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Franchise Opportunities: Buying Into A Big-Name Brand

By FranchiseKing, Guest Blogger
Published: December 5, 2012 Updated: December 5, 2012

A significant number of the people that I’ve provided franchise advice to over the years have insisted on looking at franchises that have a recognizable brand name.

I understand why they start their franchise business searches with “the brand” in mind, but do you? You will if you read this post.

Definition of a brand

Legendary marketer Seth Godin* has a great definition:

A brand is the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another. If the consumer (whether it’s a business, a buyer, a voter or a donor) doesn’t pay a premium, make a selection or spread the word, then no brand value exists for that consumer.

Now that you have the definition, let’s look at the number one reason that prospective franchise owners are attracted to the “idea” of owning a well-branded franchise.

Risk

Most franchise buyers think that if they buy a big-name franchise, they’ll be entering the world of franchising at a much lower level of risk…financial risk. Is that true? No. Here are a few reasons why:

1.  Experience

Let’s say that you decide to buy a food franchise with huge brand recognition, but you do so knowing full well that you have zero food-service experience. Do you really think that the brand name of the franchise chain can prevent your business from closing if things get bad enough?

(I use a food franchise as an example because it’s one franchise type in which franchisees, in most cases, can increase their chances of success if they actually have food-service experience.) 

2.  Capital

If you buy a franchise—and do so with a miniscule financial cushion to help you get through the very challenging first 12 months or so—no brand in the world can help you print money.

One of the most important things you can do that can actually increase your chances of success as a franchise owner is to have your finances in order. To do that, you need to figure out how much you have to invest and how much you’ll have for working capital and living expenses as your franchise business ramps up.

You’ll also need to get the right type of small business loan. And, you’ll have to come up with a business plan.

3.  PR 

If you’re part of a big-name franchise brand, your local business can benefit from some the good things that corporate does, like charity-related events, for example. It gives you a chance to roll up your sleeves and really get involved in your community. For a good example, take a look at how College Hunks Hauling Junk has partnered with Habitat For Humanity*. 

Of course, getting publicity isn’t always a good thing. For example, it was revealed that several restaurants of a popular franchise chain were closed down for health reasons. In this case, the “brand” couldn’t prevent these franchisees from losing their business.

While it’s true that the franchises in that story were only located in NYC, it’s possible that other media outlets (from other areas of the country) picked up the story and reported on it. Sometimes consumers only hear or read part of a story and assume things. So, it’s possible that owners of this chain in other geographical areas were affected negatively by this news story.

Publicity can be good or bad, and most of time you don’t have very much control over it. And sometimes, bad publicity can affect your finances.

In franchising, it’s important that you don’t get enamored by the brand name alone.

If you make sure that you’re a good fit for the business type, have your finances in order and understand that you won’t be able to always control what is being said or written about your brand, you’ll increase your chances of success as a franchise owner.

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and is a franchise ownership advisor. He coaches people on how to carefully choose and properly research franchises.   

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Are Your Employees Working Overtime During the Holidays? Understand Overtime Wage Law

By Caron_Beesley, Contributor
Published: December 5, 2012 Updated: May 15, 2013

The holidays tend to complicate small business payrolls, what with employees looking to earn a little extra cash and owners needing coverage for extended hours or shifts. But not all employers must pay overtime and not all employees are eligible. Confused? Here’s what you need to know about your obligations as a business owner when it comes to overtime pay.

When is Overtime Due?

Under the Fair Labor Standards Act (FLSA),  both full- and part-time employees have equal rights concerning overtime pay (enforced by the Department of Labor). Some states also have overtime laws. The FLSA requires that covered, nonexempt employees are paid overtime pay at not less than one and one-half times their regular pay rate (hence “time and a half’) after 40 hours of work, per workweek.

It’s important to note that these hours must be within the workweek, so for example, employees who work a 12-hour day on Monday but no other days that week are not entitled to overtime because they didn’t work over 40 hours within that one week – no matter how long their first shift was.

Do all Employers Have to Pay Overtime?

Although most employers are required to pay overtime, there are many exceptions.

