T u r n i n g  p o i n T s  n

Starting a Business

Turning Points 2 Starting a Business

Questionsn Do you have what it takes?

n Will people take you seriously?

n Can you think in business terms?

n Do you have a good business proposition?

n Whom can you talk to?

n Should you talk to your employer?

n Do you have a business plan?

n How much money will you need?

n Will you need financing?

n Do you understand cash flow?

n Can you keep good records?

n Are you a marketer?

n Can you say “no”?

n Do you have a “Plan B”?

Starting a business can be compared to

jumping off a swing at the high point of its arc.

As you launch your body off the seat, you’ll

feel the joy of flying free. The same is true

when you start a business: There’s no time

clock, no production quota, no manager. It’s

just you and the feel of the wind.

And then, gravity sets in. All too quickly, you

remember that every “up” has a “down”

as the ground rushes nearer. In business,

the “down” might be a lack of time, lack of

funding, or lack of customers.

The highs and lows of establishing a

business will test your temperament, your

skills, your finances, and your goals. Figuring

out whether you’re ready to thrive as a small-

business owner starts by asking yourself

some tough questions.

Do you have what it takes?Business owners are risk takers. If the mere

thought of an uneven relationship between

bills and payments makes you queasy, plan

on perpetual indigestion. But if you enjoy

proving you’re flexible enough to adapt to a

constantly changing environment, you’ll feel

right at home.

Explore your prospects for thriving as a

business owner by considering your ability to:

n Take responsibility. Whether the task is

large or small, it’s up to you to make sure it’s

completed. You may want to concentrate on

big projects, but someone has to make sure

bills are paid, invoices are sent, computer

security software is upgraded, and taxes

are filed. Even if you can afford to hire

employees, you’ll need to pitch in when extra

hands are needed.

n Analyze your options. You must be

able to weigh the possibility of success,

decide whether it’s worth the risk, and then

continually adjust your plan to meet the

needs of the marketplace.

n see the big picture. Business owners

must sometimes give up something—a

client, an opportunity, a day off—to do

what’s right for the business. Can you step

away from your original ideas to pick up on

something new and better?

n Balance work, life, and money. When

business is slow, time will be plentiful

but money will be tight. When business is

booming, money will be plentiful but time

will be tight. Finding balance at work and at

home is a challenge.

n gain support on the home front.

Starting a business can strain a relationship,

especially if you’re a risk taker linked to a

risk-averse spouse or partner who shudders

at the thought of uneven cash flow. Look

for ways to satisfy your spouse’s need for

Make the Move to Small-Business Ownership byDarlaDernovsek

Turning Points 3 Starting a Business

information without overwhelming them with

business worries. Remember that if your

spouse provides financial support, he or she

also should share the rewards of owning a

business.

Will people take you seriously?Earning customers’ trust is easier if you look

and act like someone who can get the job

done. Elements to consider include:

n Background and references. Describe

your background for potential new clients in

professional materials such as a résumé or

brochure. Offer references so new customers

can check your background.

n ‘image’ materials. At a minimum, you’ll

need a professionally designed logo that you

can display on stationery and business cards

to consistently convey your business name

and contact information.

n Appearance. Dress for your audience.

It’s acceptable to dress down when tackling

hands-on tasks, but you must upgrade your

appearance when you meet with clients,

give a presentation, or attend professional

meetings.

n office space. Whether you rent facilities or

work at home, you need appropriate space

and office equipment. Issues to consider

include telephone services, Internet access,

and space to meet with clients if needed.

If you’re part of the roughly half of small

businesses that are home-based, find ways

to separate your personal and professional

space to minimize noise and disruptions.

Also find out if your home business is in step

with zoning requirements.

Can you think in business terms? Separating the personal from the

professional goes beyond your office

arrangements. You’ll also need to:

n understand financial terms and forms. 

(More information on financial issues is

offered later.)

n Base decisions on business 

considerations rather than personal 

relationships. Be prepared to objectively

weigh the pros and cons of any business

decision. In some instances, this may require

Small businesses …n Employ roughly half of all employees working in the private sector.

n Have generated 64% of net new jobs since 1993.

n Continue to rise steadily in number to reach 29.6 million in 2008. About 627,200 new employer firms opened their doors in 2008, while 595,600 firms closed during that year.

