With the job market in the gutter, many are considering launching their own businesses. But sometimes people plunge into a new venture without carefully considering all the issues involved, including developing a business plan and paying taxes.
Karen Magee, president of Karen Magee and Associates, a business consulting and training firm, knows what would-be entrepreneurs need to consider when starting up their enterprises. She co-owns and operates two retail clothing stores in Sarasota and Naples, and has previously owned a retail jewelry store, was president of Magee Sign Service and was previously the assistant director of the Small Business Development Center at Manatee Community College.
What type of mindset does it take to start a business?
There are several consistent traits that you see in entrepreneurs. They are people who are absolutely willing to take a risk and are able to make decisions on their own. They are also people who never give up.
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What should your business plan entail?
There’s eight sections to a business plan.
Executive summary: If you’re presenting to a bank, you want to make sure the first section — your overview — is your best writing because that’s the section banks will read thoroughly.
Product service and description: You need to clearly and concisely explain what it is you’re selling.
Industry market and competition: In the business plan, we want to be able to see what’s going on in your industry not just today but five and 10 years down the road. Also, I strongly recommend that people go out and talk to your competitors. you can find out what works for them and what’s not working.
Marketing and sales plan: This is the area people usually think about first but what they don’t think about is how much it costs. I encourage them to find out the prices of any marketing they want to implement in their business.
Operational plan: This is the nuts and bolts, where you get down to the finite detail of what it is going to take to run your business.
Management and organization: This is where you’re determining who’s going to be the owners and managers and what type of entity you’ll be.
Goals and strategies: Begin with the end in mind. What’s your final plan for the business? Are you going to sell your business, retire from it, pass it on to your children? Or are you just going to close the door one day when you’re done. Once you determine your ultimate goal, that helps you determine how to set up your business.
Financials: The most important piece of this is the start-up costs. This is where you take all the information from sections 2-7 and determine how much it’s going to cost to open the doors. The second most important is cash flow. I do a three-year cash flow projection that tells you when money’s coming in and when it’s going out and if there happens to be any left over.
Financially, what should you expect in terms of start up costs?
The minimum costs, I would say $5,000. But that’s just to get an office set up and a basic Web site. Then it’s just going to go up from there based on what type of business you’re doing.
What do I need to know about licenses and regulations?
The best resource for state licensing is on myflorida.com. You’ll want to check and see if you need a license for your industry with the state. You’ll also need to check with the Department of Revenue to see if you need to charge a sales tax and to register to pay your payroll taxes.
If you’re incorporating, setting up a LLC or partnership, go to sunbiz.org to register your entity. At the national level, go to irs.gov to register your Federal Employer Identification Number. At the local level, call the city and county and find out if you need to pay for business tax.
How do you know if it’s better to lease or purchase property for your business?
A key thing right now is financing. It’s easier to get a real estate loan than it is to get one for operating costs. If you have the opportunity to buy real estate and you have the means to pay for it, I would say in general go for it because prices are so good right now, people are negotiating.
If you don’t have the money, then shop around for the best rates. People are very willing to negotiate there, too. They may cut the rental price by 20 percent just by saying you’re shopping around.