To determine if you need to pay overtime, you need to understand what the term “covered” means. A “covered” employee is “covered” by the FLSA and therefore eligible for overtime pay. But not all employees are “covered.” Here’s what you need to know to determine whether your employees are covered:

  • If your business does more than $500,000 in sales each year and you have at least two employees, then your employees are generally “covered” and eligible for overtime.
  • However, even if you don’t meet these criteria, you must pay overtime if your employees work in what the Department of Labor calls “interstate commerce.” This is a broad category and includes anyone who is involved in producing goods that will be sent out of state. It also covers an employee who makes phone calls or sends letters out of state, employees who travel for business and even employees who do janitorial work in a building where goods are produced for shipment out of state!

If none of these criteria apply to you, you might still be covered by your state’s overtime law.

Read more from the Department of Labor for official explanation of who is covered and who is not.

Which Employees are Entitled to Overtime?

If your business is covered by the FLSA or state overtime laws, most but not all your employees may be entitled to overtime. We’ve just discussed what a “covered” employee is, but it’s also important to understand what an “exempt” or “nonexempt” employee is and how this factors into overtime pay.

While “nonexempt” employees are eligible for overtime, “exempt” employees are not. But what is an exempt employee? The FLSA has a fairly broad list of job types that are exempt, such as newspaper deliverers or seamen, among others. For the complete list, check out this overview of employees who are exempt from overtime rules from the Department of Labor.

There is one category of exempt workers than can confuse employers – administrative, executive and professional employees. Sounds like a broad definition! But here’s the deal: employers aren’t required to pay overtime to these employees if they are paid on a salary basis and earn at least $455 a week, every week and perform certain job duties – generally managerial or supervisory. The Department of Labor offers more information about the basic requirements that determine whether an administrative, executive or professional employee is exempt from overtime.

Do I Have to Pay Overtime to Part-Time Employees

Yes. Part-time and full-time employees have equal rights when it comes to overtime, minimum wage and other requirements of the Fair Labor Standards Act.

Is Extra Pay Required for Weekend or Night Work?

Extra pay for working weekends or nights is a matter of agreement between the employer and the employee. The FLSA does not require extra pay for weekend or night work. However, if covered and nonexempt workers do work more than 40 hours in a work week, they are due time-and-a-half in overtime pay.

When is Double Time Due?

The Fair Labor Standards Act has no requirement for double-time pay. This is a matter of agreement between you and your employees.

Got Questions?

Still have questions about overtime law? You can contact the Department of Labor directly via phone, mail or email, or post your question on the SBA.gov Community Discussion Boards.

More Information

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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12 Last-Minute, Low-Cost Holiday Marketing Tips for Your Small Business

By Caron_Beesley, Contributor
Published: December 3, 2012 Updated: December 3, 2012

The holiday season is crunch time for all of us – whether you’ve got gifts to buy or gifts to sell.

If you’re a small business owner facing the busy holiday shopping and dining days ahead, here are some last-minute tips to help you maximize your holiday sales.

Fine Tune your Holiday Online Campaign

‘Tis the season of countless email offers, but there are still last-minute steps you can take to stand out from the crowd. Here are a few tips for an effective “holiday countdown” online marketing campaign:

  • Make it easy for consumers to find holiday gift lines – Organize your website by categories such as “Gifts under $50,” “Gifts for Him/Her,” “Popular Items,” etc. If you can’t do that, use emails, social media and e-newsletters to group and highlight inventory along the same lines.
  • Offer gift suggestions – Start offering up gift ideas and suggestions early in December. Buying gifts for family, friends and business acquaintances is hard work – make it easy for your customers this year! If you want to introduce a special offer early in the month, make sure it is bound by a time limit.
  • Use shipping deadlines as a motivator – Clearly state shipping deadlines on all emails and on your website. Use this as an incentive for customers to take action ASAP.
  • Get creative – Use the 12 Days of Christmas or the eight days of Hanukkah to engage with your customers. This is all about raising your brand profile during a busy time while promoting action. For example, send out daily riddles on social media and reward winners with a special offer. Another option is to promote a “catch of the day” deal on each day of your campaign.
  • As December 25 and other holiday deadlines approach, offer upgrades on shipping services – For example, 5-day shipping orders placed on December 17 could be upgraded to 2-3 day shipping at no extra cost.
  • Build urgency into your subject lines, Tweets and Facebook posts – The week before Christmas or other gift-giving days build some urgency into your messaging. “There’s still time…,” “It’s not too late…,” etc.
  • Offer ideas for those last minute impulse purchases – Whether it’s a gift for a party hostess or an office “Secret Santa” party, start giving your customers gift-giving ideas in the last week before Christmas.
  • Drive customers offline and into your store – As shipping deadlines, use your email and social media presence to remind people of in-store deals and keep feeding them gift-giving ideas.
  • For those absolute last minute shoppers – On December 23 and 24, reach out to those who are still looking for gift ideas but have missed shipping deadlines by spreading the word about gift cards or downloadable e-gift cards.

