How To Start A Small Business
How to start a small business and make the leap from corporate employee to entrepreneur. The pros, cons, and pitfalls of owning your own business and knowing when you're ready to become that entrepreneur.
So you are finally ready to be your own boss and make the leap from corporate employee to entrepreneur? There are some things to research. Some facts that will make the transition easier and a mindset to cultivate that will mean the difference between success and failure.
First, the hard part, the mindset. You must keep in mind that just because you are now the boss, it does not mean you will be sleeping later or taking more time off. In fact, you may be putting in more hours with your business than as an employee with your former company. Discipline is key when you get discouraged and "don't feel like going to work today." Do you have the drive to push yourself out of bed and into your office everyday, knowing that you are the only person to whom you have to report?
There are no paid vacations, sick days or holidays for you. If you do not work, you do not get paid. To be a successful entrepreneur you need to be extremely self-motivated. For example, if you become an entrepreneur driven solely by the desire to make a ton of money, then when money gets tight or your receivables get a little backlogged, you could get discouraged and decide not to go to work. Sometimes it is also tempting to go back to Corporate America believing that you are a failure. Tough it out! Successful people have failed time and time again. Read their biographies. Many have lost their fortunes more than once.
Now for the research part. It is important that you know your expenses each month. If you do a year-long breakdown and add in extra every month for incidentals, you will know just how expensive your life is. Make sure you figure in the reductions of a daily commute to the old job versus the new, especially if you have no further to travel than a few steps to your home office. Figure in lesser amounts for your office wardrobe too. You are your own boss, you can wear what you want. You don't think Bill Gates wears a suit and tie to work everyday do you? If you need help in consolidating your bills and clearing up old debt, check out advice columns online or order the $5.00 Pay Off Your Bills booklet from Lane Productions (410) 521-4077. Their system is an easy no-nonsense approach to getting rid of unnecessary debt.
The ideal scenario for quitting your corporate job would be to have six months worth of living expenses set aside. Failing that, try to have at least three months. If you just can't take it anymore and need to leave tomorrow or in the next five minutes, bite the bullet and do it. I did, five times and never once regretted it. I survived just fine, but then I lost most of my social life in the process and sacrificed a few years of financial security for the future in zeroed out savings accounts.
The last piece of the puzzle are the tax facts. You will need to add monthly expenses of health insurance (unless you are covered under someone else's policy), savings for quarterly tax deposits, social security and if you have employees, a whole host of other taxes and insurances. Get a good book on setting up your accounting system so that it meets your needs and the IRS's should you ever be audited. The good news about taxes is now that you own your own business, you have a lot of deductions that you are entitled to take. If you're going the small business route with yourself as the sole employee, taxes will be a lot easier and you can probably handle them yourself. When your tax booklet arrives in the mail, take some time going over the form and gather all the rest of the forms you will need (they seem to change the requirements every year). Throughout the year you will need to keep every receipt that is related to a business expense (supplies, entertainment, equipment, etc.) During the first year of your business, the cost of setting up your business is 100% deductible UP TO A CERTAIN DOLLAR AMOUNT. A year ago the limit was $17,000. That amount easily covers a computer and some chairs and desks. If you have a home office, you are also able to charge the home office rent for the space it takes up in your residence. You may also deduct a percentage of your heating and electric bills as office expenses. The key is keeping accurate and almost pristine records. This will give you piece of mind.
The rewards of working for yourself are great, the hassles are also many, however, if you have the will and desire to make it work in your life, and are determined not to go back to work for a company where you have very little say-so in your job, you will be a successful entrepreneur. Good luck!