The Boomerater™ Report, our weekly collaboration with online baby boomer resource Boomerater, this week gives you some tips to consider before starting up your own small business. A Boomerater member was looking for advice about turning her part-time business into a full-time venture and members weighed in with their advice about things to consider before taking the plunge.
[See It's Time for Some Life Planning.]
Before doing anything else; create a business plan! According to the Small Business Administration (SBA), poor planning or the lack of a written plan is the reason for most business failures. In fact, most lenders will not provide small business loans without a viable plan in place. Therefore, having a written plan is critical to starting and building a successful business. It will help you avoid making some very common and costly mistakes. Your plan will act as a road map to guide you in your decisions, encourage loans, and promote growth. You will want to revisit and update your plan at least annually to monitor your progress and make adjustments. The SBA provides a solid overview and also links to a provider of free sample plans. If you need help, hire a professional specializing in business planning.
Don’t jump without a parachute. Before taking the leap from employee to business owner, you will need to know the pluses and minuses of making the switch. For instance, what will it cost for health insurance as a business owner versus what you are paying now? Can you get coverage through your spouse’s plan at a lower cost? Are there any associations in your business or professional field that offer a group plan at a lower cost? Have you considered self-employment taxes? As a self-employed individual you will be responsible for the full 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare) versus the current 7.65 percent you pay as an employee (your employer pays the other half.) Visit the Internal Revenue Service’s small business and self-employed tax center to learn more. What about items that may become deductible such as the business use of your home? These items may offset the added costs of insurance and self-employment taxes bringing you in for a softer landing.
Find customers for your product. Start by selling at flea markets, fairs, craft shows and craft consignment shops. You will develop a following of customers who seek you out without having to lease and insure retail space. Be sure to offer a list of places and upcoming events where your product can be found. Set up a Web site to promote your products and where to find them. Eventually, you could sell products from the site. The name of your business should be unique and easy to remember. A lawyer can help you protect the name. Be sure you can secure a Web site name that matches or is a derivation of the business name. Try placing products in stores that already attract your customers.
Scope out your market, and be sure you are competitive. Have you done a proper evaluation of your product and its position in the market? There is a big difference between producing a few items for your family and friends, and selling large volumes to a wider market. Is your product unique enough to differentiate itself in a crowded marketplace? Is the market big enough to justify devoting your full time to it? How will you reach your potential customers and will the revenue you bring in from the product be sufficient to justify advertising costs?
Read other member tips for starting your own business on Boomerater. Boomerater is an online resource for baby boomers, with local directories to help you find everything from a financial advisor in Chicago to an assisted living facility in New York. The site also contains forums where boomers can post questions and swap first-hand experiences. If there are questions on your mind that you would like answered by other people who have faced similar situations, or you have advice of your own to share, go to Boomerater.com and participate in the forums. Say that The Best Life sent you.
[See also Does a Family Loan Make Sense to You?]