Starting

Comment Count:
2

Comments welcome on this page. See Rules of Conduct.

Start the New Year Off Right: 5 Resolutions for Better Business

By mbramble, Contributor
Published: January 4, 2016 Updated: January 8, 2016

Happy New Year! While everyone is making a slew of personal resolutions it is time for you to make some resolutions to get your business on track. The New Year is the perfect time to reaffirm your business lifestyle and make changes for the betterment of your business. Here are a few tips and resources to help you get started and continue to make progress.

1. Hire New Employees the Right Way

If the New Year means new hires for your business learn more about the process from start to finish. Beginning with the job description all the way to making sure the lines of communication are open with clients and existing employees. The key to this resolution is transparency. Keeping the lines of communication open between all parties benefits everyone in the end.

New Year, New Hires – Growing Your Business With New Employees

2. Review Your Benefits Package

Tailor your benefits plans to the needs of your staff and to your pocketbook. Remember that health coverage and retirement plans are the top two most-valued employee benefits. Having a well thought out, robust plan can be a draw for gaining new employees and maintaining existing ones. Of course you must stay within your means, but reviewing your options before the enrollment period especially with a growing workforce is best.

New Year, New Benefits

3. Invest in Marketing

In the New Year it is time to upgrade your marketing efforts. Now is the perfect time to take stock of the previous year and set some new goals for this year. Investing a little more time and money can go a long way. Set a few goals and be sure to check in regularly to make sure you stay on track.

4 Smart Marketing Resolutions

4. Reach Out More

While your chugging along with day-to-day business it’s easy to forget about the smaller things that can make a real impact on your business. Take some time out to schedule things like networking and training for you and your employees.

Tips for Entrepreneurs

5. Get Serious About Expanding Your Business

There are a number of ways to expand your business. Learn how to decide what the right choice is for your business and how to get started.

Ideas for Growing Your Business

About the Author:

Mariama Bramble

Contributor

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
10

Comments welcome on this page. See Rules of Conduct.

6 Steps for Opening a Fitness Center

By mbramble, Contributor
Published: December 23, 2015 Updated: December 23, 2015

Getting fit and staying fit is a state of mind and an entrepreneurial opportunity. According to IHRSA, in the beginning of 2015 there were almost 35,500 U.S. Health clubs, which was up 6.4% over 2014. In 2014, this accounted for a total U.S. Industry Revenue of over $24 billion!

The success of the fitness center Industry has been fueled by many factors – not the least of which is the growing trend among the 80 million plus baby boomers who see staying fit and healthy as an absolute necessity and daily routine.  Also, attrition has gone down because members are reluctant to give up their health club memberships choosing to save money instead on big ticket items such as vacations – reaffirming the fact that “buying” fitness is no longer perceived as a luxury item but a fundamental part of our everyday lives.  

If you are interested in serving this large and ever growing market, below are some things to consider while starting your fitness business.

1. Do Your Homework

Before you get a loan and open your doors, do your market research. You will need this information for your business plan. SBA offers a guide to writing your business plan for help getting the foundation of your business built.

Two of the most important factors you will consider are:

Deciding on your Target Market

You will need to decide which group of people you will serve and how you will serve them. For instance, you may decide that your passion is in indoor cycling and your research shows that there is a need for indoor cycling studios in your target location. You can use free consumer demographic data available through SBA.gov for your research as you narrow down your target market.

Location, Location, Location

Having the right location for your fitness center can make or break your success. If you are difficult to get to or don’t have easy parking you may lose your members. Given that rent may be your biggest expense, finding the right place for the right price in critical. Read ‘Tips for Choosing Your Business Location’ to get more information and explore any additional information you may need.

2. Staffing Your Fitness Center

The next biggest expense after rent is staff costs. You may choose to hire your own fitness instructors, trainers, membership and maintenance staff. Each of these employee groups could be structured differently. Some as full-time employees, some as part-time employees and other as contractors. Choosing and managing this employee structure can be daunting as each has their own taxation and regulatory requirements.

Below are some resources to help you in this process:

3. To Hire or Buy Fitness Equipment?

With fitness technology evolving everyday, how do you balance expenses while still providing your members with the latest fitness equipment and technology. This will depend on your business goals and strategy. But to better understand the leasing process read “Leasing Business Equipment”.

