Over half of all new businesses fail in the first five years. Only one in ten will last ten years. Know the odds and plan to beat them with basic, tried and true business sense; starting with:

o Motivation and stamina
o Good research and planning
o Good choice of business (fill a need)
o Good location
o Good management
o Good marketing strategy
o Good financing
o Good employees

Know the Laws

When planning your business, be sure to find out about applicable zoning for the location you are considering, necessary business licenses, insurance, etc.

If you have employees in your business, it is important to be knowledgeable about employment laws relating to work hours, minimum wage, workers’ safety equal opportunities, workers’ compensation and required insurance for workers.

Hidden Costs

If you work for yourself, you will be required to pay your own Social Security tax and federal and state withholding on a quarterly basis. You will also need to cover the cost of our health insurance and retirement benefits. If you have employees, you will have to cover these costs for them also.

Consult with a lawyer, accountant or other business professional about tax requirements and employment laws.

Finding the Money

Every entrepreneur needs money to get started. Funds may come from your own savings, the resources of friends, family or investors. A common place to secure financing is from a bank. Before going to a bank or other financing sources, it is important that you organize some information about your business so that you will be prepared to answer questions, be clear about your goals and financial needs and you will be more successful at securing a loan.

Business Structures

There are several types of business structures to consider before starting your own business. These include: 1) sole proprietorship, 2) partnership, 3) corporation, 4) limited liability corporation, 5) non-profit corporation and 6) cooperative. Each structure has advantages and disadvantages regarding decision-making, profit-sharing and taxation. It is a good idea to research each structure and then talk to an accountant, a lawyer or other business professional before deciding on which structure will work best for your business.

The Business Plan

A business plan includes the following information:

o Name of Business
o Name of Owner(s)
o Location and Phone Number of Business
o Definition of your Business (1-2 sentences)
o What you are offering (selling)
o What your goals are
o What makes it unique or better
o Financial Analysis
o Start-up costs; rent, advertising, inventory, equipment, utilities, etc.
o Estimated sales, expenses, profits
o One-year budget
o Marketing Analysis
o Definition of your market
o Evaluation of your competition
o Price structure for your services or goods
o An advertising plan
o A plan for selling or distributing your goods or services

This information should be organized in a clear way. The library has several texts which will help you develop your business plan. Several top-rated software packages also will help you write your business plan.

In addition to your business plan, gather the following information:

o Sources of Collateral – personal assets that you have which you can offer as security for a loan (real estate, investments, cash, personal property, etc.). A bank will almost certainly require collateral.
o Down Payment – cash that you are providing for your business start-up. Banks will expect you to make a personal financial investment in your business.
o Credit Record – documentation of all participating owners’ personal net worth.
o Management Ability – show resumes or outlines of job-related experience and education of all managers.
o Ability to repay the loan – cash flow projections including monthly loan payments from the budget in your business plan.

Organize all your information in a clear way. Make two copies – one for you and one for the loan officer. Make an appointment ahead of time. Answer all questions honestly and directly. If one bank turns you down, try another. Organization, thoroughness and planning are important to running your business and in getting a loan.