Source: Small Business Administration Office of Advocacy

Can you become The Millionaire Next Door?“The Millionaire Next Door” is a research-based bestseller written by Thomas J. Stanley and

William D. Danko that links business ownership and financial affluence. Findings include:

n Self-employed business owners head 18% of American households, or

roughly one of five households.

n Self-employed people are four times more likely to be millionaires

than those who work for others; about two-thirds of millionaires who still are

working are self-employed.

n It’s impossible to predict whether someone is a millionaire based

solely on the type of business owned; the business owner’s character is more

important than the nature of the business.

Turning Points 4 Starting a Business

the ability to disagree respectfully with your

favorite client or even your friend.

n Work with customers having approaches 

that differ from your own. You may need

to set aside personal opinions to respond to

your customer’s preferences.

n recognize scams. Check the National

Consumers League for a list of the latest

scams aimed at separating businesses from

their hard-earned money.

n Maintain your integrity. Your reputation

is an invaluable business asset, so you must

protect it even if that means giving up a job

or a customer.

Do you have a good business proposition?You must offer a skill or a service that

others are willing to pay for in the current

marketplace. This is not always as simple as

it seems. You may be selling the world’s best

slingshots, but you’re unlikely to succeed if

the marketplace demands bows and arrows.

To determine whether your business will

thrive in the current marketplace, examine

these factors:

n is there a demand for what you offer? 

Ask potential customers if they’d buy what

you’re selling. Talk to colleagues or others

in the same field—but outside your market

area—to learn more about the demand.

Determine who your competitors are and

how they differ from you. Figure out what

your advantage is and make it work for you.

n What do i need to get started? Make

a list of what’s essential now and as your

business grows. Next, figure out what it

will cost and where you can get funding.

Remember to factor in health insurance,

which can be a high-cost item unless

it’s accessible through your spouse’s

employment.

n What are the rules? Check with local,

state, and federal authorities to learn

whether you need permits, registrations, or

licenses. Investigate your tax obligations,

including sales taxes, self-employment

taxes, business taxes, and tax withholding

for employees, if applicable.

n Who’s going to do the work? Can you

handle the workload by yourself, or do you

need to hire employees or outsource some

services? Have a plan in place before you

open your doors.

Whom can you talk to? Talk to those you trust about business

operations, marketing, potential clients, and

options for helping each other out as your

business grows. Remember to be discreet to

avoid announcing your plans prematurely,

especially if you still are working for another

employer.

Get started by talking to these sources:

n Your mentor. If you have business or

personal mentors, share your idea. Ask them

to provide blunt input, then listen closely to

their insights.

n Your spouse. Never assume that your

spouse will support your business start-up.

Instead, discuss the details of your plans

and the impact on your finances.

n Joe worked for a business that contracted with insurance companies to perform emergency repairs to Midwestern homes and businesses. Unhappy with his employer’s questionable business practices, Joe decided to go into business for himself.

Once Joe made the decision to leave, he put together a business plan and began talking to other key employees who might be interested in a new opportunity. All discussions were conducted off-site and on employees’ personal time to maintain the integrity of the new venture.

After Joe resigned from his employer to launch his new venture, he began contacting potential clients, including clients from his former employer. Several key clients followed Joe to his new business, which was profitable within the first year.

“Recognizing the right path and staying on it requires more than luck,” Joe says. “Choose your image and then live it.”

Turning Points 5 Starting a Business

n Your friends. Your friends know your

strengths and weaknesses, so ask them

to speak candidly about your prospects in

business.

n An objective expert. After talking to

people who know you well, seek advice

from more objective sources. One option is

the nonprofit organization SCORE, which

describes itself as “Counselors to America’s

Small Business.” SCORE volunteers are

successful executives and entrepreneurs

who agree to provide free help to small

businesses face-to-face or online.

n Experienced business owners. Talk

to others who have started a business or

are self-employed. Get a list of their best

practices as well as mistakes to avoid.

Your lender. Your credit union business

lender can be an invaluable source of ideas

and information about financial issues.

n potential ‘partners.’ The nature of these

discussions will vary depending on whether

you’re looking for an investor, a co-owner,

or a small business willing to work with you

to tackle larger projects. Get their opinion

about your business possibilities and the

prospect of working together.

n Local business leaders. Leaders from

the Chamber of Commerce and business

organizations can help you understand

the demands of starting a business in your

community, ranging from local business

practices to zoning regulations.

n professional organizations or trade 

associations. Use resources provided

by trade associations or professional

organizations in your field to learn more

about business operations.

n Co-workers or business acquaintances 

who are potential referral sources.

