Small Business Setup Resources
This article assumes that you have already decided that you are opening up your own small business and have funding or are applying for funding. There are very few business that require little to no capital, but most main stream business owners get into a brick and mortar type business and those types of businesses represent several issues that we’ll tackle today.
Since you are in the beginning stages of starting up your business, getting organized is essential. This is coming from someone who didn’t realize that until too late. You will also need to make sure that you have all the proper resources on hand to help you through your lease (if applicable), the setup of your corporation (I am partial to S-Corps, but LLC’s have definitely grown on me), your accounting (I’ve seen up close and personal what happens to those who blatantly disregards the IRS), and of course your advertising and marketing.
Statistics show that you will most likely fall among the ranks of those whose business will fail within the next year or less. I personally witnessed a five month wreckage with the people I sold one of my businesses to, but that’s actually not uncommon. However, if you set your ego aside, with planning and the right resources for your business, you can avoid what over 85% of small business owners have to go through in owning their first small business – insolvency or bankruptcy after only 12 months or less.
I am not getting paid for any of these referrals for your small business setup resources. Just FYI. I believe they are vital to your success.
BUDGETING:
First, let’s analyze what you really think your start-up and monthly budget is going to be in your business. Then add 50% to that figure to give yourself room for unforeseen expenses. Don’t forget to include in your budget:
- Employment taxes – I set aside a healthy 17% of my projected gross payroll, but you can certainly round that figure up to 20% until you get comfortable with this and of course talk to your CPA to help you through budgeting for taxes.
- Lease.
- General liability insurance.
- Utilities – phone, water, electricity, Internet, answering service, etc.
- Office Supplies.
- Build-out – This has always cost me more than I budgeted. Without fail there’s something you will overlook and need/want to add. And of course it will cost you more after you signed a contract to build-out your space.
- Advertising and Marketing – this always rivals my salaries for the top expenses in my business. Of course every business is different and very few will survive without advertising. This is one of the top reasons most businesses will fail within the first year. Not budgeting the right amount of money for advertising. We will explore this in depth later in this article.
- And don’t forget the ever famous miscellaneous category. My CPA hates that, but there will be unforeseen expenses. Always.
PROFESSIONAL RESOURCES:
This is the part where you gather your own personal army. These people rally at your side and have your back in your new venture. They are your allies and you cannot do business without most if not all of these business resources readily available.
ATTORNEY - having a smart attorney who understands your small business is vital for your own protection. First of all, I have been able to say for the past 5 years that my attorney will kick your attorney’s ass. What that means is that your attorney should not only be familiar with small business, but they should be fiercely loyal and depending on the situation, somewhat aggressive. I remember looking for an attorney to handle something outside of my current attorney’s expertise and my criteria was this: S/he needs to be a complete asshole (to the other side) and yet a LOYAL KIND AND CONSIDERATE human being.
Boy did I ever get what I was asking for. Unfortunately for you, this particular attorney I had met recently has moved onto the title insurance field, but he will surprise you by taking on cases that are outside of field. Here’s his contact info:
ALAN CESHKER (512) 306-06963006 Bee Caves Rd A-240 Austin, TX 78746 www.Ceshker.com
However, for my day to day activities, my corporate attorney that I was referred to has been an invaluable resource.
He has:
- Set up all of my corporate entities.
- Taught me how to fire someone. He taught me to never explain why you’re firing someone. Just tell them their position has been terminated and collect any company property. It’s against what you believe you should do, but it’s very wise and is very effective at CYA.
- Let me know when a fight with a harassing client was fruitless though he would’ve benefited financially.
- Been there for various legal questions I’ve had like the time I wanted to record audio with my camera surveillance, but he told me it was against Texas law:-(
- Been the secret weapon for anyone harassing us because I can usually tell them to contact my attorney for any further correspondence or just carbon copy him in on my letter. That’s enough to let them know that we can’t be bullied around and that we have no problems following laws.