4. Understand Your Financing Options

If traditional financing options aren’t for you, you may look to a government-backed loan. The Small Business Administration (SBA) provides a guaranty to banks and lenders for money lent to small businesses, rather than lending the businesses money directly. 

There are many different types of loans, including the SBA express loan that offers small businesses the chance to get an SBA-backed loan of up to $350,000 to start-up or expand. The “express” piece refers to the fact that your loan can be turned around in 36 hours. 

Read more about SBA loans here and even search for a business loan that fits your need using this small business loans and other financial assistance.

5. The Critical Steps to Starting A Business

Just like any other business, there are a few steps that every entrepreneur needs to take when starting a business. Make sure to have all your boxes checked before opening your doors. Read “10 Steps to Starting A Business” to ensure that you have covered all your bases.

6. Business Insurance

One last thing to ensure that you have covered is your business. Look into the insurance requirements for your state and the available insurance to protect you against workplace injuries and accidents. To learn more about Small Business Insurance read:

Additional Resources

The International Health, Racquet & Sports club Association (IHRSA) offers a wealth of information for fitness center owners including:

About the Author:

Mariama Bramble

Contributor

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
4

Comments welcome on this page. See Rules of Conduct.

A Simplified Approach to Setting Small Business Strategy

By Tim Berry, Guest Blogger
Published: December 22, 2015

One of the ironies of strategy, especially in small business, is that it can seem deceptively simple when it’s done right. When it works, it seems like it was always obvious. And yet there are people doing PhD theses on business strategy.

It’s too easy to see when it’s done wrong. For example, the restaurant that wants to appeal to gourmet foodie couples but also has a kids’ menu. Or the idea of discount day-old sushi. Or the computer business that touts great service but fails to install and check the hardware it sells, then hounds customers for slow pay.

Strategy is what you’re not doing. My favorite metaphor is the sculptor with a block of marble — the art is what he chips off the block, not what he leaves in. Michelangelo started with a big chunk of marble and chipped pieces off of it until it was his David. Strategy is focus.

Strategy has to be easy to define. I like with my own identity-market-offering (IMO) method, which is pretty simple. But I’ve also worked in depth, during my consulting years, with several competing strategy frameworks, and every one of them works well if it’s applied correctly and executed.

Business Identity

Every business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals?

As an example, imagine the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like bicycles as a family activity.

Your business is unique. Think about your goals, your definition of success, and of courses your location, your resources, everything that makes you different. That’s identity.

The Market

Your identity influences your choice of target market. The bike racer focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The couple focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.

Keep your business focused on specific target markets. That bike racer shop owner has to know his products are too expensive for the families, and the families bother the high-end enthusiasts. The family bike shop can’t scare away its target market with very expensive racing bikes.

Offering

Your business offering is your product or service. You can already see with the bike shop example how one shop needs one kind of inventory and the other needs a different kind. That’s strategy at work. Your identity influences your choice of market, which influences your choice of product. Your choice of product influences your choice of market. They have to work together.

Understand that you can’t do everything. The bike shop that caters to families and racers is likely to fail. You can’t credibly offer high-end bicycles at bargain prices in a family-friendly atmosphere. If you say you do, nobody believes you anyhow. So you have to focus. Make this focus mesh with your choice of key target customer and your own business identity. All three concepts have to work together.

Roll Them Up Together

These three things are your business strategy. Don’t pull them apart. Don’t take them one at a time. Don’t ever stop thinking about them. Remember, in planning as well as in all of business, things change. Keep watching for change.

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 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
3

Comments welcome on this page. See Rules of Conduct.

The Rise of Online Business Lending and What to Look Out For

By Marco Carbajo, Guest Blogger
Published: December 18, 2015

Small businesses are the lifeblood of the U.S. economy, and financing is the viability of a small business. Small business owners rely on business financing to fuel their growth, to purchase new equipment, hire additional staff, and invest in new opportunities.

Unfortunately, major financial institutions are not lending in amounts under $1 million like they were pre-recession, which means they aren’t lending much to small businesses. “While large business loans have soared to record levels, small business lending is losing ground,” writes Ann Marie Wiersch, a senior policy analyst in the Community Development Department at the Federal Reserve Bank of Cleveland.

