starting a small business?

John Brown wrote:

ignorant wrote:

P71 wrote: Do *not* go into debt to start it. Run it from your garage part-time for a year if you have to.

umm.... What if I need capital for equipment? Say $20k for a used CNC + another $5k for used tooling?

Then save for it. I have a great idea that I am stalled with because I need to develop a plastic molding process. If I farm it out I lose the idea almost immediately before I can publish/patent the final products. Right now I am working with wood bucks and a toaster oven ;)

Have you though about resin molding? Poke around some model car sites, those guys can set you up with an in-home resin setup really easily.

digdug18 said: I mean its stressful when you do finally sell something on ebay or wherever and goto ship it only to realize that your not 100% sure where it is.

This is mostly what makes me believe "I can do it better". My organizational skills, combined with my learned education on marketing, and a crash course in sales should be quite helpful. Short term, I plan to be a small supplier to a niche of guys working on cars. Long term, I would like to go international, and work out of a small 1-2 bay garage with a little storage. right now I don't have enough sales to warrant a building, but that is where I am aiming.

I ran a business like that for three years. Got to the point where it was going to take full-time work so I sold it. New owner couldn't handle it but I don't miss it at all. Some niche buyers aren't worth the hassle. Find car enthusiasts that have money.

Most of us don't have money for very long because we all spend it on cars or bikes

Talk to the Small Business Development Center in your area (SBDC), they have free classes and material.

GREAT GREAT GREAT advice.

Maroon: Sounds like you're in the right place mentally. I was right there when mrspoo and I bought our business. Almost seven years in, and I still haven't had a year where I made as much as I did workin' for the man, but it'd be really hard to go back. Money or no money.

One I'm not sure has been mentioned: Get ready to get bent over and berkeleyed in the ass on taxes. Our first year, we were cruising along, feeling like we were doing alright. Thank god we had been saving our pennies, because the fed wanted all of them.

Another: You'll want to talk to anyone and everyone you can regarding what type of business you should be set up as. The accountant is a good first stop (you'll more than likely need one if you don't already have one.) The SBDC may be help with this as well (seriously, you need to talk to these berkeleyers regardless.) You may want to consider one of those online-lawyer-contract-writey-uppy-deals if you decide to incorporate. Otherwise, it's about a thousand bucks from a 'real' attorney.

While I love the idea of not getting into debt, it's a GREAT time to start a business, and I'm guessing Ray Kroc and Sam Walton borrowed a few bucks to get off the ground. Once again, the SBDC can point you to banks that are more willing/likely to shell out dough for small business loans.

I'd stay away from borrowing money from friends and family. Evar.

Don't forget things like liability insurance. A $1 million policy is cheaper than you'd think. Avoid having employees if possible. The increased tax burden will blow your berkeleying mind.

Best of luck!!! I'm excited for anyone who decides to take the leap. Keep us updated.

SCORE is really great those old guys have been there done that and they are great mentors. Have a back up plan / diversify products that will ensure cash flow. Hit flea mkt at car show , races , trade shows like Performance racing industry show . This countries backbone is small business good luck !! Hit me up if you need some signs

Everything poopy said except the loans

Try and find an IDA match first. If you save $2K with us we give you $4K for free. That's a heck of a lot better than a loan! Not going to do much if you're talking $20K in inventory, but there's no reason to start that big. Start it now, in your garage, and see what happens. I took that leap at 20 and was happy to have a side business. Sooner or later my new one will turn full-time.

Now is the BEST time in the last twenty years for new business startups...

...IF you've got the Huevos for it. That's a big IF.

Ask your local government for assistance. Start with the Chamber of Commerce. Tell them you need help, then ask for resources.

There are vast numbers of government agencies that exist for the purpose of helping small businesses. They usually (historically) don't help at all, but they currently don't have a lot of success stories to talk about, and that means they are UBER helpful (they need to justify their existence, before tight budgets slash them). It's amazing how much they can offer. Make sure every conversation you have talks about growth and developing new jobs.

On borrowing money- don't do it. It only makes banks richer, and they don't give a d*mn about the success of your business. You may need capital, but try to be more creative. Do it without committing to big loans payments.

For example- if you need a big injection machine, find someone who owns one and doesn't need it. Negotiate purchase terms with him that will come out of the sales as a percentage of sales. Win/ win- he gets a little money out a piece of equipment he doesn't need, a future finalized sale, and you get the equipment without a big cash outlay.

Or, go to the customers. Whoever is going to buy the parts, needs the parts, and doesn't want to be in the manufacturing business. So let's say you've identified a market for a particular type of parts, and you first customer out of the gate is going to buy 10,000 parts per month. Ask them for capital to step up your capabilities to be able to meet their needs. You will be providing a value to them (reliable supplier, quality part, etc) and making their business better. Win/win. You won't know till you ask.

