter 6

Keep track of your business books• Although you need an accountant, and

you may hire a bookkeeper, you need to know bookkeeping basics. A good

software program can help.• Understanding some basics can help you make better decisions now and in the future. When you know where your business stands financially, you can make better decisions about large purchases, or even expanding your business.


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Chapter 6

Your chart of accounts• Every business has something known as a chart of accounts, a document listing all your business accounts. Your CPA will help you develop the chart of accounts that is specific to your type of business.• Your accounts will fall into these categories:

assets, liabilities, equity, income, and expenses. An example of a chart of accounts appears on page 72.


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Chapter 6

Your chart of accounts• An asset is something of value you own.• A liability is money your business owes.• The difference between what you own and what you owe is called equity. Assets minus liabilities equals equity.• Income, or revenue accounts, are your sales from products and services.• Expense accounts categorize the bills that you pay for your business. Talk to your accountant to find out which items you can deduct as business expenses.


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Chapter 6

Your profit and loss statement• A profit and loss statement reflects whether you made or lost money in a specific period of time. This may be per month, quarter or year. See an example on page 74.• Your profit and loss statement lists your sales, minus your cost of goods sold

(if you have any), minus your expenses. If your sales are greater than your

expenses, you will have net income. If your sales are less than your expenses, you will have a net loss.


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Chapter 6

Your balance sheet• A balance sheet will list all your business assets, minus all your business liabilities, and your equity on a

given date.• For business owners, a balance sheet is

a snapshot in time about the state of their business. It can change dramatically from one day to the next. See an example on page 75.


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Chapter 6

Preparing a business budget• Your business budget will show you whether you are ahead of or behind

your planned sales. This information will allow you take the appropriate action.• You will develop your budget for a year and then break it down by month. Review your actual income and expenses and compare it with your budgeted income and expenses every month. See an example on page 77. If you are off track, make changes before you get into trouble.


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Chapter 6

Your cash flow statement• A cash flow statement shows the source

of your business’ cash and how it was spent over a specified period of time. A small-business owner needs to be

aware of his or her cash flow at all times.• A cash flow statement strictly covers cash and tells you if your cash is increasing

or decreasing. See an example on page 78.


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Chapter 6

Tips to improve cash flow• There are ways to improve your cash flow

if necessary. • You could require payment by cash or credit card instead of allowing customers to pay later. You could

also consider:- charging late fees and interest- buying less inventory and fewer supplies- sending out invoices immediately after service


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Chapter 6

Internal controls• When you understand your business finances, you are better able to identify possible problems. Knowing how to read and make sense of your business financial statements empowers you to deal with problems when they arise. Accounting and bookkeeping should never be taken lightly.


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Chapter 6

Internal controls• Setting up internal controls is a key part of setting up your business. Internal controls should cover the areas that pose the most risk for businesses: cash deposits and checks written, payroll, customer invoicing, collection and credits, and purchasing and storing equipment, supplies and inventory.


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Chapter 6

Internal controls• Internal controls call for a separation of duties. You should not give just one person – other than yourself – access to all your

business assets and all related accounting records. Fraud and other illegal activities are more difficult to conceal if two or

more people are responsible for accounting and bookkeeping duties. Internal controls can also help prevent or catch mistakes. They protect you and your employees.


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Chapter 6

Internal controls: What can you do?• You are working hard to start your business, and as a self-employed person, you must protect it.

Keep your business finances in order and stay in full control of them.

- Sign all checks- Make your own business bank deposits- Maintain a list of office equipment- Keep records of inventory- Have your business audited


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Chapter 6

Internal controlsAccurate, up-to-date financial records will also help you if problems should arise. Being disorganized makes you a target for crime. Watch for signs that your employees may be putting you in jeopardy.


Chapter 1


Chapter 6


Chapter 1


Chapter 6

Review

• To run your business effectively, you need to know how to manage your business finances and understand your business books, so you can make informed decisions.• Your business needs a budget. This budget will show you whether you are ahead of or behind planned sales. You’ll also need to understand your balance sheet, chart of accounts and cash flow statement.• Internal controls can help you protect your business from mistakes and fraud.


Chapter 1


Chapter 6

“The ability to concentrate and use time well is everything.”

– Lee Iococca, former Chrysler Corporation President and Chief Executive Officer


Chapter 2

Chapter 7 … Office Organization:The Key to Having Everything You Need When You Need It


Chapter 7

If you are going to successfully run a business, having good records is a

must. You need to have accurate records to prove that you can legally operate your business, you have paid your taxes, you have paid your suppliers, you can collect on invoices from who owe you money, and more.