In response, a rise in online business lending is sweeping over the small business lending space. In a recent Federal Reserve survey 18% of small business owners reported looking for capital online with a 38% approval rate, compared to a 31% approval rate at large national banks. A new generation of online lenders is surfacing with the promise of an efficient, streamlined application process with quick turn-round (turnaround?) times and higher approval rates.

With online business lending a small business borrower fills out an online application, which generally takes 30-60 minutes. They get a response within hours and can be funded in a matter of days.  This process is an attractive solution for small business owners who on average spend 26 hours on the traditional loan process and wait weeks or even months for an answer from a bank.

Many online business lenders use technology to evaluate the risk of a business differently from traditional lenders. For example, online business lenders may access a company’s online payment transactions and cash flow via their bank accounts or analyze other digital data points to review a business.

Although online business lending offers speed, convenience, and the opportunity to get funding fast, there are important factors small business owners need to look out for.

These factors include but are not limited to the following:

Terms of repayment – Online lenders provide business owners with a variety of repayment terms. Depending on the lender, the short-term business loans may range from 3 to 24 months while the long-term loans range from 1-5 years. It’s also important to note that methods also vary depending on the lender. Some online business lenders require a fixed amount to be paid on a daily or weekly basis via ACH, while others require a traditional monthly payment.

Interest rates – Online business loans tend to have higher interest rates compared to traditional bank loans. Look for online lenders offering competitive interest rates, and keep the loan amount small. Instead of paying thousands of dollars in interest, find a loan with a good interest rate. Although the rates offered online are higher compared to bank loans, they are typically lower than options such as merchant cash advances.

Security – When you apply for a business loan online, it requires you to furnish sensitive data, such as a Social Security number, business information and bank account details. Look for encryption or security measures on the site such as SSL (Secure Socket Layer) encryption and privacy measures – which should be disclosed on the website.

With banks maintaining a tight grip on loans, more and more business owners are turning to online business lending and non-traditional lines of credit for their financing needs. While online business lending has its place in the alternative lending landscape; it’s crucial for small business owners to do their due diligence and research.

Online business lending can be an attractive and viable option. But, hiding behind the flashy websites, impressive videos, and the promise of instant funding, are pricey products that can quickly get a business into trouble if they are not used in the correct way.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
2

Comments welcome on this page. See Rules of Conduct.

The Dos and Don’ts of Conducting Background Checks

By mbramble, Contributor
Published: December 16, 2015 Updated: December 18, 2015

There are many negative consequences of making the wrong hire. And you want to make sure that you have all the right information before you make the decision. Skipping out on this process can affect your employee’s morale, productivity and impact customer relations. Not to mention the cost of replacing experienced workers can be extensive.

There are many things you can do to ensure you make informed decisions and hire quality employees and one of them is to use background checks.

Of course if your employees work with children or in other care positions, it is worth doing the most extensive check possible and make sure you know what the state requirements are.

The most important aspects are to always stay within the law and to do your due diligence so that you don’t allowing hiring to become a headache.

Do conduct a pre-employment background check. A background check can also provide insight into an individual’s behavior, character, and integrity. Making the right hiring decisions for your company is critical to your business success.

Do conduct a criminal background check. To what extent, will vary state by state. Since it is not consistence you should consult with a lawyer or do further legal research on the laws of your state before exploring whether or not an applicant has a criminal past.

Do communicateIf and when you find something on a background check that may impact the decision to hire an applicant, you should — at a minimum — engage in a conversation with the applicant.

Do outsource to an agency to perform complete background checks. Great screening companies will do a far better job of locating the information you want. They have the experience and processes to be accurate and efficient. They also prevent you from viewing data that might be a violation of state or federal law.

Don’t run a limited search yourself. You can’t find everything online. So much of the concrete, legally obtained data for background checks can only be conducted by a licensed firm.

Additional Resources

About the Author:

Mariama Bramble

Contributor

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
7

Comments welcome on this page. See Rules of Conduct.

Bookkeeping Basics for Small Business

By mbramble, Contributor
Published: December 9, 2015 Updated: December 9, 2015

Bookkeeping is vital to properly managing your business resources.  Additionally you will need these records for tax purposes. Whether you DIY or hire someone to keep track of everything you should understand the importance and the basics of bookkeeping.

