Women Business Owners – Find the Help You Need to Start Up and Grow
There’s no doubt about it, women are a rising force in American entrepreneurship. Here are some fast facts on women-owned businesses:
- The latest Census data indicates that 7.8 million U.S. businesses are owned by women. This represents a stunning 44% increase from 1997-2007, twice the growth rate of men-owned businesses.
- Women-owned firms now make up close to a third (29%) of all nonfarm businesses across the country.
- These firms generate a total of $1.2 trillion annually and employ 7.6 million people.
Clearly, women-owned firms are not in the minority. Neither are they a small niche market, but they are a major force in the U.S. economy.
The Opportunities and Challenges of Women-Business Ownership
Business ownership represents a significant opportunity for women. The flexibility of being your own boss provides for a work/life balance that can be hard to achieve when you’re working for someone else. Business ownership also affords the opportunity for career advancement beyond the confines of corporate America’s “glass ceiling.”
Despite this, women business owners continue to face their own particular challenges. From sex discrimination by vendors, investors and even employees, to juggling the demands of business and family obligations while being the “Chief Everything Officer.”
And then, of course, there’s the economic climate and the challenges that women face trying to gain access to capital. According to the National Association of Women Business Owners (NAWBO) Public Policy Survey of its members, women still rely on personal savings as their main source of business funding and often don’t apply for business credit because they believe they will be turned down. Likewise, women also deal with racial discrimination. According to NAWBO’s member surveys, nearly 50 percent of African American women business owners have encountered obstacles or difficulties when trying to obtain business financing.
Women’s Business Centers – Assistance and Education in Your Community
The good news for women business owners is that there is a range of free and low-cost resources available to help them overcome many of these challenges and succeed in business. In particular, the SBA’s Office of Women’s Business Ownership (established in 1988 to help women overcome barriers to business ownership) oversees a network of Women’s Business Centers (WBCs) throughout the U.S. and its territories. These centers provide women entrepreneurs with in-person assistance and business counseling programs that can help them start and grow successful businesses.
WBCs can specifically benefit women who are economically or socially disadvantaged and wouldn’t otherwise have access to comprehensive training and counseling offered in many languages.
Because each community is different, each WBC tailors its services to the needs of its individual community, although you can expect to find training and counseling services on a wide range of topics including:
- Preparing for business ownership
- Business planning
- Business management
- How to navigate the loan process
- Opportunities for selling to the government
- And more
WBCs can also help women business owners explore the range of government loan programs offered through SBA.
Check out SBA’s Directory of Women’s Business Centers to find the one nearest you.
Additional Resources for Women Business Owners
SBA and its Office of Women’s Business Ownership work with a variety of organizations to help women business owners succeed. Here are just a few:
- SBA Local Offices – In addition to supporting WBCs, SBA also has its own network of more than nearly 70 district offices. These offices can be a useful starting point for pinpointing the support available to meet your specific business needs. Local SBA offices can also provide information on SBA loan programs, the application process and participating lenders, and often hold regular training workshops.
- Mentoring and Counseling Services from SCORE – With a network of over 13,000 volunteers, SCORE provides free and confidential counseling, mentoring and advice to startups and small business owners nationwide. SCORE’s volunteers have business experience across 62 industries. SCORE also offers low-cost seminars at its local chapters and online training.
- National Association of Women Business Owners – NAWBO is a membership organization that provides resources (including excellent newsletters) and networking opportunities for women in business.
- National Association for Female Executives (NAFE) – NAFE provides information on an association committed to women of excellence in business, with benefits including success stories, newsletters, discounted services and equipment and much more.
- Women Impacting Public Policy (WIPP) – WIPP is a national nonpartisan public policy organization that advocates for and on behalf of women-owned businesses in the legislative processes of our nation, creating economic opportunities and building bridges and alliances to other business organizations.
And don’t forget to check out SBA’s Women-Owned Business Guide for links to information about loans, selling to the government and more.
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How to Choose the Best Location for Your Business
Whether it’s Main Street or Silicon Valley, your business location can mean the difference between success and failure. But more than that, your business location is the linchpin for your reputation, your brand, and your profits.
In fact, choosing a business location is perhaps the single most important decision a small business owner or startup will make, so it requires precise planning and research. It involves looking at demographics, assessing your supply chain, scoping the competition, staying on budget, understanding how state laws and taxes might impact you, and so much more.
Here are some tips to help you choose the right business location.
What are your needs?
Most businesses choose a location that will provide exposure and drive foot traffic or volume to their location. That makes features like parking, pedestrian and vehicular access, the reputation of the neighborhood, and the proximity of other businesses all factors to consider.
However, there are other less obvious factors and needs to consider as well. For example:
- Brand image – Is the location consistent with the image you want to maintain?
