Starting a Small Business - What's the most important question to ask?

Starting a Small Business – What’s the most important question to ask?

Starting a business is more complicated than most people think. There are many issues to deal with and questions to ask when thinking about starting a small business. Starting a business the right way can inprove your changes for success.

Should I incorporate? LLC? C Corp? S Corp?
What name should I use?
How do I get or set-up my website?
How do I find a CPA? Do I even need a CPA?
How do I get a license to do biz in my state?
What accounting? Quickbooks? Excel?

And the list goes on and on…
But the real most important question is this……………….

If I start a small business, how do I get out of my small business?

What is your exit plan? Your goals, time frame, limitations?

If you will think through, with honesty, this question – How do I exit my business?  You will make a better decision about how you go into your business. Do you want to sell the business? If yes, then there are things you need to do when you set up your small business…Want an example?

If you want to sell your business don’t name your business after yourself. Believe me, Wizards A/C and Heat Service is easier to sell, and at a higher price, than John Q. Smith, Inc.

If you want to sell your business keep your financial information accurate, timely and clear. It is very difficult to sell businesses that have poor records and financial statements. Don’t be tempted to “massage” your financial statements to reuce your taxes, it will cost you dearly when you sell.

Think about your exit plan, it will help guide your decisions and avoid value crushing mistakes that we see made every day.

Send me your start up questions that relate to your exit plan, I’ll take a shot at getting you useful answers.

Running your business in tough economic times

There have been many, many businesses that have taken advantage of difficult times and positioned themselves for the future. Running a business in good times is almost idiot proof. It’s what you do in tough times that makes the difference between a great business and a business that you just ride along with the tide. My rules for managing in tough times:

Train your people in an area that could increase gross margins (moth dollars and %)
Outsource, outsource, outsource

Conserve cash, delay investments, avoid the “buy more for a sale” mentality
LOWER your break-even point while RAISING your gross margin %.     
Focus on cash, conserve it and use it wisely.

Find a job or buy a business… a choice worth investigating.

Buying a business could help you achieve your retirement goals. Today’s economic problems have changed the future for many people who thought they had a job for life (or at least a job until they decided not to have a job). In times like these, finding a new job is not only difficult but maybe even unwise.
Have you thought about buying a job? You can if you buy a business…..but you’re thinking “oh, but it’s so risky”… I doubt it’s any riskier than going to work one day and getting fired because some idiot in New York bet that oil prices would go up forever or bet that people who took out mortgages they couldn’t afford would some how hit the Lotto so they could make the payments.
What’s the risk in owning your own business? First you might ask… are you smart enough to run it? In my experience with thousands of business owners I can tell you, I.Q. and education have very little to do with success.
Why do small businesses succeed? Because the owners understand what it takes to get people to pay for the product or service they provide. It’s not rocket science.
But you say, with the economy so bad nobody is spending money. Wrong, the economy looks like it will be down about 5 % in this last quarter of 2008. Guess what that means? 95% of the money spent last year is still being spent. Have you stopped spending money on EVERYTHING? Electricity? Food? Toothpaste? Beer? Gas? Internet? … get the idea.
Just look around your neighborhood. Even in this economy you will see many, many businesses whose owners are doing a lot better than an unemployed person who used to have a job.
What does it take to buy a business? Here’s simple formula that can give you a general idea of the financial requirements of a business purchase:
Whatever salary you want to replace, you should have about that much money for a down payment. If you want to replace a $50,000 per year salary, you need about $50,000 for a down payment…. $100k salary…need about $100k down payment, etc.
Where do you get the down payment? There is a tax break for you! You can use money in 401(k) or I.R.A. to fund the down payment (see CPA or got to with no penalty or taxes for withdrawal.
But you say “that’s my retirement money!”. First it won’t be if you need to withdrawal it to live on and secondly you have no idea if it will increase in value over time.
If you own a small business that could be your retirement..SELLING IT. In fact you are likely to buy the business who is retiring!
Where do you find a business to buy near where you live? First you can check There are other business brokers out there but Sunbelt is the biggest with about 250 offices in the U.S.
While you’re worried about finding a job, also spend some time worrying about how you can gain the security of owning your own business. I do and you can to.

Why do some businesses sell and some just close?

Operating a business for the benefit of the business owner – today….. is different than operating a business that is building value and will one day be sold for a nice profit.

Do you want to be able to sell your business when you no longer want to own it?

Here’s what you need to start doing NOW!!

  1. Keep your books accurately. A buyer will pay you a multiple of the earnings you can PROVE. You will not be paid for earnings that you can’t prove.
  2. Make sure your employees are paid in accordance with all federal and local laws.
  3. Get rid of any lawsuits that may be haunting you.
  4. Make certain your insurance policies are up to date.
  5. Make sure your business name is properly registered and protected with local agencies.
  6. Pull a Security interest report and get rid of any old UCC-1 filings (remember the copier you leased, then bought, 5 years ago? The UCC-1 was probably never released by the secured party (a UCC-3 form will release the lien).
  7. Limit the number of family members working in the business.
  8. Fully document, in writing, all important systems and processes in the business. This is difficult and time consuming but will help you get a much higher price when you sell the business.
  9. Get rid of unused assets – excess inventory, old equipment, etc.
  10. Most importantly – You may not know when you’ll need to sell the business so do the above NOW, so you can respond to any opportunities that might come your way.

The best advice…”Run your business like it’s always for sale, because it is.”