Keeping good records of operations will alert you to any cash flow issues and potential legal problems as well. Here are a few basics that should always be standard practice to keep in your books.

Revenue and Expenses

Every transaction should be recorded. How much is coming in and how much is going out and where is it is all coming from and going to.

Cash

It is important to record the cash your business spends so you'll have an accurate number of expenses each year. Writing reimbursable checks and keeping detailed petty cash records are both valid methods of documenting cash expenditures.

Inventory

Maintain records of all inventory! This will help you to forecast for the upcoming year by tracking trends, prevent stealing and misplacing merchandise, keep inventory holdings to a minimum. Dates purchased, stock numbers, purchase prices, dates sold, and sale prices are all relevant information for inventory records.

Accounts Receivable and Payable

Always keep track of what customers owe you and what debts you owe others. It's prudent to record as much data as possible including invoice dates, numbers, amounts, terms, dates and amounts paid or due, balances, and client information in real time.

Employees

Hiring even one employee invokes your responsibility to file and pay forms and payroll taxes and each state has its own tax obligations.  Employers are responsible for maintaining employee forms such as the W-4 (Withholding Allowance Certification) and the I-9 (Employment Eligibility Verification). You are responsible for maintaining records on withholding, employer matching, unemployment, and worker's compensation.

If you decide to do your own bookkeeping you should consult with an expert especially at the beginning to make sure that you are on track. As your business grows you may want to bring someone on and/or deploy more sophisticated bookkeeping software.

How do you keep your books up to date and on track?

Additional Resources

About the Author:

Mariama Bramble

Contributor

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
4

Comments welcome on this page. See Rules of Conduct.

3 Tips for Taking the Stress Out of Business Planning

By bridgetwpollack, Guest Blogger
Published: December 3, 2015 Updated: December 3, 2015

If you’ve got a great small business idea, everyone will tell you that you need a business plan. But the process of creating a plan for a business that’s just a spark in your mind can be scary.

But writing a business plan isn’t like taking a test. There are no right or wrong answers, and everyone’s looks a little bit different when it’s finished. And unlike a test, your business plan can -- and should -- change over time. It’s a working document you’ll revisit over the life of your business to refine and adjust your path to growth and continued success.

It’s not a process to take lightly, but business planning doesn’t have to be a stressful experience. If you’re feeling nervous about getting started on your first business plan, remember these three tips to take the frustration out of your business planning experience.

Take your time

If you’re anxious to get your business idea off the ground, you might feel like you need to complete a business plan overnight. Working quickly can be helpful, but rushing through a business plan can leave your enterprise hurting later on.

Don’t try to complete your business plan in one sitting. Instead, spread your workload out over several days or even a week or two. Researching the competition in your target market might take a few hours to consider. Meanwhile, you might get carried away fiddling with the numbers for your financial projections, and figuring out the right combination for success in that section alone could take a few days.

By plotting out a schedule for completing the sections of your business plan, you can pace yourself to think clearly about your business goals.

Use Samples and Templates

Starting a business plan from scratch can be daunting. By using a business plan template tailored to your type of business, you can start planning with an idea of what a typical business plan looks like, how long it might be, and what type of language to use.

If math isn’t your strong suit, you’ll find financial templates to be particularly helpful. These spreadsheets already include the formulas you need to make estimates about your business costs and potential for growth.

But even if you use templates, don’t get caught up in what your business plan “should” look like. There’s no perfect business plan, and you shouldn’t expect the first draft of your plan to reflect your dream exactly.

Get Help Along the Way

You might write your business plan on your own, but you shouldn’t keep it to yourself. Share your early drafts with friends and family members who are invested in your small business success. These trusted people will ask you tough questions that will strengthen your plan -- and they may recall elements you’ve forgotten to include.

If you feel stuck on one portion of your business plan --or simply want a fresh set of eyes -- call on a SCORE mentor. These seasoned professionals have seen countless business plans and can guide you toward completing a plan you’re proud of.

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.

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
4

Comments welcome on this page. See Rules of Conduct.