Don’t Forget Super Saturday

The last and busiest Saturday for buying gifts is December 22 this year. Mark your calendar and plan accordingly – this is the time to offer targeted promotions and incentives. For bricks and mortar retailers, why not do a little more to entice your customers to come in during the last few shopping days before the holidays, perhaps a warm glass of apple cider or a free shoulder massage for your frazzled holiday shoppers (or their spouses)!

Restaurants and Food Service Businesses – Target the Holiday Crowd

Restaurants can do a roaring trade during the holidays, but there’s always room for more! Here are some ideas for boosting your share of holiday profits this year:

  • Work on attracting last-minute office parties or lunches – Many smaller companies wait until the last minute to treat their staff or customers – think of ways to entice this crowd. Talk to your regulars, train hostesses and servers to mention your party services when they speak to customers on the phone or in person. Promote special incentives for parties that make bookings on quiet days/nights.
  • Target the New Year’s Eve crowd – Offer incentives for customers to come and dine outside and either side of peak hours so you can maximize bookings throughout the night. You could also offer an incentive to New Year’s Eve revelers to move to the bar after they’ve dined with you.

Good luck and happy holidays! For more tips check out this transcript of the SBA web chat: "Holiday Marketing Tips and Ideas". 

Related Blogs

 

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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In Praise of the Lean Business Plan

By Tim Berry, Guest Blogger
Published: November 30, 2012

Confession: I wish I’d come up with the term lean startup. I love the term and, for that matter, the idea behind it. Credit for that goes to Eric Ries, author of the book The Lean Startup, and Steve Blank, blogger, entrepreneur, and sometimes professor (at Stanford and Berkeley both, no less, which I guess is also a feat) who’s adapted it and popularized it along with Eric.  If you’re curious, here is the Wikipedia definition:

“The Lean Startup … relies on validated learning, scientific experimentation, and iterative product releases to shorten product development cycles, measure progress, and gain valuable customer feedback. In this way, companies, especially startups, can design their products or services to meet the demands of their customer base without requiring large amounts of initial funding or expensive product launches.”

I also wish I’d named my last book The Lean Business Plan instead of The Plan-As-You-Go Business Plan. Jerry Calmes, then the publisher at Entrepreneur Press, and his marketing team and my marketing team at Palo Alto Software and I spent weeks trying to find a title that described my revised sense of business planning, which is very much in tune with the ideas behind the lean startup: keep it small, expect it to change, review and revise often, use it to steer and manage your business. Plan-as-you-go was the best we could come up with. We would have loved the lean business plan if it had occurred to us.

The sense of flexibility, rapid change and iteration in the lean startup makes perfect sense with business planning too. Both startups and business plans need to reflect the rapid change in business landscape as technology advances.

Regardless of the name or label, business planning has in fact changed in recent years. It has become leaner and more agile. The long-winded formal business plan is obsolete. Nobody should postpone business in the name of developing a business plan. No business plan should be long-winded or formal. And any realistic useful business plan is obsolete in a few weeks.

As military leader and former president Dwight Eisenhower once said: “The plan is useless. But planning is essential.”

Here are some tips for adopting lean business planning (even if I call it plan-as-you go) for your business. And this is for your business, regardless of whether or not you need a plan document to take to a bank or show potential investors. This is for running your business better:

  1. The first and most essential component of the plan is the review schedule. Set up a set day of the month for taking an hour or two and reviewing the plan, looking at actual results and comparing them to the plan, and revising as necessary.

  2. Always list assumptions. The best way to tell whether you need to change a plan or stick to a plan is to look at whether assumptions have changed. In today’s world, the assumptions change quickly. When assumptions change, the plan has to change.

  3. Keep it short, simple and just big enough. It’s not a text. It’s a loosely related collection of modules. Use bullets and don’t sweat the style, format or editing. It can live on your computer in different files for different components. Spreadsheets are great for financial projections, bullet points for strategy and focus, and lists for tasks and responsibilities and metrics and milestones.

