FAQ's About Starting a Small Business

Learn to Start a Small BusinessObjectives

Take an entrepreneurial test

List the advantages/disadvantages of owning a small business

Review the business basics – marketing, financial, business planning

Find FREE resources to help you

Do I have what it takes to own/manage a small business?

You will be your own most important employee, so an objective appraisal of your strengths and weaknesses is essential.

Let’s take a quiz to see how ready you are to start a business!

Entrepreneurial Assessment Test Take this simple assessment test to see how

ready you are to start a business. Be honest with yourself as you answer the questions!

At the end of this assessment you may find that you’re ready to begin your business, or you may get constructive feedback you can use to strengthen your skills or target areas where you need help.

This is not a scientific test for business success. It’s simply the author’s view of critical traits you will need to run a successful business.

Entrepreneurial Assessment Test

Choose the answer to the following statements that best describes your true actions and feelings.

Add together the points from each answer to see your total assessment score.

Check your total assessment score to see your results.

Let’s begin!

Entrepreneurial Assessment Test

I have an ‘entrepreneurial’ spirit. The thrill of being in business for myself excites me.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test Question: I set written goals and objectives

for myself, and work towards attaining them. I am determined to succeed. The goals are posted and reviewed.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I have a deep desire to be my own boss and set my own hours. I am comfortable making multiple decisions often.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I have a compelling desire to obtain financial freedom. I understand that there is a high risk involved in starting a new business. I could lose my investment.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I am creative and a self-starter. I can think “outside the box” and find innovative solutions to challenges.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I understand that I will need to sacrifice personal time to start my own business. My family is supportive of my venture.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I am a good listener. I am willing to listen to customers, staff, and vendors. I will use their input to improve my business and myself.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test Question: I do not know it all. I will get

assistance when needed. I believe that you must have taken a class, attended a seminar, or read an industry book within the last year to excel in your business.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test Question: I am comfortable meeting people

and networking for my business. I can ask for the sale and collect the invoices. I am effective communicating in person, by telephone, by e-mail, and by writing letters.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test

Question: I understand financing and how to obtain the funds I need. I keep track of the details and follow through with action.

Answer: 1. Never, not a quality (1 point)2. Seldom, unsure (2 points)3. Often, strongly agree (3 points)4. Always, identify with completely (4 points)

Entrepreneurial Assessment Test Total of your assessment test scores:

1 – 15: You are not a strong candidate for owning your own business.

16 – 22: You are not ready to begin. Research, read, and study.

23 – 31: You have some good characteristics, but wait a year while you study your industry and work on the weak areas.

32 – 40: Good potential. Develop a plan to work on weak areas.

41 – 46: You’re almost ready. Develop objectives and work on overcoming limitations.

47 – 50: You’re ready; started.

Assessment Test Results

Usually, the best business for you is the one in which you are most skilled and interested.

If you’ve “passed the quiz,” you need to look at the advantages/disadvantages of owning a business.

Advantages of Business Ownership

Call your own shots

Personal satisfaction

Wealth and job security

Creativity

Contribute to society

Direct contact with customers

Disadvantages of Business Ownership

Can be stressful Still not your own boss Assume the financial risk Hours are long and hard Income not steady Potential legal liabilities Strain on family relationships Buck stops with you

Looking at the Business Basics

1. Test the market: look at the competition within your selected industry.

2. Write a business plan to test the feasibility of your idea, and identify the legal issues that may be involved.

3. Develop a financial plan / find funding.4. Get educated. 5. Design a timeline for establishing your

business, and get any questions you may have answered.

6. Review your business plan/idea with the SBDC and other professionals.

What is my market?

The principles of determining your market share and market potential are the same for all geographic areas:1. Who are your customers?2. How many customers? How many

dollars?3. Who are the competitors and what are

their relative strengths and weaknesses?

4. What is your potential?

What kind of profits can I expect?

Not an easy question. However, there are standards of comparison called industry ratios that can help you estimate your profits.