How to Start a Non-Profit

Published: December 2, 2015 Updated: December 3, 2015

Starting a non-profit can be an extremely rewarding entrepreneurial experience. A non-profit gives you the ability to give back to your community and really make a difference unlike any other industry. But starting a charity or nonprofit organization is just like starting a for-profit business. And just like starting a for-profit business, there are steps that you need to take to ensure that you are successful.  Here are some tips to consider before you start and some points on generally how to start a business.

Step 1: Have a Plan & Do Your Homework

When starting a non-profit organization you have to ask yourself a few initial questions:

  • What is my objective?
  • Who am I trying to reach?
  • Do I have the resources to achieve this goal? 
  • What is my timeline?

As you begin the process of documenting your idea, mission, and vision as well as the formation path of your non-profit consider investing a good amount of time in the beginning writing a detailed business plan.  This is an important step because you will need parts of your business plan to include in your federal Form 1023 application for tax-exemption status and future fundraising. 

One of the critical elements of your business plan to determine is your initial startup costs and your future operating costs. Some of your initial startup costs may include:

State Filing Costs. You can find some information on this chart that illustrates the costs necessary to file in each state 

  • Infrastructure costs to deliver your services
  • Office space
  • Supplies
  • Potentially special licenses, permits or certifications.

To determine what you may need be sure to visit your state association of nonprofits and speak with a legal counsel that is familiar with nonprofits.  

Step 2: Incorporate Your Nonprofit & Establish Governance 

Nonprofits cannot escape the paperwork that is required in starting a business and may even require a few extra steps to obtain a 501(c)(3) tax-exempt status. This will be where most of your time will be focused on in the beginning. To make the process to incorporation easier and getting to 501(c)(3) faster here is a checklist:

Pick a creative and relevant name

This is important because it will be your brand, your rally cry and your identifier. Make sure whatever you choose is available by doing a name search with your Secretary of State or through nonprofit search engines

Recruit a Board of Directors

This group is very important and requires a large commitment by them because they will be legally accountable to help your organization meet its vision and mission. The requirements set upon them are different state to state, so be sure to check with your Secretary of State.

Draft your bylaws with your Board of Directors guidance. This will be your operator’s manual for your nonprofit. You will need to have a copy of this on premise at your office on record for filing your Articles of Incorporation and will need to submit these when applying for your federal tax-exemption. 

Decide on a Legal Structure

Below is a list of potential legal structures to consider. Be sure talk with legal counsel and your accountant to determine what will best work for you:

  • Nonprofit corporation (this is the most common)
  • B-Corporation
  • Nonprofit LLC
  • L3C
  • Unincorporated Nonprofit Association 
  • Trust 
  • Prepare & File Articles of Incorporation 

This is done with the State your nonprofit is headquartered in and some of the information that you will need includes:

  • Purpose of organization
  • Name of Initial directors
  • Name of incorporator 
  • Name and address of registered agent
  • Statement membership
  • Get your Federal Employer Identification Number (EIN)

You can obtain your EIN by filing out IRS Form SS_4. This can be done online at the IRS EIN Online page. 

You will need your EIN for:

  • All federal tax returns and receipts
  • Opening a bank account
  • Hiring employees
  • Get your 1023 Federal Tax-Exemption to get 501(c)3 Status

Next, you will want to do all your research to figure out if your nonprofit is eligible for any tax exemptions. What you need to include when filing for your 501(c)3 Status: 

  • Certified copy of certificate of formation from your state
  • Copy of bylaws
  • Details pro forma financial statements, including revenue and expense statement for current and three preceding fiscal years
  • Proposed budgets for the next two fiscal years; including a list of anticipated financial support
  • Narrative description of past, present and future planned activities with an emphasis on broad public benefit of organization’s activities
  • Names and addresses of director and officers
  • Annual accounting period (what is your fiscal year)
  • Statement as to whether the org is claiming status as a private foundation or public charity
  • EIN
  • Fee of $400 or $840
  • Finally register for Charitable Solicitation and Fundraising 

Many states require this registration prior to soliciting funds or hiring solicitors. 

