starting a business?

[LivingAlmostLarge]

Do you guys have any advice about starting a business? Any tips or insights about what you get yourself into if you take on partners or a huge loan?

[maat55]

You get yourself into risk. DR is adamantly against doing both. Think of every possible problem that could happen beit, relationships, spouses, unequal input, death, liabilities( legal and tax ) need to be administered by all parties. How to dissolve the partnership should be agreed on before hand.

Who is liable for the debt by %. How is controling interest established.

[whitestripe]

have an amount saved first, if you intend to leave other employment first. if you are getting a loan from a bank, they will want business plans. be as organised as you can.

my number one tip, from personal experience, is start proper office procedures STRAIGHT AWAY, if you are thinking of doing home based business (or even if it is not home based, but you have input into the office procedures). It might seem silly, if at first you have two clients, doing all these procedures and record keeping and note taking, but i can't stress enough that once you start to get busy, it all goes to HELL. honestly!
i have worked in my family's office doing the financial side of it for about 7 years, a year after they first started the business. my mum started the 'office procedures', the year before i started, when they had one job a week. and every single day i am here i wish to god i could throw everything away and start again from scratch, because it's just set up so terribly. alas, i can't, as the business is so much larger now that its not possible to start everything from scratch, so its a long and tedious process of doing one thing at a time, then implementing it, then getting people to stick to it, and getting them to forget the old way...
anyway, you get my point!

ummm. other than that:
if you can, start moonlighting at your new business for a while and keep current employment if you have any. work out if you take out a business loan, how you will pay it back if the business doesnt work out.
work out the minimum you need to pay suppliers, wages, bank loans materials etc and if you can reasonably earn that amount. if not, then maybe you need to work out another plan altogether.
research and do background checks on your employees before you hire them. <-- very important!
consider doing your own accounts, if you can. it will save you money, and you'll have an insight into your own business finances. some bosses have no idea whats going on.
research the tax refunds you can get.

no advice on partners, sorry!

hope thats some info you can use?

[LivingAlmostLarge]

Definitely thanks to both of you. And hope it keep coming.

Maat good points about death and beneficiaries. By the way you wouldn't be reading this people didn't start businesses without risk. Even Dave Ramsey started a business, granted it was selling to people in debt more tools to get out.

But I appreciate the thoughts on dissolving the partnerships, death, etc. Had not considered death at all. I think this means higher life insurance right?

whitestripe, this is not a home based business. This would be done in a rented space. And there will likely be no business loan unless we can borrow $1 Million minimum. This will likely need VC or angel investors. We will put up some ourselves, and so I want to know what to think about and look for. Thank you for the input on office procedure. Good to keep in mind.

[maat55]

[quote]

Originally Posted by LivingAlmostLarge

Maat good points about death and beneficiaries. By the way you wouldn't be reading this people didn't start businesses without risk. Even Dave Ramsey started a business, granted it was selling to people in debt more tools to get out.

Starting a business with no partners and your own savings is one form of risk. Adding partners and debt is another. Only you can know how much more the added risk is.

But I appreciate the thoughts on dissolving the partnerships, death, etc. Had not considered death at all. I think this means higher life insurance right?

That would help. Having a contract with a number of thought out contingencies would be a good idea as well. Many people go into business with friends or relatives and forget that business is business.


DR after going bankrupt in the real estate business, became an on-fire financial adviser, his passion led to what he is today, an agressive businessman selling products and advise that are helpful to others, for a profit, the way capitalism is meant to be. He also built his business without debt or partners. I'm not saying that it's bad to start a business with partners or debt, but that it is an added risk to be considered and planned for. Good luck.

[LivingAlmostLarge]

I wonder though if he did it without a single loan to build his business? He never borrowed a cent to rent office space, etc? Everything was cash only and he paid back what he owed from bankruptcy?

One thing is I'm not doing business with family and friends. That is separate completely.

[maat55]

[quote]

Originally Posted by LivingAlmostLarge

I wonder though if he did it without a single loan to build his business? He never borrowed a cent to rent office space, etc? Everything was cash only and he paid back what he owed from bankruptcy?

That's what he says. I've heard him say on a few occations that he has a building fund to pay cash for his building. He has since payed cash for it. Many people refuse to believe that you can pay cash for everything, if you want to bad enough. I could do it, but my wife could not. If it were fully up to me, we would be living in a paid for condo saving money to pay cash for a house.

[whitestripe]

look into the legal requirements for public liability insurance and income protection as well. some suppliers/banks/even customers won't do business with you without you providing them with insurance policy details and public liability providers.

[LivingAlmostLarge]

Ugh. Definitely. Good to know. I knew about disability and workman's comp but not the other stuff.

Maat, there is no need to buy a building if you rent! LOL. People think buying is always the answer, but then forget that for some like buying a house is not the answer because it makes more sense to rent.

[maat55]

Originally Posted by LivingAlmostLarge

Ugh. Definitely. Good to know. I knew about disability and workman's comp but not the other stuff.

Maat, there is no need to buy a building if you rent! LOL. People think buying is always the answer, but then forget that for some like buying a house is not the answer because it makes more sense to rent.

I agree, I've rented for twenty years. Renting during the startup of a business make good sense. I only used his buying with cash as an example of a major expense on a cash basis.