Also, understand that banks are asset lenders. That means they don't lend unless you already have the value of the asset sitting on the premises. Banks don't lend money for potential future sales or growth, only for past and existing infrastructure and assets. Look to the customers, small investors, or government loans for capital, not banks. And make sure it's payback is enclosed in your operating budget, and tied to your cash flow peaks and valleys. That means, allow the investor to make more money then he could elsewhere, but he's gotta take some of the risk too.

Banks don't take risk. Creativity is significantly more valuable than a bank's cash.

On borrowing money- don't do it.

Hey man, I just want everyone else to share in the joy of waking up at 3 AM in cold sweats wondering how the berkeley they're going to pay the business loan this month.

Honestly, I couldn't have done it any other way; but we bought an existing business.

maroon92 wrote: I plan to be a small supplier to a niche of guys working on cars. Long term, I would like to go international, and work out of a small 1-2 bay garage with a little storage. right now I don't have enough sales to warrant a building, but that is where I am aiming.

I've been doing that for about 7 years now. There a busy times, and slow times, and you can never guess when they're going to be, so you always need to be able to get through a slow month. I like to do as much as I can myself (my labour is cheap, and I trust my work), and rely on a few key suppliers for parts, and services as I need them. It is important to build a good relationship with your suppliers. They'll be there for you when you really need them. Do not borrow money. It will be difficult enough getting by, without having to pay loans. OTOH, I do have a line of credit, just incase I see a deal, or need to cover something short term. Short term is the key here. Watch the little stuff. It will kill you. Couriers, paypal/ebay fees, banking charges, customs, shipping charges, taxes, etc. You need to keep a close eye on this stuff so it doesn't eat up what little money you might make in the beginning. It's not what it used to be, but I used ebay to let people know what I was doing. You couldn't otherwise get that kind of advertising for that price anywhere. I find it way too expensive now, and don't use it anymore.

I don't have any real advice to give, I'm only just starting my business now, starting as a part time thing so I can continue to pay bills. I'm definitely losing my free time rapidly, but so far I'm loving it even so.

I remember hearing that even if you have a one in a million chance of success, it just means you have to try one million times. Definitely keeps me motivated when things don't seem to be working the way I want them to.

In reply to digdug18:

I couldn't agree more w/John Brown. Save for it. If you can't afford it, SAVE for it! This is that kind of economy, right now.

The only way to justify borrowing money is if you already have customers lined up and banging on your door.

If you're just starting out it seems to me that warehouse space is an overhead that's not necessary. I'm trying a virtual office in the short-term. It's 99 a month. If my business picks up I can get a 'real' office, but I'm not going to front all that money before building a client base.

I use CES Virtual Offices, but you would have to call them to see if they're in your area. It makes me look professional and credible, something that's VERY important for online business.

AWESOME thread guys. . . This has lit the fire in my belly!

The more fingers in your pie, the less control you have. If you can start it all by yourself, in the garage, part time, at night, then you are solely in control.

Stay sole proprietorship until you can use incorporation. There really is no sense is doing it until your business is ready for it. And that's not when you're playing in a garage at night. If for no other reason than the taxes and recordkeeping for a corporation are a whole lot more painful and time consuming than they are for a sole proprietorship.

Don't delude yourself with visions of protection just because you file articles of incorporation. It's a thin veil, and easily pierced.

There are a lot of machine shops that you can make your magic widget at with nothing more than a DVD. They will give you their software to build on. If you're really paranoid about your design being stolen, have each piece made at a different machine shop.

Borrow if you must, but understand that means you must succeed. Debt is what wakes you up at night in a cold sweat. Yes, you can get a business going a lot faster this way. You can also kill a dream a whole lot faster as well.

Borrowing from family is a great way to destroy a relationship with them.

Talk with people all you want, ask all the advise you want, but until you actually start the business, it's just a pipe dream. There are those who do, and those who talk about doing.

idea ideas ideas.....hhhhmmmm lots of very good advice and the thing i can add since i havebeen doing the same thing for a while now is the local small buniess office and classes at the local college of they are offered are great. still trying to get going eough for myself to get more off the ground with y buniess. but then again mine is super cheap for what i do..... i do photographry as a side job to try to make some extra cash to pay for my race car....and some of the other cars. sorry for borrowing the topic...back to the regular mess....

Dont hire anyone unless you absolutely have to. If you need one more guy pop out a kid or something and work extra hours till hes 3 or 4 and you can press him into service.

