Small Business Finance Question

[PeggyFair]

Hi everybody,

In the near future I plan to launch a small business, online. My only major expenses will be website development, logo design and initial inventory, any other expenses like business cards, merchant accounts, and stationary I plan to pay upfront with cash. I will be keeping my day job while launching this venture and I will have about $15000 saved up in an online savings account by the time all of this happens. I plan on getting one of those "%0 on purchases for 12 months" type deals and charge ONLY the cost of web and logo development and the initial inventory, which will run me somewhere under 10 grand, to this card.

Since most businesses take 2 to 3 years to take off, I figured that I could pay the minimum on the card and when the 12 months is up, switch to another card to avoid interest. I think this is a good way to get an interest free loan until the business gets up and running. The fact that I will be holding on to my day job ensures a steady income and I can fall back on my savings to pay off the debt if the business fails. What do you all think? Thanks in advance!

[b4freedom]

What kind of a business?

Why can't you create your own logo? I don't understand why people pay tons of money for logo's. They are overrated and really aren't a priority to a new company. Your priority should be on the business plan, product development, marketing, etc. Not the logo. When things are running smoothly and making you money, then worry about the logo.

Is this going to be a web company? A top notch website can cost you a small fortune. If it is a web based company, I'd suggest taking a course in web development so that you understand the basic concepts and don't get cheated out of your startup cash. I've seen startups pay $15000 for something any idiot could do in an hour. Make sure you have a clear understanding of what your getting for your money. Better yet, have that clear understanding be a part of your business plan. If it's not an online company, maybe you don't need it to start off.

Also, it's never a good idea to create a business and plan on financing it with personal unsecured high interest rate debt.

[scfr]

PeggyFair - I'm really, REALLY glad to hear that you will be keeping your regular job while you get your business up and running.

My husband started his own business about 7 years ago, and I started mine 3-1/ years ago.

I shared a bit about financing a start-up in this blog entry, if you're interested:
How to ... Prepare financially to start your own business: Scfr's Personal Finance Blog

Neither of us paid anything for logos. My husband did his own, very simple, letters inside a shape that he did himself on the computer. Mine is a picture from one of those computer programs where you do things with pictures (not Photoshop, but something like that).

I'm glad to hear you are pursuing your dream in a prudent manner, and I wish you great success!

[PeggyFair]

Yes, I have taken a web design course so I know alot of the ins and outs of what I want and what I should pay, and from my experience and observation of web sites and prices, logo development and website design should be under 5000 bucks, which is very cheap considering how much some companies try to charge to people who are not in the know. Believe me, I am not one to be taken by people who want to charge an arm and a leg because I always do my research before I hand over large sum of money to anybody.
I guess I agree with you on logo design but I guess it comes down to people's preferences.

I don't know if you read my entire question or not, but I am not intending to use "high interest" debt, which is the reason why I am considering the 0% rate offers and as I said in my question, I will have enough savings to pay it off if without payin g any interest if things don't go as planned.

[PeggyFair]

Thanks Scfr. I am trying to do this with the least amount of risk possible, which is why I'm holding on to my day job. I will check out your blog.

[Scanner]

Peggy,

I think your 0% credit card idea should be a second resort.

I think a useful exercise for you would be as follows:

1. Draft a business plan. Include in it, your marketing plan (niche, competition, advertising, referral stimulation), your pricing/fees, your mission statement, your vision statement, customer service plan, etc. along with a pro forma cash flow statement (a balance sheet is probably unnecessary) You can pick up a book on business plans from amazon.com or your local book store to get an idea of the "essentials" of a business plan.

2. Approach 3 banks about opening a line of credit you can draw down on. Experience being refused and accepted. I was refused on my first approach but then approved on my second approach to a bank. Give them your business plan if they ask.

I think even if you get turned down 3x and you have to go with the 0% credit card route, you'll appeciate how the exercise makes you think in different ways about your business and you'll get real feedback criticism.

For instance, if the banker says, "No, Peggy. . .and the reason why is we don't see how you have any plan on selling this to the web community as a whole", well better to hear it from him/her now, than after you've risked the 15K.

If after you draft a business plan, you would like me to examine it and critique it, I'd be happy to and I would respect that the information is proprietary and confidential. If you have other advisors closer to you, then ask them, probably ones more with web-based business experience.

[vsjhoc]

You can pick up a book on business plans from amazon.com or your local book store to get an idea of the "essentials" of a business plan.

No need to pay for a book. There are lots of great resources for free online. Check the US Small Business Administration at http://www.sba.gov and SCORE at SCORE.org.

[PeggyFair]

Thanks Scanner. However, I have made it a point not to deal with banks. I now only do business with a credit union. My credit union doesn't offer a business line of credit, but they do offer personal lines of credit and credit cards with super low rates that can act as a business line of credit. To be honest, I don't have a complete business plan, just a rough one that I sometimes add to.

[Ini_g]

What kind of business is?. However you can get a lot talented designers for your website is sites for freelance jobs, and the design of logo too. It´s more cheap and personalized.

Good Luck.

[PeggyFair]

Ini, yes I have researched web design firms and have narrowed it down to 3, these are small firms that have top notch skills and are willing to deliver services at resonable prices.

[disneysteve]

Yes, I have taken a web design course so I know alot of the ins and outs of what I want and what I should pay, and from my experience and observation of web sites and prices, logo development and website design should be under 5000 bucks

My partner used an online logo design service located overseas somewhere and they were WAY cheaper than any local/US firm. I'll ask him if he still has their info. I know they were great to work with. He faxed a sketch of what he had in mind and some thoughts on color scheme. They e-mailed multiple samples for him to pick from. He then picked one and asked for some changes to it. That went back and forth a few times until the final version. I know he saved a bundle using them.

[disneysteve]

Business Logos - Quality Business Logo Design Since 1997

Here is the logo company I mentioned.