More Resources 

  • About.com Non-Profit Portal - Covering everything from starting up, fundraising, and managing volunteers to marketing your non-profit, About.com's Non-Profit Guide is an invaluable and resource-rich Web portal.
  • Non-profit Guides - Free Web-based grant-writing tools for non-profit organizations, charitable and educational organizations, public organizations, and other community-minded groups.
  • USA.gov for Non-Profits - This site is the online version of what many companies offering CFDA assistance services use to advise their clients. It is available for FREE to all who wish to reference it. It has specific information for non-profits divided into 3 sections: grants/loans, management/operations, and tax information.

About the Author:

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
5

Comments welcome on this page. See Rules of Conduct.

5 Things You Need to Know About Projecting Startup Profits

By Tim Berry, Guest Blogger
Published: November 24, 2015 Updated: November 24, 2015

This year alone I’ve seen several startup business plans projecting year three profits at 40%, 50%, or more, as measured by dividing net profits into sales.  And most of these are pretty good plans as measured by potential product-market fit, scalability, and credibility of the management team. What’s wrong with this picture?

By profits, I mean net profits divided into sales, also called profits to sales. Of course there are other ways to define and compare profits, such as gross margin (sales less direct costs), earnings before interest and taxes (EBIT), and EBIT less depreciation and amortization (EBITDA). 

So why have such unrealistic profit projections? No good reason I can think of. Overly optimistic projections make a plan look worse, not better. So please, if you’re planning a startup, get a clue. Here are five things you need to know.

1. High Projections Hurt Credibility

Unrealistically high profit projections almost never mean that your startup is going to be profitable. Almost always, they mean that the people doing the business plan failed to estimate expenses.

On the other hand, you might not be alone. Browsing for background on this post, I found the public thinks the average company makes a 36% profit margin, which is about 5X too high, according to a post by Mark Perry for the American Enterprise Institute.

(Source)

As the title suggests, multiple polls of the general public indicate people think profits are way higher than the 6%-8% that is a real average.

2. Industry Averages are Available

If you’re writing a startup business plan, do your homework. Industry averages are available. Check out this page from Yahoo Finance, showing average profits for different industries. The overall average is about seven percent. There are, however, some industries that do better. According to that source, some kinds of real estate developments average more than 30%. Drug manufacture advertises 22%. And among some of the high-tech categories that attract many startups, biotechnology averages 19%, electronic technology 17%, and business software, 14%.

To find averages for your industry, do a web search. Multiple sources are available. One cluster of sources compiles averages from among publicly traded companies, divided by industry. Another cluster uses aggregated tax data from different industries, combined together to protect privacy. Search for “average profitability by industry,” “industry data,” “industry reports,” and “average financials” to turn up vendors. Look also for websites of industry associations for your startup’s industries.

Don’t be afraid to project profits at levels different from industry averages. Lots of startups have good reasons to presume profits better than averages. Maybe they have better technology, or innovations in marketing or business model. What I suggest isn’t just to follow the averages, but rather, if you are different, know what the standard is, and be able to explain how and why your startup is different.

3. Startups Need Time to Break Even

Normal startups take some time to break even. That’s part of the rationale behind the concept of break-even analysis. It’s the main reason startups need startup financing, which is generally capital that supports the business while it’s new and still growing. That comes from SBA loans, friends and family financing, founders’ personal resources and savings, or outside investors. The rule is early losses. The exception is quick profitability.

4. Inherent Conflict Between Profits and Growth

Growth costs money. It’s a matter of common knowledge among business owners, experts, and angel investors. Businesses that generate high growth rates are almost always making lots of small decisions that channel available money into spending that increases visibility, awareness, leads, and sales.

Ultimately, it comes down to a simple trade-off.  Profits are what are left over when the spending is done. Business owners who want to generate sales growth decide not to take that money home as profits, but rather to put it back into the business as marketing expense. They spend it on more web presence, advertising, promotions, lead generation, sales expense, and even product research and development to support future growth. And of course they also spend it on struggling to grow, and making mistakes.

5. Good News: An Easy Error to Fix

So now for the good news. At least in the context of angel investors looking at startups, which is a process, I’ve been involved with for several years now. If you have a good team, product-market fit, potential growth, and a good argument for barriers to entry, scalability, and a long-term prospect of an exit, you have a good investment regardless of poor financials. Most investors will help you make better estimates. I’ve heard angel investors say it too, more than once: “poor financials are the easiest problem to fix.” 