[cptacek]

You need a plan and a timeline.

You need an entrance strategy and an exit strategy (even if you don't have partners).

Even though you won't be in business with friends or family, are they (especially your spouse) ready for you to put 100% into the business with little time for anything else?

Keep good records, not only for tax reason, but also for planning and projecting reasons. Cash flow is very important (am I going to meet my obligations this month/year), but debt is ok if it helps you grow your net worth.

Underestimate income and overestimate expenses for the first year, at least.

Get liability insurance.

You need a good working relationship with your banker, your tax person and your lawyer. In fact, having two bankers might not be a bad idea...you never know when the bank's balance sheet will impact your expansion plans.

Even if it is your passion, you have to treat it like a business if you want to make money / make a living at it. Otherwise it is just a hobby.

[LivingAlmostLarge]

Maat, good to know you've rented the entire time. I think it's a huge financial commitment to buy, even in the future for a business. Being so unsure about what will happen.

Cpatek, thaks a lot. We do have an plan, my DH has written it and submitted it to 2 business competitions and sending it out. It has a time line for 5 years with an entrance and exit strategy. It also includes the expenses over that time.

We predicted no income the first year. And we talked with a realtor over the price of renting. We also looked at what we could pay people. I told my DH put 50% on top of salary for benefits, not sure if that's necessary or how it owuld play out.

I haven't researched liability insurance. Where do you get it from?

Someone suggested a post-nup in case of divorce. How to split assets. We've talked about a LLC or incorporating as well and are starting the paper work. Should we disucss something like this?

[cptacek]

We have our liability insurance through Farm Bureau.

[whitestripe]

it will be different for you, but my parents business has their public liability insurance through an organisation that provides advice, trade links and services to business in their industry (building). before that i am pretty sure it was just with a bank.

[LivingAlmostLarge]

I don't think we could borrow $1 million it would take to start the business. We've got a pretty well laid out plan with entry and exit and a 5 year plan. Costs are in there and outlines of hires, etc.

But insurance. Yuck.

[simpleyme]

I have never found insurance to be a big deal just talk to your insurance agent you have other policies with ,we have had bonds and liability policies none cost over 350 bucks a year just depends on your claims record and the type of business you are doing

[wincrasher]

Unless you can get an SBA loan, then forget about borrowing the money.

Banks, if they do make business loans, are making pretty tough terms - including demanding equity in your business on top of high interest.

It's just crazy right now.

[reptile411]

I am starting my own business. I currently own one that has hit hard times. My over head is almost 0 so I keep it going even though I am a little in the red. Starting a week or so ago I went into the landscape maintenance business. I don't need a license for this. I have property that is all landscaped therefore I already have the tools of the trade. I do the work myself so no need for employees or WMC or anything. I get paid $20-$40 per lawn so do the math. it takes about 30 minutes for an average lawn in my work area. that's $320-$640 per day assuming a busy 8 hour day "which i don't have yet" but the potential is there. I use GPS when traveling which is in the car and it helps cut down fuel cost by calculating the fastest rout for me. Basically my only overhead is fuel and oil and a little maintenance for the equipment which is very small and some advertising and travel expenses but those are small as well. It runs me about $20 per month for an add in the local paper and about $40 per month to advertise on Google however I don't get many clicks so this month thus far I have spent 0 on them. Its not a business for everyone but I really enjoy the work. I love seeing a yard come alive and as I said my overhead is so small its not even funny. Now we must keep in mind as with any business venture it takes time and work to make anything from it. I am still very unbooked and get annoyed sitting here for the phone to ring but I am on a path to greatness and I still have my 9-5 as well as my other business so its not a concern. My other business deals in retail and is done out of my home, it dosnt take a rocket scientist to knwo retail is doing bad now and that's why it is doing bad but I have 0 debt and a killer product "literally" so when the market improves I will be poised to make a killing.

[Russell]

reptile, thanks a lot. That was quite helpful. I wish more people would share their stories about how they got started, what they do to manage/run the business and really what's involved.

I have dreamt of having my own business for at least 5 years, I've read a few books and have done some research on the SBA site but it all sounds so complicated. I have a huge background in IT, I don't write software (though I could I have a degree in CS) but designing, architecting and setting up complete solutions (servers, firewalls, networks, databases etc) is what I do in my employment for large corporations. I keep thinking about offering the same services to small businesses that can't afford full time IT personnel but I get discouraged because everyone knows some friend of a cousin who could do that for them. Maybe something else will come to me...though the taxes, accounting and managing a business still seems complicated and remain a mystery for the most part.

LivingAlmostLarge, sorry for going a bit off-topic.

[reptile411]

My brother indulges in the hobby f computers. He has no degrees or anything other than trial and error training however working on systems for local business far out performs the income from his 9-5 I don't know why he dosnt quit his day job, maybe he enjoys the security I don't know. I have become greatly interested in online security as of late and spoke to my wife and a few others about designing anti virus, adware and spyware software as a business. There are a lot of options out there. I particularly like AVG, maybe its because its free but it seems every solution lacks one option or another. My idea was an entire security suite but my knowledge in this industry especially in writing programs is greatly lacking.