ROT estimates the amount of dollars invested in the business.

What is a business plan and why do I need one?

A business plan: Defines your business Identifies your goals Serves as your firms resume.

Its basic components include: Current and projected balance sheets Income statements Cash flow analysis

It helps you to: Allocate resources properly Handle unforeseen complications Make the right decisions

Why do I need to define my business plan in detail?

It may seem silly to ask yourself “What business am I really in,” but some owner-managers have gone broke because they never answered that question.

One watch store owner realized that most of his time was spent repairing watches while most of his money was spent selling them.

Various Types of Legal Entites

Sole Proprietorship

Partnership

Regular “C” Corporation

“S” Corporation

Limited Liability Corporal (LLC)

What about an attorney?

You might need the assistance of an attorney in completing the following: Deciding on an organizational form (sole

proprietorship, partnership, corporation, etc). Registering a fictitious name (www.sunbiz.org

for FL residents). Obtaining licenses (city, county, state level if

required). Familiarizing yourself with zoning laws and

occupations licenses. Obtaining a Tax-ID from the IRS.

Financial Plan: How much money do I need to get started?

This is really a function of start-up expenses, capital equipment and working capital needs until the business reaches financial self-sufficiency.

You will probably need enough money on hand to cover operating expenses for three to twelve months. This must include money to service your loans.

What are the options for financing a business?

Self Investment: Committing your own funds is often the

fist financing steps (most banks require you to invest at least twenty percent of the start-up costs).

Investing your own money is the best indicator of how serious you are about your business

Risking your own money gives confidence for others to invest in your business. You may want to consider a partner for additional funding.

Lender Criteria

Character

Capital

Cash Flow

Collateral

What do I have to do to get a loan?

Initially, the lender will three basic questions: How will you use the loan? How much do you need to borrow How will you repay the loan?

Be prepared to answer these questions with detailed, specific answers!

Financial Statements

You should understand three basic financial statements: Balance Sheet: A record of assets,

liabilities and capital. Income (profit-and-loss) Statement:

Earnings and expenses over a given period of time.

Cash Flow Statement: How much cash the business generates from operating, financing, and investing.

Accounting and Bookkeeping

The importance of keeping adequate records is critical, both to satisfy legal requirements and as your primary management tool.

Without records you cannot see how well your business is doing and where it is going. You can’t manage what you can’t measure!

Finding Employees

Chose your employees carefully!

Decide before hand what you want them to do.

Be specific! You may need flexible employees who can shift from task to task as required.

Interview and screen applicants with care.

What to Pay Employees

When determining pay, keep these factors in mind: You must withhold federal and state

income taxes. You must contribute to unemployment

and workers compensation systems. You must match social security

withholdings.

Hiring Family Members

Frequently, family members of the owner help out in the business. For some it is a rewarding experience. For others it can cause irreparable damage.

Carefully consider their loyalty and respect for you as the owner-manager.

Marketing and Advertising

Your business growth will be influenced by how well you plan and execute a marketing plan and advertising program based on your understanding of your customers.

Be sure to plan and budget well for marketing and advertising.

Continuing Education Resources

www.sbdcseminars.org www.sba.gov www.score.org www.famee.org www.bizjournals.com www.entrepreneur.com www.incorporate.com/score

Where can I go for help?

Small Business Development Center (SBDC)

Small Business Administration (SBA)

Chamber of Commerce

Service Corps of Retried Executives (SCORE)

Economic Development Center

Trade Associations

When do I know I’m ready?

You have a completed, edited business plan.

You know where you want to operate.

You know how much cash you need, and how you will repay it.

You have your staff. You have your vendors. You know your costumers… and why

they will buy from you!

What You Need

A unique product

A competitive and fair market price.

Integrity: Do exactly what you say you are going to do. Create your own reputation.

You can do this – and succeed – if you are truly committed and dedicated.

Good luck!

I wish you great luck and success in your business venture!