(817) 861-1000
Parks, Huffman, McVay, Shepard & Wells 503 East Border Street Arlington, TX 76010
CPA- having an aggressive CPA is my criteria for hiring my personal CPAs at tax time. However, for an ongoing business, I much prefer the conservative CPA. You don’t want to find out later that your CPA has been arrested for money laundering or has been stealing your funds. You gotta figure that if he’s looking for every which way to screw the government out of some cash, why isn’t he doing the same to you?
The reason you need to have a CPA may be glaringly obvious to you, but I will clarify this because it became even more clear after one of my business partners got into a hell-hole of a lot of trouble that I really appreciated their role in covering my ass. An adept CPA will accomplish quite a lot for you, however, they will definitely help you with the following:
- Not only make sure to prepare all of your taxes (and there are so many types of taxes between quarterlies, annuals, employment, etc.) but they will also make sure to give you explicit instructions on how to get them sent out in time. It is a rather tedious process for most of us creative people who get into business. I have a head for numbers but in the sense that I can figure out the profit margin on a business on a napkin while eating lunch, not being able to make any sense of my liabilities, losses, appreciation & depreciation, etc.
- They will make sure that you get your employee’s W2′s out on time every year.
- They will make sure that any contractor you pay over $600 to in the year gets a tax statement as well.
- They will make sure that you understand how to pay your employees: Contractors vs. Employees which will come in more detail in a later article.
- They will make sure that any discrepancies in your accounts get addressed. I gave mine ‘viewer’ log-in so that they could get my bank information without having to call/email me each time they had a question about who a check was made out to. I of course kept terrible records so I could never remember what check I had written until I went to my check image on my online banking anyways. This just saved them from having to wait until I got to a computer myself.
- They make sure to slap your hand when you take a cruise on your company credit card or pay for your para-sailing activities too.
- They CYA.
Really accurate and efficient CPAs are worth their weight in gold. Unfortunately, it’s very easy to find one that will charge you by the hour for their work and for each minute you spend talking on the phone with them of have a face to face meeting.
I remember cringing every time I had an accounting question with my first CPA. I remember my business partner told me her monthly CPA fees were about $1,100 per month. That is just ridiculous unless you are earning several millions of dollars per year or you have lots of transactions to keep up with which would put you over the normal time allotted for an account of your size.
My current CPA charges me by the month. I pay a very reasonable and sometimes guilt incurring fee of $250 per month for when I had 3 salons. In all fairness, we had just negotiated a higher price since I had 11 bank accounts, 6 credit cards (includes my employee credit cards), $800,000+ in revenues and 3 salon locations they had to keep up with. Every one I’ve referred over to them has taken the time to thank me profusely since they are a great firm to work with. Jan actually takes care of my accounts, not the head CPA, Bobby, but she is so good at not making me feel like a bumbling idiot with 6 thumbs for toes around my own finances.
They are based out her in the DFW Metroplex, but they have clients all over the country.
Here’s their contact information:
BOBBY BURDEN, CPA (817) 274-7724 2012 E. Randol Mill Road, Suite #201Arlington, Texas 76011-8294 www.RGBurdenCPA.com
MARKETING - almost all new business owners will under budget their need for marketing. Unless you own a convenience store or a Starbucks-like business then without the proper marketing you will fail regardless of how much money you put into your build out, business cards, training, etc.
Unfortunately, most people don’t understand marketing nor are they being mentored properly about marketing and advertising. When I was a national marketing director for Hobbs/Herder Advertising, one of the key points I took away was this:
You need to budget 15-20% of what you want to gross in revenues for your advertising budget.
Please note that it doesn’t state 15-20% of what you made rather it’s of what you want to make. So this means that if you want to gross $100,000 this upcoming year, then you need to budget about $20,000. So what if you only made $20,000 this last year?…well, the answer is, that’s for you to figure out. Dont’ forget to include this in your budget when you apply for a loan whether conventionally or through a family member.
We grossed $825,000 this last year in our salons. We paid roughly $10,000 every month towards our advertising. And the only reason we got away with only this amount is that we had been shelling out the 20% or better over the past few years that we were recognizable and were able to scale back in some areas and redirect our funds in other areas to be more effective with our advertising dollars.
