Whether you are looking to augment your income, replace your lost job, or just get out from under the thumb of management, you may be considering starting your own business. Before you do you may want to check this out for some helpful suggestions and advice to get you started on the path to success (or at least help you avoid the path to failure).
While I've never personally been self-employed or run my own business, I have seen a lot of small businesses up close and personally. My parents have run several different enterprises, from the time I was a small child. When I was a teenager, I worked for one family business (briefly). In addition my siblings, spouse and several close friends have all been self-employed at one time or another.
Disclaimer: I am not a lawyer. None of what I say should be considered competent (or even incompetent) legal advice.
Start With an Idea, Make a Business Plan
Owning your own business means you are going to work longer hours for less money than you probably could make as a regular employee of someone else, so be sure to pick something that you won't mind working at for slave wages. Keep in mind that cooking an elaborate dinner for your friends once a month is a much easier and more enjoyable task than cooking for a restaurant full of strangers every night. Try to find a field where the task itself is enjoyable, not the reaction you get from others when you complete it.
Once you have your business idea, the next step is to develop a real business plan. You don't need to develop a professional document with three-color pie charts, but you should sit down with pencil and calculator and put some concrete ideas down on paper. What are your expenses going to be? Do you need a dedicated space or can you initially work out of your home? How are you going to reach your customers? How are you going to buy your materials? Do you need financing and if so, where could you get it? Are you going to have to hire employees? What sort of licensing requirements will you have? What is a reasonable expectation of your revenue? Most importantly, how much are you going to lose if all your expectations fall through and your business never takes off?
Nobody starts a new business expecting it to fail, but the fact of the matter is that that is exactly what happens to the majority of small businesses in this country. Just because a business closes its doors, it doesn't mean that it wasn't profitable. It could mean that it wasn't profitable enough to justify the long hours of work necessary to keep it afloat. Or it could mean that it once was profitable, but something has changed in the market. In any case, you should always consider what sort of losses you will be left with if your optimistic projections fail to materialize.
Start Small
One way to limit your losses in the case of failure is to dip your toe in before you jump in with both feet. If you can build a small scale version of your business, you can often determine where your plan needs to be modified before you have invested too much in a failure prone model. If someone tries to convince you to take on a business that involves a large outlay of capital on your part, either to buy inventory or to pay for a franchise license, you probably look for the nearest exit. These sorts of arrangements rarely work out well for the entrepreneur.
One good way to learn some of the potential pitfalls is to partner with someone who already has a successful model. Apprenticeship has been one step on the path to self employment for many people over the centuries. It is a tried and true method of learning a trade by only investing your time, not your capital. If you are thinking about starting a restaurant, first learn the business by working in one. If you are thinking about starting a consulting company, look around for someone established in a similar field who may be able to take you on as a partner.
Take a good look at businesses in your area that have become successful and take an even better look at those who failed. You can often learn more from mistakes than from successes and if you can benefit from somebody else's mistakes, that's way better than making your own.
Set Up Your Finances
It's vitally important that you keep meticulous records of expenses and income associated with your business. These records will not only be essential when it comes time to file your taxes, but they will allow you determine how profitable this business really is. Try to keep track of your own time as well as your money. It has value too.
One easy way to keep your business records separate from your personal funds is to open a bank account and credit card account that are only used for business related expenses. You don't need to open them in your business name, particularly if you are in the early stages of creating this business, but you do need to make sure you have a separate accounts.
You will probably want to use some sort of accounting software to keep track of your finances. There are free versions available, such as QuickBooks Simple Start, that may be perfectly adequate to get you started.
Business Regulations
Finally, you need to be aware of the many government regulations that you may fall under when you start a business. If you want to run your business out of your home, you need to be aware of zoning regulations that may apply to you. If you want to run a business that involves food, you are going to be subject to health regulations. If you hire employees, there are a whole host of labor laws you will need to comply with from wages and working conditions to benefits and employment taxes. You are either going to need to do a fair bit of research or you are going to have to pay someone to manage your employee relations for you.
The best place to find out what your local regulations are, is to contact your local government offices. Many places have already assembled all the information you will need to know before getting started and all you have to do is ask. You may also want to seek out advice from both a lawyer and an accountant, particularly if you are planning on incorporating your business. Incorporation can be fairly straightforward, but by forming a corporation, you are going to be subject to a whole new set of laws and regulations you need to follow. However, there are both tax benefits and liability benefits to incorporation, so you shouldn't necessarily rule it out, just because it may make your business more complicated. It is just something you probably don't want to do without professional advice. Before you meet with a professional, draw up a list of specific questions you want answered. If you are paying for someone's time, you want to make sure that time is spent focused on your areas of concern.
Update [2009-6-12 15:57:14 by sarahnity]: One thing I forgot to mention is that another great source for researching regulations and laws that apply to your particular business is Nolo Press. They are my first stop for accurate legal information as written for the layman.