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 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Comment Count:
8

Comments welcome on this page. See Rules of Conduct.

7 Tips to Starting a Successful and Legal Child Care Business

By Caron_Beesley, Contributor
Published: November 23, 2015 Updated: December 1, 2015

Child care is a hugely important part of American life and a key contributor to the economy. According to First Research, the U.S. child care services industry is currently worth $20 billion thanks to an increase in the number of working mothers and the desire to provide young children with educational opportunities. According to the latest data from Census.gov, 25% of children are cared for in organized facilities including preschoolers (ages 0-4) and grade schoolers (ages 5-14).

If you have a passion for child care and child development but also want to enjoy the independence and responsibility of being your own boss, this small business opportunity may be for you.

So what does it take to get started? What laws and regulations must you follow, here’s what you need to know.

Understand the Demand in your Community

Do some research within your own community to gauge what child care facilities are in demand. Considerations include the number of working mothers, availability of other care facilities (and their waiting lists). This useful infographic from Census.gov breaks down some key demographic information about the profile of a typical family in need of child care. 

Demographic data can also tell you where future demand will lie. For example, if the majority of the childhood population is currently at pre-school age, then you can expect a demand for school-age child care services (such as after-school programs) to increase in future years. SBA offers a number of free market data and statistic resources that can help you with your detective work.

In addition to quantitative data, you can also get valuable information about market need by talking to parents themselves. You could post a quick poll or survey on online community message boards, parenting forums or social media groups, or browse these forums for child care related topics and discussions.

Are You Ready to be a Business Owner?

Operating a successful business is not for everyone. In addition to doing what you love, you must also deal with the universal requirements of business ownership such as staying on top of business law, managing employees, coordinating sales and marketing, and maintaining tip-top customer service.

Here are some resources and questionnaires that can help you gauge your readiness to be a business owner.

In the same vein, think about the kind of business you want to run and the kind of child care service that you want to provide. Will you be licensed? Do you want to operate out of a private residence? What kind of hours do you want to dedicate to your business?

Develop a Business Plan

A business plan is a must. It will help guide your decision making, help you map a path to success and is essential if you want to secure any kind of financing. SBA offers many planning resources that can help including this handy step-by-step business planning tool.

Understand Licensing and Zoning Laws

Whether you choose to operate your business from your home or in a commercially-leased property you will need to consider zoning laws as well as get a legal determination whether or not the property can be used for a child care business. You should also check with your state licensing agency to see how many children you can care for before you need to be licensed (smaller care providers may not need a license while larger ones almost inevitably do). Read more about child care licensing from ChildCareAware.org.

If you are looking to operate a child care business from your home, check out these tips for starting and operation a home-based business as well as the home business zoning laws that may apply. Educate yourself on the safety regulations and the child care provisions of the Disabilities Act. Be sure to have a licensing specialist visit your home before you renovate and when you complete. Their suggestions and recommendations can save you money.

Get Insured

Different types of insurance are needed for different types of businesses. It’s a good idea to get the advice of a lawyer and insurance broker to ensure you have the right coverage for your needs. Read What Kind of Business Insurance Do You Need as well as SBA’s Business Insurance guide.  

Set Your Business Up Correctly

Starting a business involves several legal, regulatory and financial decisions and steps that you’ll need to check off. For example, how will you structure your business? Which authorities and tax agencies do you need to register it with? And so on. These 10 Steps to Starting a Business can help guide you through that process.

Financing your Child Care Business

In addition to traditional bank, credit unions and other alternative finance resources, a variety of federal, state and local government funding programs provide assistance to child care operators for everything from start-up to operational costs to general business improvements. The Business.USA.gov financing tool walks you through some of these options, be sure to check “Child Care” as your industry.

 Additional Resources

  • Child Care Aware - A program of the National Association of Child Care Resource & Referral Agencies (NACCRRA), Child Care Aware provides a hub of information for parents and child care providers.
  • Office of Child Care – Part of the Department of Health and Human Services, Office of the Administration for Children and Families, the Office of Childcare is as an information resource for the child care community and also provides information on funding opportunities for providers, assistance programs for your customers as well as other child care resources.  

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

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!

Pages

Subscribe to RSS - Starting