During recession, with high unemployment, many people think about opening their own business. About two thirds of new businesses do not survive the first year. Below, a few words from someone who has done it several times before.
It is simple and easy
When starting a new business you do not need to incorporate, but you should. Forming a limited liability corporation separates your personal finances from the business, as your business becomes a new entity. While incorporation rules vary state by state; the concept stays the same. In Illinois, where I live, you can do it yourself by filling out a simple form and paying a $175.00 fee or $281.50 for expedited online processing. If you have partners, or if there is a meaningful investment, you should hire a lawyer. Be prepared to pay anywhere from a few hundred to several thousand dollars for getting incorporated.
It is treacherous and complicated
By incorporating you create a new legal entity. This has its consequences. The IRS wants to tax it. Your city, county and state might have regulations requiring obtaining a license for whatever you plan to do. You may need to obtain a business permit in your city or county as well. There might be some business specific taxes too. If you plan to hire employees, you need to understand payroll taxes and labor laws. You need to find out all of this before starting a business; you do not want to be caught not paying taxes you should, not having licenses or permits you should or not obeying any other laws. If you start a business because you have a lot of money, you hire lawyers and they will do this for you. If you start a business to make money, you may consult lawyers here or there, but you have to be on the top in comprehension of all these essential issues.
You better be serious
Think big from day one. Pick up a catchy company name, commission a good logo. Have a company motto, have an appealing marketing phrase. Be on the internet. Forget about the 40-hour work week. Be prepared that your business might need you on Christmas Eve night or on your child birthday. But, you should be in charge; plan, think ahead of what can happen and be prepared for the worst. If something can go wrong it will; if you count on your good luck you should play the lotto, not starting a business.
The cash that is not
When that down payment from your customer lands in your bank, and when it is several times larger than the paycheck you were getting before, you may feel rich. It is too soon. That is not your money, it belongs to the corporation. When you count money in your head, profits tend to be greater than when you count them on the spreadsheet. So, use it. From day one have business accounting software so you can monitor your cash flow. Pay yourself after all other bills are paid. Be prepared that it might take a while.
All hats are yours
One day your business may have separate departments for service, technical, accounting, sales, marketing, personnel, purchasing, R&D and maybe other matters. When you start your business you wear all these hats, you are the chief and the key worker in all of these areas. You cannot be good at everything; you cannot do everything yourself either. The sooner you find dependable people to work for you, the faster your business will grow. For this reason, it is good to start with partners.
Do not be alone
Partners can complement your skills. It is great if one person is strong in sales and marketing, another in management and someone else is a technical expert in your product or service. Partners can tell you how stupid your latest great idea is, before you act on it. Partners can step in when the flu knocks you down for a few days, or you just need some time off.
Take a break
In order to succeed, your business needs your full devotion; especially in the start-up phase. It is easy to fall into a trap of working 80 hours per week. Occasionally, you can pull it for a week or two, but after that you will be chasing your own tail, you will be cheating yourself that you work. Take a break. At least for half a day; better for a long weekend. Disconnect; be with other people, engage in other activities. You will see your business differently when you come back.
It is fun, it is worth it
Despite all the risks and all the pain, or maybe because of them (who said that life should be nice and easy?), starting a business is enjoyable and gratifying; even if you will not become the next Warren Buffet. Do not wait, start today.