We purchased more concentrated radio spots during traffic times as well as paid extra for endorsement spots which boosted our name recognition and our calls dramatically. We had even started to explore different types of viral marketing before I sold my shops. However, for our business, one $3,500 spot on Good Morning Texas (on the same ABC network as Oprah!) each month produced more revenue for us than $7,500 on certain stations.
When we were able to apply PR tactics and got on NBC (more than once), our web hits and converted phone calls overwhelmed us and we had a waiting list 3 weeks out with appointments booked as far as 6 weeks out at a time.
We also learned some strategies of gorilla marketing like buying multiple domains to capture your audience better. For example, we owned www.wrapmenowtx.com, but we also bought www.wrapmenowtexas.com for those who wouldn’t be sure which spelling would work. Then we also purchased domains for those who are challenged when it comes to spelling, so we bought domains like rapmenowtx.com. In this same method, we also purchased the variations of competitors’ domains as well. It’s a little bit of an investment up front, but at $7 a domain (you get a discount when you buy in bulk) it has been worth the traffic we have been able to pinpoint in our analytics.
So, the question is, do you want to try to tackle this on your own? If you have marketing experience, then I am reminding you to not sway from your basic marketing principals because it is so easy to do so when your emotions get involved. And believe me, when it’s your business, your emotions will get involved!
If just this little bit of information is overwhelming to you or if you don’t care to tackle this to free up your time then I suggest you find yourself a marketing and advertising guru. when interviewing advertising firms, you should determine the following:
- How do they get paid? My marketing agency charged me 15%, but that was after they got me a huge discount because of their pull with the radio stations. Since they bought in bulk, they passed along their savings to us. Sooo…we actually paid less per spot/run than when we ran the ads on our own and that new price included their firm’s fees.
- Do they have any experience with PR, or do they deal strictly with radio, TV and print advertising?
- Do they own or have access to their own printing company? Or are they charging you a premium because they are being charged retail?
- Do they have their own designers or do they have to pay retail for design work?
- Do they work with collateral materials – meaning do they design boxes, brochures, business cards, etc. should you need those?
- Ask for a list of their clients and then take the time to call a few…at least until you are certain that you’re dealing with knowledgeable and upstanding people.
- Are they familiar with gorilla marketing tactics, or are they old school and conservative?
The firm I use is based out of Las Colinas, TX. They are brilliant and they seem to know everybody in the business which helps when we have issues with talent or sales people or just to get some help when we’re in need. I’m pretty sure they work nationwide, but that would be my first question if you’re not from around these parts.
GURU PARTNERS (972) 248-86001431 GREENWAY DR #220
IRVING, TX 75038 www.GuruPartners.com
PRINTING COMPANIES – not all printing companies are created equal. We were so oblivious to how much money we were overspending with our first printers because the quality of their work was impeccable. They also had this amazing customer service so the pricing seemed like it was normal. Well, along the way, we’ve had to print not only business cards and flyers, but custom sized brochures & over sized postcards. The variations in pricing and quality are pretty evident. However, money is King. We were fortunate enough to find these people when we were opening up our clinic. We needed business cards and postcards but had a limited budget. So one of my partners found this printing company that supplies and prints for OTHER printing companies – another words, he went straight to the source and they’ll print for any body.
500 business cards only cost me $39. Double sided. Full bleed. Color.
I was paying $124 before because of the quality of the paper I was using as well as the ‘raised’ ink we had originally chosen. We got $124 worth of business cards. Well, with upwards of 20+ employees at times $2,500 worth of business cards every 6 months became ridiculous.
Let’s talk about my over sized postcards. I was paying about $2,000 for 10,000 postcards that were had an aqueous coating. My new printers charges $350 for 5,000 5″x7″ postcards, with a better discount for bigger orders. I know. I could throw up thinking about how much money we literally threw out the window over the past several years. We have only been using this new printer for about a year, but they are priceless!!! Don’t forget to check out their specials page.
Oh, and did I mention that they ship within 48 hours???
PK GRAPHICS (877) MIA-GRAFX (877) 642-4723www.PKGraphics.com
I’ll be happy to give you more info on any of these companies and I’m sure they have other clients who would love to tell their experiences.
Here’s to a prosperous 2009!
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