Chapter 1


Chapter 7

Separate business, personal files• Because your business and

personal finances, bank accounts and credit cards are separate, you should organize your business and personal files separately.

• Set up one box for your business files and another box for personal files. You may need to keep some business records permanently. IRS Publication 583 can tell you

how long to keep your various business records.


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Chapter 7

• Set up a business box with 80 file folders and a personal box of 50 file folders. See pages 84 and 85 for a detailed list explaining how to organize your business box. See pages 85 and 86 for a detailed list explaining how to organize your personal box.


Chapter 1


Chapter 7

• Organizing your files is easy and doesn’t take much time if you regularly maintain your files. There should be a place for anything and everything regarding your business.• Depending on your type of business, you may want to consider using

simple accounting software.


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Chapter 7

Phone and Internet service• Many phone companies provide bundled services, offering phone and Internet

service for one rate. Compare companies’ offers and find the most efficient, affordable deal for your business.• If you want a cell phone for your business, compare plans to find the best one and be sure you know how long of

a contract you will be asked to sign.


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Chapter 7

Setting up your office• Your office needs to be set up, with everything in place, before you open your doors for business.• You will need equipment and office supplies. Don’t buy expensive equipment or furniture right away. A list of recommended equipment and supplies is on pages 87 and 88.• When shopping for supplies, buy in small quantities. Large quantities of office supplies are cash on the shelf.

Put your cash in the bank, instead.


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Chapter 7

Managing your time• To accomplish the things you want and need to get done, you need to stay in control of your time.• Prioritizing time and tasks is essential. • Keep your schedule with you at all times.• As a business owner, you will have tasks that must be done daily, weekly and monthly. There will also be tasks that occur once a quarter.


Chapter 1


Chapter 7

Making lists• Start with a list of all the things you need

to accomplish. This is your monthly list.• Then, decide which tasks must be done this

week. Decide which of those items must be done today.• There will always be many tasks that need your attention. You have to decide whether they will help you achieve your goals or whether they could be delegated to someone else.


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Chapter 7

Your daily schedule• Your schedule each day is based on your daily list of things to accomplish. Leave time for your routine activities and lunch.• Overscheduling can create a tremendous amount of stress. Decide which tasks and requests are priorities.• Never be late for an appointment, fail to meet a deadline or follow up on something you said you would do.


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Chapter 7

Your daily schedule• You need to control your schedule. Remember that time is money. Which tasks will help you make money? Which will cost you money if you

delay them?• Time management is a discipline. If you watch successful business people, you will see that they each have a schedule and a list of things they intend to accomplish during the day.


Chapter 1


Chapter 7


Chapter 1


Chapter 7

Review

• If you are going to run a successful business, having good records, being organized and managing your time are essential.

• Keep your business and personal files separate. Set up a separate box for each.

• You need to set up your office completely before you open your doors for business.

• You don’t need expensive equipment, furniture and a lot of supplies right away.

• Manage your schedule. Make lists of tasks that must be done daily, weekly, monthly and

quarterly. Time management is a discipline.


Chapter 1


Chapter 7

“Pretend that every single person you meet has a sign around his or her neck that says Make Me Feel Important. Not only will you succeed in sales, you will succeed in life.”

– Mary Kay Ash, founder of Mary Kay Cosmetics


Chapter 2

Chapter 8 … Branding and Marketing:Creating the Right Image to Attract Customers


Chapter 8

• You’re open for business, but how will potential customers find out about you? In order for someone to purchase your products or services, they have to know about your business. • Branding your business helps you define how you want customers to view your business.• Marketing is how your future customers will find you.


Chapter 1


Chapter 8

BrandingWhen you create a brand for your business, you convey a consistent look and message you want to send your customers.

- Appearance: A logo and color scheme can help customers easily recognize

your business and marketing materials.- Values: Emphasize what you want your business to stand for – quality,

professionalism, etc.


Chapter 1


Chapter 8

Branding- Consistency: Can your customers depend on a certain level of courtesy and professionalism when they do business with you?- Details: Reinforce your brand, right down to your e-mail address.


Chapter 1


Chapter 8

Designing a logo and business cards• An effective logo is a first impression of

your business, and it is an important part of branding your business.• A good logo should be simple, memorable and easily recognizable.• It should fit the theme of your business.