- Competition – Are the businesses around you complementary or competing? Some businesses, such as retail stores, benefit from being in a retail hub alongside the competition. Others may be at a disadvantage if located close to competition.
- Local labor market – Does the area have what you need in terms of potential employees? Can they make it into work without encountering hellish traffic?
- Plan for future growth – If you anticipate further growth, preempt the need for multiple moves by looking for a building that has extra space you can expand into should you need it. Your budget should also include cost estimates for furniture, utilities, and IT needs.
- Proximity to suppliers – They need to be able find you easily, too.
- Safety – What’s the crime rate? Will employees feel safe alone in the building or walking to their vehicles?
- Zoning regulations – These determine whether you can actually conduct your type of business in certain properties or locations. You can find out how property is zoned by contacting your local planning agency.
What about the money factor?
Besides working out what you can afford, you’ll need to be aware of some other financial considerations:
- Hidden Costs – Very few spaces are walk-in ready. Don’t forget to include costs like renovation, decorating, IT system upgrades, and so on in your budget.
- Taxes – What are the income tax and sales tax rates for your state? These vary greatly. What about property taxes? Could you locate your business across a nearby state line and pay less in taxes? This article on AOL Small Business from SBA guest blogger, Barbara Weltman, stacks up The Best and Worst States for Small Business Taxes.
- Minimum Wage – While the federal minimum wage is $7.25 per hour, many states have a higher minimum. For example, in Washington state the minimum is $9.04 per hour. If you are re-locating your business, this might negatively impact payroll costs. View the Department of Labor’s list of minimum wage rates by state.
- Government Economic Incentives – Business location can determine whether you qualify for government economic business programs, such as state-specific small business loans and other financial incentives.
Does the state or community offer business support resources?
Getting good advice about laws and regulations on business ownership in a particular location is essential. Likewise, as you look to grow your business, it can be advantageous to work with a small business specialist or counselor. Check what programs and support your state government and local community offer to small businesses. Many states offer online tools to help small business owners start up and succeed. Virginia.gov’s Business One Stop is just one example. Local in-person community resources that specifically support small businesses include SBA Offices, Small Business Development Centers, Women’s Business Centers and other government-funded training, mentoring and counseling programs. Find out if there are any in your location here.
What’s the bottom line?
Do your research, because getting your business location wrong can be costly. Talk to other business owners and potential co-tenants, work with a mentor, and use available resources, such as these free demographics from SBA.gov, to help in your efforts.
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How to Estimate the Cost of Starting a Business from Scratch
How much does it cost to start your own business?
Of course, the answer depends on your business model and your chosen industry. However, a useful estimate based on a 2009 study conducted by the Ewing Marion Kauffman Foundation puts the average cost of starting a new business from scratch at just over $30,000.
Many small businesses, particularly freelance, online and home-based businesses come in a lot lower than this, often needing only a few thousand to get started.
But averages aside, what can you do to calculate your specific startup costs? Read on.
Understand the Types of Costs a Startup Will Incur
Before you do any estimating it’s important to understand how startup costs are categorized. All startup costs (meaning the period before you start generating income) include two kinds of spending: expenses and assets.
- Expenses – These are the costs for operations that occur during the startup phase, although they will continue throughout the life of the business. Startup expenses include deductible items such as travel, payroll, rent, office supplies, marketing materials, etc. Expenses also include initial organizational costs like legal fees, state incorporation fees, etc. You can write off up to $5,000 in business startup costs and another $5,000 in organizational expenses in the year that you start a business.
- Assets – Also known as capital expenses or expenditures, these are the one-time costs of buying assets such as inventory, property, vehicles, or equipment as well as making upfront payments for security deposits. These startup assets don’t usually qualify for deduction, however, some can be written off through depreciation at tax time.
You can read more about the difference between these two and why it’s important to keep good expense records in SBA’s Small Business Expenses and Tax Deduction Guide.
Define What You Need to Spend Money On
To estimate your startup costs, start by creating two lists – one for your startup expenses and one for your assets. Your list should be informed by the aspects of your business that will have costs associated during the startup phase, such as facility improvements or the equipment and inventory you need. But don’t forget to consider items such as brochures, business cards, and website development costs or any security deposits you need to make. Do you need the help of a consultant, tax advisor or lawyer to help you get started?
Next, categorize these items as essential or optional – do you really need to spend money on these before you start making any kind of income?
Now we come to crunch time – assigning costs to your startup “to do” list. This process is always going to be a best guess, but be realistic and use past experience, research, and advice from other entrepreneurs to guide your cost estimates. Organizations such as SCORE and your local Small Business Development Center can provide free and valuable advice about how to calculate your startup costs.
If you use a smartphone, another option that you might find useful is the SBA Mobile App which includes a handy tool for calculating startup costs.
