For many, the American Dream includes owning your own business.
As more people experience layoffs, the time may be right to “go for it.” Tough times can make growing a business harder, but it should not be viewed as impossible. Survival when times are tough will give you the springboard necessary to get your business soaring once the “good times” return.
Here are five smart ways to build your small business.
1. Set Up and Create the Essentials
First, legally set up a business structure. This will allow you to submit some of your expenses as legitimate business expenses. Depending on the entity, it can also provide a certain measure of legal protection, too.
Next, open a separate checking account for your business. This keeps your business income and expenses from being co-mingled with your other income and expenses. It will provide the clarity when you make financial business decisions.
Lastly, if you’re setting up an office in your home, make sure you dedicate it to work activities only. It is psychologically important to divide work from your personal life. And from a tax perspective it is also important.
2. Build and Maintain a Professional Business Image
To make sure you’re taken seriously, you’ll need to first take yourself seriously. Make sure your professional image is consistent and dependable. Do not have your children answering the business line. Do not mix casual relationships with client relationships. Carefully consider how you can socially separate your business and personal pursuits.
Additionally, prepare professional materials that explain your talents, products, or service. Do not skimp on planning out ways to inexpensively gather publicity and other marketing. Reach out to people in your network and see how you can help them because they will frequently return the favor. Join professional organizations and dedicate time to learning your industry in depth (even if you’ve worked in the industry as an employee).
3. Consider Your Funding Sources
Funding your business can come from a variety of sources. Common ways to fund a growing business are to take money out of your savings, your current paycheck, an inheritance, or by raising funds from family and friends. Newer ways to raise capital include peer-to-peer lending from sites such as Virgin Money, Prosper.com, and LendingClub.com. Investigate local initiatives, too. For example, small-town Staunton, Virginia offers business loans through their Staunton Creative Community Fund.
4. Plan for and Invest in Insurance and Benefits
There can be advantages as a sole proprietor if you go ahead and invest in your very own “benefits package.” For example, it is smart to set up a health insurance plan, medical savings account, and/or retirement investment account like a Keogh Plan. There are specific rules so do your research and talk with a fee-only certified financial planner and/or tax accountant.
5. Carefully Expand with 1099 Freelancers or Your First Employee
When you’re starting out, it is smart to keep your overhead as low as possible for as long as possible.
However, depending on your growth, it may make financial sense to take on the additional costs associated with a freelancer or employee. A general rule-of-thumb is that an employee should earn their pay in one day or less. If you work more efficiently with part-time or freelance assistance, you can view the money spent on their wages as hours you retain to earn your wages. Ask for guidance and mentoring from your local chapter of the SBA (Small Business Administration), SCORE, or the Kauffman Foundation. Do not overlook the experience and wisdom you can gain from respected family members or business associates, too.
Remember: it takes equal measures of hard work, dedication, and creativity to build a business. But at the end of the day it is yours. You will benefit from the experience no matter the level of success your business achieves. Good luck!