Even before you’re ready to announce

your business plans, you can ask general

questions about business relationships and

the need for vendors in specific fields. After

your business is launched, contact them

again to seek referrals.

Should you talk to your employer?If you intend to compete with your employer,

stay quiet until you’re ready to leave. If

you’re not pursuing the same customers,

then use your judgment to decide when

to alert your employer to your plans.

Depending on your employer’s needs and

policies, you might be able to continue

working part time while launching your

business. Always protect your reputation

and minimize the potential for hard feelings

by behaving in an ethical manner.

Do you have a business plan? Your business plan is a vital document that

provides a guideline for your launch as well

as credibility for lenders and other experts.

The SBA’s online Small Business Planner

offers excellent information about how to

write a business plan. Another option is

looking for business start-up courses at

your local community college or technical

institute.

Putting up a tentAnnie had a successful marketing career, but she yearned to return to her roots as a writer by pursuing freelance work half-time while raising two sons with her husband, Frank.

Frank insisted her plan would never produce enough income to help pay the family’s expenses. Frank’s construction job required extensive travel, so he underscored his financial concerns when he was on the road by staying in a tent, rather than a motel.

To get Frank out of the tent, Annie agreed to keep working. Meanwhile, she continued talking to experienced writers, potential clients, and business mentors until she could prove to Frank that her idea made financial sense. To ease the transition, she agreed to work half-time while she launched the business.

Within two years, Annie was able to quit her job to concentrate on freelancing. Fifteen years later, she’s still running her own business. Frank burned the tent.

Turning Points 6 Starting a Business

Although length and detail of business plans

vary, your business plan might include these

elements:

n Executive summary

n Market analysis

n Company description

n organization and management

n Marketing and sales management

n service or product line

n Funding needs

n Financials

n Appendix

Once your plan is complete,

remember to review it quarterly

and update it annually to help keep

your business on track.

How much money will you need?Your business plan will help you figure your

financial needs, including how long it will

take for the business to support itself and

generate a profit.

Most small business owners must plan

ahead to cover two types of expenses:

1. Business expenses required to launch

operations and support their growth.

Depending on your business plans, these

may include purchasing supplies and

equipment; paying for fees, licenses and

professional services; and hiring employees

or contractors.

2. personal expenses that must be covered

during the business launch. These include

day-to-day living expenses as well as

expenses that formerly might have been

covered by your employer, such as health

insurance, life insurance, and retirement

savings.

Will you need financing?Chances are good that the answer is “yes.”

In some cases, that financing might come

from private sources, such as personal

savings, a home equity loan, or income

produced by a spouse who is employed full

time. In many cases, business loans will be

required to provide start-up capital.

Many credit unions offer member business

lending services designed to serve small

businesses. Your credit union also may

provide SBA loans or recommend another

lender who offers this service. Finally, credit

unions also offer business deposit services

to handle the money flowing into and out of

your business.

Do you understand cash flow?Cash flow looks at the timing of your

income and expenditures, which determines

whether you have the funds on hand to cover

your obligations.

Monitoring cash flow starts with keeping

track of what must be paid and when, as well

as payments due to your business and when

you can expect to collect them.

Covering the timing gap between revenues

and expenses requires a combination of

savings and access to credit, such as a

business line of credit from your credit

union. Obtaining a business credit card also

may be an option, however, bear in mind

that high interest charges can hobble your

business unless you use the card sparingly

and repay it promptly.

Can you keep good records?Creating a filing and/or computer system to

store your records should be one of your first

tasks. Your system should help you track

information about:

n Expenses, which includes bills payable

Small Business SurvivalAmong new employer firms:

n 69% survive at least two years.

n 51% survive five or more years.