What feeling do you want to convey? Friendly? Businesslike? Child-oriented?• You may want to include a tagline,

a one-line sentence that sums up the purpose of your business.


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Chapter 8

Designing a logo and business cards• After you have a logo, you can create business cards and other marketing materials. There are many businesses and online sites that print business cards inexpensively. You can have professional- looking business cards, flyers and other materials without spending a lot of money. After you have business cards, be prepared to hand them out to everyone you talk to.


Chapter 1


Chapter 8

Marketing: Reach out to potential customers• Marketing is about building relationships –

with your customers, with other business owners who may become your customers or refer people to you, and with people who can help you promote your business.


Chapter 1


Chapter 8

Marketing• A marketing plan was probably included in

your business plan. You can use two basic types of marketing – active and passive.• Active marketing involves contacting people you know and telling them about

your business. Include friends, family,business associates, people from your church

and people you know from civic organizations and activities in which you are involved.

If you aren’t in any activities or organizations, now is the time to become involved.


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Chapter 8

Marketing• Passive marketing involves buying outside sources (billboards, TV and radio ads, Yellow pages ads, etc.) that market to the general public. Passive marketing is typically expensive because you are marketing to a wider audience.• Use a mix of active and passive marketing to

reach as many people as possible.


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Chapter 8

Marketing• When marketing your business, you need to confidently describe the benefits of your product or service and how your customers can expect to benefit from it.• As you attract customers, ask them how they found you. What advertising did they see, hear or read? Knowing your customers and knowing how most of them found you will help you focus on where you want to spend your time and marketing budget.


Chapter 1


Chapter 8

Networking• Networking with other business people in your community should be part of your active marketing plan. When you are in business for yourself, you need to take advantage of every opportunity to meet people who might want your product or service.


Chapter 1


Chapter 8

Networking• There are organizations specifically designed

to help you get to know other business owners and tell them about your

business.• Chamber of commerce• Business networking groups • Trade associations and organizations


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Chapter 8

Web sites• A web site can help you introduce yourself more quickly and easily to customers.• Your customers will expect you to have one,

and it may be one of the main ways they communicate with you.• Your web site doesn’t have to be sophisticated or complicated, but it should help you brand your business by emphasizing what is unique about it.


Chapter 1


Chapter 8

Web sites• If you want or need to

hire a web site designer, this can be moreexpensive. Compare several designers’ work and their prices. Hire a designer you feel comfortable

with. Be sure to sign a contract with the designer that includes the details of how your site will be designed and managed.


Chapter 1


Chapter 8

Social media: Reach customers online• Social marketing – making use of social media tools such as Facebook, Twitter and blogs – gives you a budget-friendly way to stay in touch with your customers every day.• Content you put online should reinforce your business brand and be easily recognizable to customers.


Chapter 1


Chapter 8

Social media• Social media is an effective way to build relationships with customers, as long as you use this tool carefully. • At least 90 percent of communication on social media should be focused on helping your customers, giving them useful information and getting

to know them.


Chapter 1


Chapter 8

Social media• Make a habit of using an online search engine (such as Google or Yahoo!) to search for your name and your business name at least once a month. Find out what people are saying about you and what information is readily available about you and your business. You will want to correct inaccurate information and minimize negative information as much as possible.


Chapter 1


Chapter 8

Social media• What tools are available to you? See

pages 97-99 for explanations of some of the most popular social marketing tools:- Facebook - LinkedIn- Twitter - YouTube- Blogs - E-mail lists


Chapter 1


Chapter 8

Working with the media•Forming relationships with local media can help you get news about your business out to

the public.• Some newspapers have pages, sections of the paper or sections of their web sites devoted to local business. Contact your local paper to find out who to send these kinds of news items to. Your local paper might also write stories about new businesses.


Chapter 1


Chapter 8

Working with the media• You might also want to contact your local television stations or newspaper if your business is involved in an event that might make a good business story.


Chapter 1


Chapter 8


Chapter 1


Chapter 8

Review

• Branding your business helps you define how you want your customers to view your business.• Marketing is how potential customers will find out

about you. There are two basic types of marketing – active and passive.

• Networking with other business people in your community should be part of your active marketing plan.

• A web site can help you introduce yourself quickly and easily to customers; they will expect you to have one.• Social marketing makes use of social media tools to build relationships with customers.• Build relationships with local media; they might be able to

help you promote your business.