  4. Keep it focused on its business purpose. For most of us, it’s about managing better, as in breaking long-term goals into meaningful steps and defining metrics and tracking results. In some special cases, it’s for communicating with outsiders. If it’s not a document for bankers or investors, don’t waste time making it pretty. Don’t waste time writing out what everybody in the company already knows.

  5. Always include milestones. Those are specific lists of what is supposed to happen and when, how much it costs or brings in, and who is responsible for it.

  6. Always include basic numbers. Cash flow is the life-blood of the business and you can’t afford not to plan and manage for cash. In practice, it takes projected sales, costs, expenses, assets, liabilities and capital to predict cash.

And that’s what you can call a lean business plan. Don’t ever expect to finish it, because when the plan’s finished, your business is finished.  And don’t expect it to be right, because management isn’t about guessing right, but rather knowing how and in what direction you guessed wrong and how to correct. 

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 44 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.

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Sandy Update 3: Top Five Reasons You're Eligible to Apply for SBA Disaster Assistance

By James Rivera, SBA Official
Published: November 29, 2012 Updated: November 29, 2012

A month after Hurricane Sandy devastated the East Coast, homeowners, renters and businesses are dealing with the challenging task of rebuilding their homes, businesses and communities.

Hurricane Sandy

There’s a lot of information out there about different forms of federal assistance, and a lot of confusion about the U.S. Small Business Administration’s role in helping homeowners, renters and businesses recover. The SBA is committed to the long-term recovery of the people and businesses affected by Hurricane Sandy. 

 

Don’t let misinformation keep you from getting an SBA disaster loan! Here are the facts:

  1. You don’t have to be a business owner to apply for an SBA disaster loan.  SBA makes low-interest loans to homeowners of up to $200,000 to repair or replace the residence.  Renters and homeowners are also eligible to apply for up to $40,000 to repair or replace damaged personal property – like furniture, cars, appliances – that isn’t fully covered by insurance.
  2. Most business disaster loans approved by SBA are made at the 4 percent interest rate.  There is no sliding or variable interest rate scale.  Businesses that have additional assets, cash flow and higher credit scores that enable them to qualify elsewhere for credit can still get an SBA loan, but at a higher interest rate of 6 percent.
  3. A notice about the Coastal Barrier Resources Act – which prohibits residents and businesses in Coastal Barrier areas from receiving federal disaster assistance – was included in disaster loan packets. If your property is on a coastal area, don’t assume you aren’t eligible to apply for an SBA disaster loan.   Once we get the application, we can make the decision to process the loan application.
  4. Even if you don’t have insurance, you can still apply for SBA disaster assistance.  And if you do have insurance, don’t wait to receive a settlement before you apply for an SBA disaster loan. We don’t want you to miss the application deadline.
  5. Your important documents – like property records, financial information – were probably lost in the storm.  No worries – the SBA has resources available to help you complete the disaster loan application anyway.

There are several ways to apply: 

To be considered for all forms of disaster assistance, register online at www.disasterassistance.gov or use your mobile device at http://m.fema.gov.

Previously

Sandy Update 1: SBA Coordinating with Our Federal Partners
Sandy Update 2: SBA Standing Ready to Help Businesses, Homeowners and Renters Recover

About the Author:

James Rivera
James Rivera

SBA Official

James Rivera was named Associate Administrator for SBA’s Office of Disaster Assistance in November 2009 after serving for several months as Acting Associate Administrator. In a typical year, his office approves about 20,000 loans totaling about $1 billion. This is the SBA’s sole direct lending program.

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Heroes on the Homefront: New Report Highlights Our Veterans' Contributions as Job Creators

By Marie Johns, Former Deputy Administrator
Published: November 29, 2012 Updated: November 29, 2012

 

I’m excited to announce the release of a report by the Interagency Task Force on Veterans Small Business Development called “Heroes on the Homefront: Supporting Veteran Success as Small Business Owners.”  This is the second report of its kind where task force members from seven agencies have come together to collaborate on small business issues that are unique to Veteran business owners.Veterans

The U.S. Small Business Administration (SBA) believes that two of America’s greatest assets are the service of our returning veterans and the economic dynamism of our small businesses.  It is no secret that entrepreneurs and small businesses are the engines of American innovation and economic prosperity.  For example, our nation’s 28 million small firms employ 60 million Americans, or half of the private sector workforce, and they are responsible for creating 2 out of 3 net new private sector jobs across the country.  And, these numbers are even better when looking at Veteran Owned Small Businesses:

  • U.S. military veterans own 2.4 million businesses, or nearly 1 in 10 of all businesses nationwide. 8.3 percent of veteran business owners have service-connected disabilities.
  • Veteran-owned businesses generate $1.2 trillion in receipts and employ nearly 5.8 million people.
  • In the private sector workforce, veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed.