There is lots of good specific advice here. If you are serious about being an entrepreneur, understand the odds are stacked against you. 9 out of 10 new businesses fail. Some people look at that statistic and think, "Starting my own business it too risky." Others look at it and say, "I'll expect to start 10 businesses, if needed." I've pursued two in my spare time so far that fizzled for various reasons. I haven't decided what I am doing next. But I thought of an interesting idea this morning.

You are limiting your growth potential if you do not have the ballz to leverage yourself...

Thats right... Loans are good if done appropriately.

This is atlittle advacned, but If I can invest dollars in something that will earn 10% and I can get a loan for 3%,.... I'd rather have my money in the 10% account and pay my bills with borrowed money.

Also, start a legal entity as quickly as possibly, there are an ass load of benefits.

Type Q wrote: There is lots of good specific advice here. If you are serious about being an entrepreneur, understand the odds are stacked against you. 9 out of 10 new businesses fail. Some people look at that statistic and think, "Starting my own business it too risky." Others look at it and say, "I'll expect to start 10 businesses, if needed."

I don't believe this. It depends entirely on what your measure of failure is.

To a true entrepeneur, failure would be measured as failure to try.

I know a lot of whiners who say they started a business and failed. Their expectations were wrong before they started. I also know a lot of entrepeneurs who have started dozens of businesses and never failed.

It's all in how you look at it.

Just don't start it with the expectation of failure; expect to succeed, but keep in mind that it may not, rather than the other way around.

ignorant wrote: You are limiting your growth potential if you do not have the ballz to leverage yourself...

That's true. But it is also true that you are defining your risk exposure. I would never suggest that borrowing is bad, but borrowing for the purpose of starting something that is unproven is foolish, narrow minded, uncreative, and doomed.

There is no growth potential for something that does not exist.

Prove that you can do it without the crutch of borrowing, be prepared to borrow when the time is right for the growth you are developing. Don't try to finance a hope. Borrow to increase a proven formula, after you have shown you can handle things when they are small.

If you can't manage money when things are small, more money will not give you the ability to manage money. It will only accelerate your demise.

ignorant wrote: This is atlittle advacned, but If I can invest dollars in something that will earn 10% and I can get a loan for 3%,.... I'd rather have my money in the 10% account and pay my bills with borrowed money.

Right again, my point exactly. Learn FIRST how to invest before borrowing the money to do so.

ignorant wrote: Also, start a legal entity as quickly as possibly, there are an ass load of benefits.

I gotta agree completely with Iggy on this. Anyone who doesn't pursue corporate opportunities with a business no matter how small probably doesn't need to be in business. They are thinking too small, and missing enormous opportunities for the sake of convenience. If paperwork scares you, do not go into business.

BoxheadTim wrote: Just don't start it with the expectation of failure; expect to succeed, but keep in mind that it may not, rather than the other way around.

Most start a business with the expectation of failure without realizing it. Failing to plan IS planning to fail.

The "statistics" mostly define people who should not have gone into business in the first place. They failed to plan.

SVreX wrote:

ignorant wrote: You are limiting your growth potential if you do not have the ballz to leverage yourself...

That's true. But it is also true that you are defining your risk exposure. I would never suggest that borrowing is bad, but borrowing for the purpose of starting something that is unproven is foolish, narrow minded, uncreative, and doomed. There is no growth potential for something that does not exist. Prove that you can do it without the crutch of borrowing, be prepared to borrow when the time is right for the growth you are developing. Don't try to finance a hope. Borrow to increase a proven formula, after you have shown you can handle things when they are small. If you can't manage money when things are small, more money will not give you the ability to manage money. It will only accelerate your demise.

I agree. I do not understand the "don't borrow" comments. I believe that if you can't effectively manage your money and borrow when appropriate, maybe you don't belong in business.

SVreX wrote:

BoxheadTim wrote: Just don't start it with the expectation of failure; expect to succeed, but keep in mind that it may not, rather than the other way around.

Most start a business with the expectation of failure without realizing it. Failing to plan IS planning to fail. The "statistics" mostly define people who should not have gone into business in the first place. They failed to plan.

My sister called me the other day she goes, "Help me do a business plan." I said, "Ok for what idea and what business." She said, "Dosen't a business plan help me figure that out.

Me =

John Brown wrote:

ignorant wrote:

P71 wrote: Do *not* go into debt to start it. Run it from your garage part-time for a year if you have to.

umm.... What if I need capital for equipment? Say $20k for a used CNC + another $5k for used tooling?

Then save for it. I have a great idea that I am stalled with because I need to develop a plastic molding process. If I farm it out I lose the idea almost immediately before I can publish/patent the final products. Right now I am working with wood bucks and a toaster oven ;)

Ever heard of first mover advantage?