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About... Starting a Business
by QualityBooks.com © Copyright.

This Life AdviceSM pamphlet about Starting A Business was produced by
the MetLife Consumer Education Center and co- sponsored by the U.S.
Small Business Administration. Editorial services provided by Meredith
Custom Publishing.

Although most people head off to work for someone else every day of
their careers, some march to the beat of a different drummer by owning
and operating their own businesses. Are you ready to join them?

Entrepreneurs' Top 10

Getting a new venture up and running takes business skills and persona-
lity traits that aren't all that common. If you are considering start-
ing your own business, take a moment to ask yourself the following


___ ___ Do you have organizing ability, personal drive and leadership qualities?
___ ___ Are you in good physical health, able to endure long hours?
___ ___ Are you psychologically ready to take some risks?
___ ___ Are you prepared to wait several months before you make a profit?
___ ___ Do you have specific expertise in the business you want to start?
___ ___ Do you know how to find your particular niche in the market and how to identify your customers?
___ ___ Do you know how to sell enough of what you have?
___ ___ Can you obtain the money you will need to start and keep the business running?
___ ___ Do you like to think ahead and plan for your future, then work to make it happen.

Although there are no guarantees, if you answered yes to a majority of
the preceding questions, you may have what it takes to be successful
in starting your own business. If you really don't see yourself here,
don't despair. You're now aware of the kinds of skills and traits you
need to cultivate in order to prepare yourself. You should, however,
carefully rethink your plans. Every new business faces difficulties.
You want to be sure you're up to the task.

Getting Started

The right mind-set is just the beginning. Running a business also
takes a sharp business sense. Knowing how to take advantage of market
conditions and developing strategies to get through the tough times
will help turn your great idea into a successful business.

First, you'll need to develop a business plan. It will be the road map
you'll use to establish and guide your business. Start by defining your
idea in business terms. This is not a time to focus only on the
positive. You need to take a hard, critical look at your plan and all
its components. Ask every question you can think of, and be sure you
come up with satisfactory answers.

* What type of business do you want to own? Will it be retail, service
or manufacturing?

* Who's the competition? Is the community large enough to support
another similar business? Head to the local chamber of commerce for

* Where will you locate your business? Is there a similar business
nearby? Get information on the community's plans for business growth,
such as shopping malls and business park expansion.

* Will you be able to find enough qualified people to employ?

* Will you buy, lease or build space for your business? Buying space
is costly. For that reason, it's usually wise to rent at first in case
your plans don't work out.

* How will you identify customers for your product or service? Look at
population figures-current and projected.

* How will you sell to potential customers or clients?

Find out not only if your prospective customers really are viable, but
also where your product fits in the marketplace. Talk to your intended
suppliers and, if possible, your intended customers. Also do some
research at the library and through trade associations. Contact the
Small Business Administration (SBA). Your goal here is to get as much
information in measurable form as you can. These facts and figures
can-and should-be used to make solid projections for your business.

Be prepared to revise your business plan if the information you gather
doesn't add up to a strong possibility of success, or make discreet
inquiries about the availability of an existing business.

This is no time to go it alone. Find and consult qualified
professionals-real estate agents, lawyers, accountants, public
relations experts and consultants-to help you make the best decisions.
Ask other local business owners for referrals, or check the Yellow
Pages. Even if your dream business is small and you have a great deal
of experience in that particular line of work, don't expect to know
all there is about running a business. Good advice may be the
difference between success and failure.

The Capital Idea

Securing adequate financing is a primary concern for most new
businesses. Most people don't personally possess all the resources it
takes to get a business up and running, but as a business owner you'll
need to invest some of your own money. Putting your funds into a
business venture helps prove your commitment to potential investors
or other sources of financing.

Those sources include banks, the Small Business Administration (SBA)
and private individuals. Be aware that many banks avoid new business
loans as being too risky even when money is not tight. The SBA is
usually eager to help new enterprises, but competition is keen for the
SBA's limited loan guaranty support. Before applying for financing, you
need to carefully prepare a thorough, well-thought-out loan proposal.
Write up detailed figures on the capital needed, and be sure to include 
a salary for yourself and sufficient funds to cover start-up costs. A
bank or SBA representative will review your business plan to be sure
it's solid. Once you obtain a loan, you'll probably have to provide
updated financial statements on a regular basis. As long as your
business is profitable and you're making loan payments on time, you'll
probably have minimum contact with the bank or SBA. Short-term loans
may require closer bank monitoring.