The focus of this year’s report, the Task Force’s second, is to provide updates on the 18 recommendations that were made in last year’s report.  The recommendations are organized around three priority areas for engaging the Federal government: (1) Increase Opportunities for Growth; (2) Improve and Expand Counseling and Training Services; and (3) Reduce Barriers to Growth and Improve Coordination and Efficiencies. 

We are pleased to report great progress has been made since the Task Force’s initial review.  In FY 2012, the Task Force, along with the interagency Veterans Employment Initiative, developed and piloted a re-designed military transition program, entitled Transition GPS, that includes an entrepreneurship training program called “Operation Boots to Business: from Service to Startup.” This program is expected to be rolled out nationally in the coming year.  The Task Force has also worked to streamline programs and cut paperwork for veteran small businesses through support for initiatives such as BusinessUSA and QuickApp for surety bonds and it has continued the efforts begun last year to make the process of winning Federal government contracts simpler and easier for service-disabled veterans and veteran-owned small business.

We know that our nation’s veterans helped reshape the American economy following World War II. They helped to build one of the longest periods of economic growth in our country’s history. And we know they can do it again if they are simply given the right tools and the right opportunities.

That’s why the SBA and the entire Obama Administration is committed to ensuring that these amazing men and women have the access and opportunity they need to fully realize their potential as entrepreneurs and small business owners.

These men have women have served our country so well. And as they begin this next chapter in their lives, we are prepared to be with them every step of the way.

Related

SBA Resources for Veterans

About the Author:

Marie Johns

Former Deputy Administrator

Marie Johns is a former Deputy Administrator of the U.S. Small Business Administration. 

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4 New SBA Online Tools That Can Take Your Small Business to New Levels

By Caron_Beesley, Contributor
Published: November 29, 2012 Updated: December 4, 2012

The old adage “time is money” is perhaps one of the most pertinent statements that you can apply to small business owners. Whether you’re starting a business or managing a growing one, entrepreneurs and business owners wear many hats and have many questions:

  • What laws and regulations apply to my business?
  • How do I start to write a business plan?
  • Where can I get help with X, Y and Z?

Many of us invariably turn to our networks and the Internet to find answers. But how can you trust that the information you are getting is truly applicable to your business and, let’s face it, even accurate?

As part of its mission to help business owners start, succeed and grow, SBA, through the SBA.gov website has developed numerous online tools and guides to help small businesses get information and answers they need quickly and efficiently. For example, these 10 Steps to Starting a Business and these 10 Steps to Hiring your First Employee guides are essential reading. SBA Direct is another useful tool that personalizes business owners’ experience on the SBA.gov website. Then there are the Licenses and Permits Search Tool and the Loans and Grants Search Tool.

New Online Tools to Help Business Owners Plan, Manage and Grow

Over the past couple of months, SBA has expanded its capacity and selection of tools and information business owners need by developing a whole range of new online features! Check them out:

1. Get to Know Your Market and Competition Better with the SizeUp Tool

Want to know how your business stacks up against the competition? Where your potential competitors are located? Where the best places are to advertise your business? These are all critical inputs for your business plan and can also help back up any financing applications.

Now with the new SizeUp tool you can crunch millions of data points and get customizable reports and statistics about your business and its competition. Just enter your industry, city, state and other details. SizeUp then runs various reports and provides maps and data related to your competition, suppliers and customers. It also highlights potential advertising opportunities.

2. Build a Business Plan Tool

Business planning can seem a daunting task, but it doesn’t have to be that way. To help you plan and steer your business, this new “Build a Business Plan” tool guides you through the process of creating a basic, downloadable business plan. The great thing about it is you can build a plan in smaller chunks of time, save your progress and return at your leisure.

To use the tool, simply log into SBA.gov (registration is free, sign up here) and enter information into a template for each section of the business plan including, market analysis, company description and financial projections. The tool is secure and confidential and will keep your plan on record for up to six months. You can also save, download or email the plan at any time.