Factors affecting survival:

n Years in business, with the rate of closings declining significantly after four years.

n Access to capital

n Gaining the size required to have employees other than the owner

n The owner’s education level

n The owner’s motivation in establishing the firm

Source: Small Business Administration Office of Advocacy

Turning Points 7 Starting a Business

as well as tracking expenses for specific

business segments.

n invoices, which should include a system

for sending invoices, tracking payment,

and contacting customers when payment is

overdue.

n insurance, including coverage for liability,

property/casualty, life, health, vehicles

or equipment, business interruption, and

workers’ compensation.

n Taxes, including local, state, and federal

obligations as well as tax deductions that

will reduce your tax burden.

n Licenses and permits, which again occur

on the local, state, and federal level.

n Equipment records, which includes

warranties, operating manuals, computer

software, and related issues.

n Client records, which detail the

relationship with a specific client.

n Vendor records, which can ease the

process of ordering supplies or requesting

services.

n professional resources, which provide a

place to save general information for future

reference.

In addition, you’ll need to maintain a

calendar either on your computer or on

paper. This calendar is vital to help you track

deadlines, renewals, payment dates, and

other issues.

Are you a marketer? Marketing is a must. You can’t assume that

clients will come to your door. Instead, you

have to go out and get their attention.

Marketing issues to ponder include:

Product or service: Will you be all things to

all people, or will you serve a specific niche?

Are you willing to reshape your business to

respond to specific opportunities or enter an

emerging market?

Price: What will you charge? Do you intend

to go for quality or quantity? How will you

decide?

Target market: Whom are you going to sell

to? Where are they located? How will you

reach them?

Competitors: Who else offers this product

or service? What sets you apart from them?

Why should customers buy from you instead

of them? How will you deliver that message?

Business strengths: What unique strengths

or talents does your business offer? Are you

willing to develop new products or services

to appeal to a specific market?

Identity: How will you protect your business

name? What legal steps are required?

Issues may range from Web site availability

to trademarks that protect your rights to a

specific name.

Public relations and marketing

communications: How will you reach your

target market? How will you let them know

what you have to offer?

Can you say “no”?Once you launch your business, you will face

a continual stream of information, ideas,

and requests. People from outside your

business will attempt to sell you equipment

and supplies; persuade you to give to their

cause; ask for your support of organizations

or events; seek a share of your marketing

dollars; and even hope to enlist you in a

business scam.

Inside your business, employees will seek

approval for ideas; ask for promotions or

raises; and request vacations. Clients will

beg you to meet unrealistic deadlines, slash

prices, and deliver products or services that

simply don’t exist.

Finally, you’ll have your own desires to deal

with. You might be tempted to take on more

work than you can handle, buy equipment

that you want but cannot afford, or invest

in a new line of business that’s unlikely to

prove profitable.

Learning to say “no” is essential to keep

your business on the right track.

Do you have a “Plan B”? You must be willing to accept the risk that

things may fail to go according to plan. You

may learn that you hate running a business,

find that the market for your product has

disappeared due to new technology, or

simply get an irresistible offer from someone

who wants to buy your business or hire you

as an employee.

As you launch your business, remember

to keep skills and certifications up-to-date

to keep your options open. As soon as

financially feasible, begin addressing your

need for retirement savings so you don’t

fall behind. Build your personal savings

to protect yourself and your family from

business swings.

By taking these steps, you’ll be prepared

when the right opportunity arises, whatever

it may be.

Turning Points 8 Starting a Business

n Entrepreneur.com, the online source of

information and ideas from Entrepreneur

magazine. Call 949-261-2325 for general

information or 800-421-2300 to purchase

start-up guides for entrepreneurs.

n internal revenue service Web

information and publications aimed at

starting and running a small business.

Also check the small business section. Call

800-829-4933 to access toll-free telephone

assistance for businesses.

n Visit the small Business Administration,

and click on “Small Business Planner” or call

toll-free, 800-827-5722.

n sBA office of small Business 

Development Centers; the centers provide

management and technical assistance to

small business owners. Call toll-free, 800-

827-5722.

n Business.gov, “The official business

link to the U.S. government.” For more

information, contact the SBA toll-free at 800-

827-5722.

n sCorE, Counselors to America’s Small

Business; call toll-free, 800-634-0245.

n Local and state resources, including:

• Your local community college, which

may offer low-cost courses on starting

a small business.

• Your state’s Department of Commerce

• Your community’s municipal or county

government

• Your community’s Chamber of

Commerce

Useful resources

©2009 Credit Union National Association., the trade association for credit unions in the U.S.