Whatever you do, don’t underestimate your costs, or try to force your costs to fit the amount of money you have available. If the costs are too high, consider another approach to starting a business.
- Could you run a home-based business?
- Instead of buying inventory upfront could you have manufacturers drop ship?
- Could you subcontract rather than hire employees?
- What about buying surplus office equipment and furniture from the government at or below cost?
It’s All in the Timing
Remember, as mentioned above, startup costs are accrued before you have income to supplement your business. So develop your budget with this in mind. For example, startup expenses such as rent and payroll are only that until your business is operational, once you reach that point they become running expenses that you take out of your profits as deductible against your taxable income. So you may want to delay some of your depreciable costs until your business is up and running.
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Five Legal Myths about Startups
Last year, more than *565,000 businesses were started in the U.S. The majority will make it – at least for a number of years – some will not. Unfortunately, many owners believe certain myths about starting and running a business and these beliefs can be their undoing. If you’re thinking of starting a business or have recently begun one, make sure you know fact from fiction so you can be a good statistic!
Myth 1: You can do it yourself.
When getting started, many owners try to save money by doing everything they can by themselves. They form their own corporations or limited liability companies (LLCs) and write their own contracts and other agreements. Doing some legwork can reduce the cost of legal fees and this is a good thing. However, there’s no substitute for professional advice. The cost of legal fees can be cheap in the long run if they save you from expensive litigation or other serious problems.
Turn to an attorney for the following:
- Determining which type of entity is best for your situation (corporation? LLC? sole proprietorship? etc.)
- Setting up the entity you decide on (or at least reviewing submissions if you choose to do it yourself using an online incorporator such as *BizFilings or *Legal Zoom.
- Drafting contracts and other agreements for your business to use.
You can minimize attorneys’ fees by doing some work on your own. For instance, you can use various online templates to write an employee agreement, but then rely on the attorney to view what you’ve done. Find some useful agreements at the SBA site.
Myth 2: A handshake seals the deal.
When you do business, it’s great to have trust. Many in the diamond industry trade millions of gems on a handshake. But for the rest of us, paperwork is better. Oral agreements can lead to misunderstandings and can be difficult to prove in court. In some situations, written agreements are mandatory if you want to sue.
You should put in writing:
- Agreements with co-owners. Partnership agreements spell out terms and expectations of owners and help to settle in advance what happens if one owner wants to leave the business or when partners disagree about things.
- Employee agreements. Make sure that when hired, employees sign nondisclosure agreements so they keep company secrets (pricing, etc.) confidential.
You must put the following in writing:
- The sale of goods for more than $500
- The sale of real estate.
- Agreements that take longer than one year to complete.
Again, templates can minimize legal costs, but are no substitute for a thorough legal review to make sure your interests are protected.
Myth 3: Incorporating protects your assets.
Many owners are under the misimpression that their personal assets are protected if they incorporate or form an LLC. While these entities do protect assets from the claims of many creditors, there are a number of situations where owners remain exposed:
- Co-signing any company obligations, such as leases, business car loans, and lines of credit; in most cases, owners are required to give their personal guarantee.
- Not paying employment taxes to the government. Owners who fail to pay withheld income taxes and the employee share of Social Security and Medicare taxes are personally liable for these amounts.
- Using a business as your personal pocketbook. If you fail to keep business finances separate from your own, then any creditor can set aside the legal protections you thought you had.
Myth 4: No legal protection for the company name is necessary.
Maybe you’ve thought up a clever name for your company or product. Maybe you have a great tag line for advertising. The problem is: someone else may have also had the same idea and taken steps for legal protection. Don’t assume you don’t need to seek protection for your intellectual property (IP).
- Using someone else’s protected name or other IP can expose you to costly lawsuits.
- Not protecting your own IP can cost you in legal fees down the road if another business uses your IP.
Myth 5: Being small makes you invisible to the government.
Businesses are highly regulated at the local, state, and federal levels. While some laws exempt small businesses, many regulations apply regardless of company size. Assumptions that rules or regulations don’t apply or that businesses won’t get caught can get a business owner in serious, and costly, trouble.
Regulations can seem overwhelming. Get started by checking the SBA’s Business Law and Regulation page. Also, talk with your local chamber of commerce or other business organization for guidance on how to stay compliant with government rules and regulations.
Starting a business requires you to open your eyes and dispel the myths that can get you into trouble. When in doubt, ask an expert. There is free help through SCORE.
*Denotes a non-government Website
Barbara Weltman is an attorney, author of several business books including J.K. Lasser’s Small Business Taxes, and trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and her monthly e-newsletter Big Ideas for Small Business®; both are available at www.barbaraweltman.com, and host of Build Your Business Radio. Follow her on Twitter at twitter.com/BarbaraWeltman.
About the Author:
Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.