3. Size Standards Tool –Find Out Fast if You Qualify for Government Contracts

In order to be eligible to sell to the government and compete for small business “set-aside” contracts, business owners had to rummage through various rules and matrices to find out if their business is truly “small” according to SBA size standards. Now, with this new Size Standards Tool, you can follow three simple steps to cut through the guesswork and quickly find out if you qualify for government contracting opportunities. SBA also offers other resources including government contracting training courses, and guides to help you register as a contractor.

4. Events Calendar – Locate Business Training and Seminars

SBA and its partners, including Small Business Development Centers, Women’s Business Centers, and SCORE, hold hundreds of small business training seminars and workshops across the country. Until now, there was no single repository for these events. Now, with SBA’s Events Calendar, you can quickly find and sign up for training. Enter a date range and/or zip code to locate events in your area. Results are filtered by topic such as “starting a business,” “managing a business,” “business planning,” and “financing a business.”

Tell us what you think about the new tools below. You can also Tweet @SBAgov or post your feedback on the SBA Facebook page.

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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More Than Just a Seller – How to Start a Business on an Online Marketplace

By Caron_Beesley, Contributor
Published: November 28, 2012 Updated: November 28, 2012

Starting a small business enterprise on eBay, Amazon Webstore, Etsy or even Craig’s List has become an increasingly popular option for entrepreneurs looking to get instant visibility and access to a massive online marketplace.  

But how do you go about becoming a serious eBay seller and forming a business around your enterprise?  At what point does your enterprise become more than just a hobby? Will you need to get a business license, incorporate, and pay sales tax?

Here are some answers to these and other common questions about moving beyond just selling online to becoming a serious online business owner.

Do I Need to Form a Business to Sell on eBay, Amazon, etc.?

Actually, no – as long as you aren’t making a profit, you can buy and sell on these sites without formalizing a business entity. To the IRS, you are a hobbyist.

It might even be a good idea to test the waters this way to give you an idea of what you’re getting into before diving in head-first. But remember, once you start making a profit, the IRS will consider you a for-profit business and you’ll need to report any income you earn. Since neither eBay nor PayPal reports transactions to the IRS, it’s up to you to report your profits.

For more information check out IRS guidance on when your online marketplace activities are a considered a hobby and at what point they become a business.  

What Do I Have to Do to Make It Formal?

If you are serious about selling on eBay or Amazon, then you need to behave like a business: obtain a license and/or a permit, register with the local authorities, obtain a sales tax permit, and determine how you structure your business.

How? Follow SBA’s 10 Steps to Starting a Business for some great tips. Some things won’t apply to you. You may not have employees, for example, so skip the part about being an employer. Here are the steps to pay attention to:

- Write a business plan – A business model that relies 100 percent on another company for its revenues is risky. So plan your entry into the online marketplace carefully. When writing a plan for starting an eBay or Amazon business, think about what you’re selling. How will you position yourself? Will you concentrate on specific brands at a discount? How will you differentiate yourself from the competition? What kinds of margins are you shooting for and how will you achieve that with the inventory you have? Try to predict a profitability point where you’ll be able to extend your online marketplace business with your own online business.

- Finance your business – You may not need a business loan, but it’s useful to plan your options. Could you fund initial inventory with savings or credit? Could you borrow from friends or family? Would a microloan be a good fit?

- Register your business – Don’t overlook it; it’s not only the law, but it also affords several benefits. For instance, it will enable you to open a business bank account, write off business expenses, and help you leverage competitive pricing agreements with wholesalers. Registration involve several steps, not all of them necessary, but important to be aware of:

  1. Register a “Doing Business As” Name - If you are operating an online store under a name other than your own, you may need to register a “Doing Business As” name, also known as a DBA, trade name or assumed name. You can do this directly with your local government. If you’re not sure whether you need to register a DBA, check with your local government office.
  2. Choose a Business Structure – Many small businesses operate as sole proprietorships, meaning there is no legal difference between your business and you, as an individual. You’ll also file your business taxes on your personal income tax. No formal action is needed to form a sole proprietorship. Often, online marketplace business owners file for incorporation or become an LLC to help separate their business and personal finances and gain legal protection as a business entity. Consult a lawyer or legal expert to help you determine the pros and cons of incorporation and how to register.
  3. Obtain Licenses and Permits – These are a necessary part of doing business and are required by your state and local government. Even online and home-based businesses cannot operate legally without them. Use SBA’s License and Permit tool to find out what’s required.
  4. Get a Sales Tax ID or Permit – You’ll need a sales tax ID in order to collect and pay sales tax. The law about collecting sales tax online can be confusing and is explained here. Many online marketplaces offer tools to help you calculate sales tax, but as of now, it’s your responsibility to pay it. In order to collect sales tax, your state may require you to obtain a sales tax permit. You can find SBA’s links to state tax resources here.
  5. Get a Federal Tax ID – If you have employees or are structured as a partnership, corporation or other types of organization, you’ll need to get an Employer Identification Number (EIN) from the IRS. It’s the business equivalent of a social security number. You can apply for an EIN from the IRS online.

While these are some of the main legal steps you’ll need to follow, there are other important considerations, including:

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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Helping to Support Our Troops When They Return Home

By bridgetwpollack, Guest Blogger
Published: November 27, 2012 Updated: November 28, 2012

On November 11, we took the time out of our day to thank those who serve and protect our nation.  However, our nation owes it to them to show them our gratitude every day, and provide them with the support they need after what they have given for us. The men and women of our military sacrifice so much for our freedom, and when they return after years of serving, it is a difficult transition for them and their families starting the next chapter in their lives.

The number of veterans early in their careers is on the rise: 74 percent of service-disabled veterans over the last 10 years is under 30 years old. They are equipped with unique skills as a result of their service, and their veteran status offers distinct business advantages. For those veterans and their family members with the entrepreneurial spirit, there are now several programs aimed at helping them leverage their skills and talents and start a business. With the help of these initiatives, veterans have a greater chance of achieving success and once again, providing critical support for our country as one of the many small businesses that are the backbone of our nation.

  • Joining Forces: Led by the First Lady Michelle Obama and Dr. Jill Biden, Joining Forces is a comprehensive national initiative to mobilize all sectors of society to give our service members and their families opportunities and support. The mission is to integrate existing services and offer new forms of business support, knitting them all together and making it work for each veteran’s individual needs.
  • Veteran Fast Launch: For over 48 years, SCORE has been a leader in providing mentoring and training to entrepreneurs through its network of more than 12,000 volunteer mentors and trainers. With the support of its partnership with the Wal-Mart Foundation, the Veteran Fast Launch initiative provides veterans and active duty military members – plus spouses and members of their immediately family — with:
    • FREE or significantly discounted resources for starting businesses, such as computer software and business services (provided by major corporate partners)
    • Training in how to start and how to grow a successful/profitable business
    • SCORE’s mentoring program where Fast Launch participants will be assigned a knowledgeable and highly experienced mentor to guide them every step of the way.
  • Operation Boots to Business: The U.S. Small Business Administration (SBA) recognizes the contributions that veterans make by owning and running businesses that employ millions of Americans.  According to the most recent U.S. Census Data, veteran-owned firms represent 9 percent of all U.S. firms. These 2.45 million veteran-owned businesses employed over 5.8 million individuals. Transitioning service members are natural entrepreneurs, possessing the training, experience, and leadership skills to start businesses and create jobs. SBA is dedicated to help even more veterans grow their businesses and create jobs.  Through the Boots to Business initiative, service members will learn the nuts and bolts of how to start and grow a business. They will also be introduced to the SBA’s nationwide Resource Partner network for support throughout the lifecycle of their new business.
  • Veterans Business Fund: The Veterans Business Fund (VBF) is a not-for profit organization,  established in response to the high unemployment rate among veterans, many of whom are well qualified through their military experience to become successful small business owners but lack sufficient equity capital to qualify for a small business loan.  The VBF assists veterans by providing them with the supplemental capital required to satisfy the equity requirements for a small business loan, providing capital to veterans in the form of a non interest bearing loan with favorable repayment terms.
  • Operation Endure and Grow: Aimed at National Guard and Reserve members, Operation Endure and Grow gives them, their families and business partners access to online training courses focused on the fundamentals of launching or growing a small business. This program offered by the Whitman School of Management, in cooperation with the SBA, offers service personnel courses on crafting a business or nonprofit plan. In addition, they'll receive ideas for presenting to investors, lenders or other financial backers.

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

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