Chapter 1


Chapter 8

“Stand up to your obstacles and do something about them. You will find that they haven’t

half the strength you think they have.”– Dr. Norman Vincent Peale, minister, author and founder

of Guideposts magazine


Chapter 2

Chapter 9 … Resources:Where to Go When You Have Questions


Chapter 9

• Starting a business can be a fun, exciting journey – and one that will leave you with lots of questions. Your team of professional advisors will be invaluable to you, but an abundance of other kinds of resources also is available.• Small Business Development Centers, operated nationwide by the Small Business Administration, or SBA, offer diverse help and guidance to small-business owners – and most services are provided free of charge. For information, go to www.sba.gov/aboutsba/sbaprograms/sbdc/

index.html


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Chapter 9

• In addition to the SBA, many web sites such as these offer useful information, support and advice:

Business Advice and Resourceswww.irs.gov/businesses/small www.score.org www.bbb.org www.allbusiness.comwww.entrepreneur.comwww.toolkit.comhttp://smallbusiness.aol.comhttp://ask.officelive.com/smallbusiness www.smallbizmanager.com


Chapter 1


Chapter 9

http://www.irs.gov/businesses/small

http://www.score.org/

http://www.bbb.org/

http://www.allbusiness.com/

http://www.entrepreneur.com/

http://www.toolkit.com/

http://smallbusiness,aol.com/

http://ask.officelive.com/smallbusiness

http://www.smallbizmanager.com/

Government Siteswww.ftc.gov

Credit /Financewww.annualcreditreport.com www.cdfi.org

Home-Based Businesseswww.business.gov/industries/home-based www.bizoffice.comwww.home-based-business-solutions.com/business-resource-center.html


Chapter 1


Chapter 9

http://www.ftc.gov/

http://www.annualcreditreport.com/

http://www.cdfi.org/

http://www.business.gov/industries/home-based

http://www.bizoffice.com/

http://www.home-based-business-solutions.com/business-resource-center.html

http://www.home-based-business-solutions.com/business-resource-center.html

Social Media ResourcesSee chapter 8 for a detailed explanation of how some popular social media sites can help your business. Other sites online can help you maximize your use of e-mail and social media.www.Hootsuite.comwww.mailchimp.comwww.merchantcircle.com


Chapter 1


Chapter 9

http://www.hootsuite.com/

http://www.mailchimp.com/

http://www.merchantcircle.com/

Online magazineswww.inc.commoney.cnn.com/smallbusinesswww.homebusinessmag.com

Employee issueswww.dol.gov/

Trade show informationwww.tscentral.com


Chapter 1


Chapter 9

http://www.inc.com/

http://www.money.cnn.com/smallbusiness

http://www.homebusinessmag.com/

http://www.dol.gov/

http://www.tscentral.com/

When you run a business, ask for help when you need it• When you own a small business, don’t be afraid of making mistakes – the key is to learn from them.• When you run into difficulties, knowing where to go for help is essential. The resources in this chapter may help, or you may need to consult your professional advisors. This may be especially true if you feel like your business is growing too slowly.


Chapter 1


Chapter 9

When you run a business, ask for help when you need it• If your business is not growing at the pace you expected, give yourself some time limits. Decide what changes you’ll need to make to be successful.• Always carefully monitor the health of

your business.• This is your business, and you make the decisions about how much risk you are willing to take.


Chapter 1


Chapter 9

“I believe going into business for yourself is probably one of the most rewarding journeys in life.”

– Jeannine Lecy, co-author, “Start Right: Build Your Own Business”


Chapter 2

Chapter 10 … A Checklist for Starting Your Business


Chapter 10

• As your business grows, you will encounter new opportunities and challenges. You will be pushed to grow beyond what you think is possible, but

persistence and determination are keys to your success.

• Remember what you’ve read in this book, and use it as a guide to ensure you’ve done the work necessary to build a viable business.


Chapter 1


Chapter 10

The checklist on pages 108-110 will serve as reminder of many essential tasks that you, need to do to build a solid foundation for your business. If you can do everything in this book, on this checklist, you can run a business.


Chapter 1


Chapter 10

“(Owning a business is) a risk. Every day, you have to keep taking them.

Will people buy this? Should I order more? Try something different?

Is this too expensive? Is this too cheap? You have to spend money to make money,

and that’s scary. … I get excited when something sells, or I get a new client, or finish a product I’m proud of,

but then you have to go right back to making it all happen. It’s a jump, a leap of faith. Every day. But it’s worth it.”

– Jamie Meares,entrepreneur and designer


Chapter 2


Chapter 10

start right: build your own business. “as a prospective business owner, you are getting ready to...

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