You may consider seeking private investors who wish to have an equity
stake in your business. Relatives or friends may be potential
investors. Keep in mind, however, that these people may,
understandably, expect to have a say in how the business is run.

Legal Formations

For tax and legal reasons, you'll need to decide what form your
business will take. Generally, all businesses fall into one of these
broad categories: sole proprietorship, partnership, corporation, S
corporation and limited liability corporation. Your choice of business
form will affect your exposure to personal liability, how you draw
profits and pay taxes, your ability to raise capital and how you run
the business.

Here's where professional advisors play a key role. Consult with an
attorney and an accountant before you decide what form to use for your
new business. They can advise you on tax advantages and which form
offers you the best protection of personal assets.

A Sole Proprietorship is the quickest, easiest way to start a business.
Simply check with a knowledgeable attorney about any licensing or legal
requirements and you're in business. In a sole proprietorship, profits
and losses are simply included on your individual tax returns. On the
downside, if someone sues your business, they may be able to sue you
personally, and your personal assets are subject to those claims.

A Partnership is an association of two or more people working as
co-owners of a business with the intent of making a profit. As with a
sole proprietorship, the trademark certificate filed with the county
clerk gets the business rolling and the individuals are personally
liable for the business. The involvement of two or more people in the
business, however, generally increases the complexity and the amount of
paperwork. Also, general partners can share unlimited liability, and
each is usually responsible for the acts of the other.

A Corporation is a legal entity that functions somewhat like an
individual, legally and for tax purposes. Liabilities are held by the
corporation, minimizing the personal liability for owners. The
corporation operates as a business and can be owned wholly or partially
based on registered certificates called stock. To set up a corporation,
you must file an application for a legal name, pay a corporate
franchise fee to the state in which you file, appoint a board of
directors and corporate officers, and keep minutes of periodic meetings
of the board.

There's a unique type of corporation-called an S Corporation that
provides the advantages of a corporation but, unlike a corporation,
is treated for income tax purposed as a flow through entity. Income
is reported individually by the owners or stockholders on their
personal income tax returns.
Also, the owners may deduct the corporation's losses against other
sources of income. If your new business will have fewer than 35
stockholders, you may want to talk with your accountant and attorney
about this option.

Another alternative is a limited liability corporation, in which income 
and income tax are distributed among partners, but the partners are not 
personally liable for debts. This is a brand new legal form of
business. If you are interested in setting up such a corporation, be
sure to consult a knowledgeable attorney.

Down to Business

You've got your business pretty well defined, you know what form it's
going to take and you know where you're going to locate. Now it's time
to get down to the business of running your business. Here are some of
the major concerns you'll need to address as you get under way:

Marketing. Identify your potential customers-they're your target
market. Then identify what is unique about your product or service.
Develop a strategy for telling your target market about your product
or service, and that's the basis of your marketing plan.

Pricing. The amount charged for a product must cover all costs and
return a profit. Many small business owners fail to consider all the
variables of producing their products in a competitive manner, so they
either fail to generate a profit or charge more than the market will
bear. The three main components of price are material, labor and
overhead costs. Do a complete cost analysis and set a price that falls
in line with your marketing strategy.

Supply. Identify suppliers of the materials you will need to provide
your product or service.

Production. Determine the best, most efficient way to make your product
or offer your service.

Distribution. Figure out the fastest, least expensive way to get your
product or service to your customers.

Staffing. If you're going to hire employees, be sure their roles are
clearly defined. Prepare an organizational chart of personnel that
covers the functions of sales, service, manufacturing and purchasing.

Training. Provide opportunities for your staff to learn more about
their jobs and responsibilities.

Details, details. Don't neglect the following:

* Get a federal tax identification number
* Get a state sales tax identification number
* Establish a banking relationship
* Retain an attorney for the business
* Retain a CPA/accountant/bookkeeper
* Choose an insurance company

Open the Doors

Starting your own business can be an exciting and rewarding venture
that can bring financial success, along with a sense of accomplishment
and contentment. We hope the information in this pamphlet will help you
get your business firmly on the road to success. Success takes
planning, determination, hard work and, of course, luck. Good luck.

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