Question on starting your own business

[emw]

Recently my wife decided that corporate America was no longer where she wanted to be, and that after 23 years in various positions she felt she'd rather pursue an avenue that involved doing something she loved vs. doing something just for the paycheck.

I'm completely supportive of this, and have encouraged her to pursue this goal, and as such she's quit and is going back to school and has all the paperwork completed for setting up her new company.

Right now it's a small thing - it's not an LLC or other corporation, just a DBA, but it's a start. As she's getting into it (her business is focused on a couple of things - some she can do now, some she needs the training for), she's getting a little frustrated on how difficult it is to get responses and get started up with her activities.

So I'm curious if any of you have started your own business and what some of the challenges you faced were, as well as how long it takes to really become established with clients, etc. Her focus is personal wellness - fitness, nutrition, skin care, etc. She's very good at it, and I don't want her to get too discouraged too soon.

My thought was that for at least the first six months we would expect only (potentially significant) negative income from the business since she'd have startup costs, training costs, etc., and there would be a lot of learning and business development going on. And that it could be at least a year before things start to hit a stride.

Maybe it will be better than that, but we're not selling white iPhone cases, so I have limited expectations.

Does anyone have words of wisdom - or condolences - to offer that I can pass on to help her see others' points of view who have done this sort of thing?

 

[mscriv]

Starting your own business is difficult. In my experience it's all about managing your cash flow and having realistic expectations. In my opinion the best advice is to start your new business while you still have a solid income and grow it to the point that you can transition when it has proven to be self sustaining. You didn't mention your job, but I'm assuming that your income will support the family while she tries to make this work. Often people use debt to try to start their business and if it doesn't succeed then they find themselves in a rought spot.

I wish you guys the best. The most important thing she can do is work hard. Network to make solid business connections and build a solid foundation of treating your customers like you would want to be treated. Her word of mouth reputation will be vitally important.

Keep us posted on how things work out.

 

[emw]

^^^ Yes, my current job and our savings will cover us as necessary to support her lack of income and business startup costs. Plus her training could translate into a 9-5 type job again should it be absolutely necessary. We're hoping not!

Thanks for the comments!

 

[Queso]

She needs to find a decent accountant and keep them very close for the first couple of years until she gets used to the rhythm of various deadlines, forms and tax payments. Otherwise it's very difficult to predict cashflow, which is essential whilst the business is getting established.

She is so doing the right thing though. Working for yourself completely rocks!! Tell her congrats from me, even if she does respond "Who?"

 

[obeygiant]

Marketing. Some companies offer to buy mailing addresses of people within a certain demographic. Buy a list and make a flyer with some sort of call to action on it and send it out.

Partner with some local fitness clubs.

Call the newspaper or local news affiliate and offer them an article or idea as PR for your business, sometimes they'll pick it up.

 

[emw]

She needs to find a decent accountant and keep them very close for the first couple of years until she gets used to the rhythm of various deadlines, forms and tax payments. Otherwise it's very difficult to predict cashflow, which is essential whilst the business is getting established.

She is so doing the right thing though. Working for yourself completely rocks!! Tell her congrats from me, even if she does respond "Who?"

Very good advice. We have an accountant, but I think we need to find one more dedicated to small businesses vs. using our standard tax accountant. And I'll pass on your well-wishes, thanks!

Marketing.

Yeah, that's the hard part - we've done a little bit, and the response has been slow. I think her expectations are a bit high still, considering she's been in business for all of about 6 weeks. My goal is to keep at it - I think it will take time to find that right mix of marketing vehicles that will help things take off.

 

[Thomas Veil]

emw, have you tried places like community rec centers? A number of them hire people like personal trainers on a contract basis, and while it doesn't sound like your wife is exactly that, it does sound like she has a "product" that they can sell. If they take you on, you're still your own company, but you get access to their established customer base.

And simply because you're talking about fields like health and skin care, I'd really recommend incorporating. All you need is one jackass deciding to sue you because the makeup your wife recommended gave her a rash... Not tryin' to scare or dissuade you, but you know how people are.

 

[4JNA]

...I'm curious if any of you have started your own business and what some of the challenges you faced were, as well as how long it takes to really become established with clients, etc. Her focus is personal wellness - fitness, nutrition, skin care, etc. She's very good at it, and I don't want her to get too discouraged too soon.

My thought was that for at least the first six months we would expect only (potentially significant) negative income from the business...

i did something similar (about 10 years ago) after moving to a very rural/remote location from a large metro area. also started by using the DBA method, and writing off my home office and corner of the basement used only for inventory.

different business/focus, but starting from scratch is no joke hard. use any friend/contact/etc you can think of to get the word out. fliers, cards, magnets, etc. hit the pavement and do door to door handshakes and info at any local established location that would be a potential outlet/sales lead. lots of driving, lots of 'no thanks', lots of hard work.

try different or out of the norm stuff as well. for her, it might be a free session at home with several friends who bring other friends, or a free makeover thing at a local shop or something. lots of hands on, lots of hand outs, lots of cards for everyone who attends.

my business was computer related, so i started doing volunteer work at several small rural libraries and senior centers. pretty soon (3-6 months) i was getting called the 'computer guy' by local patrons at the library and by the nice/retired folks at the senior center where i taught easy/intro email and internet classes for free. all added up to word of mouth, people told friends/family about me, people started calling, and then at some point i couldn't even keep up with the calls much less get any customer work done.

which leads to the second point. you are both invested, and can't imagine that ya'll would have made the leap if you didn't think it would work at some point. think beyond getting back to zero. if it goes, what happens next. need more space, need additional help, etc. it can get pretty stressful if you/she don't have some idea of what plan B is when things start moving fast. plus it's just fun to think about taking over the world and all that...

best of luck to her, and good on ya for going along with it. best of luck.

EDIT: and keep CRAZY good records of everything. down to the receipt level, especially for all the free stuff that gets used for 'advertising' during the start up. writing off stuff can make the first bit seem a lot less negative! don't even get me started on keeping inventory records...

 

[snberk103]

Started my own business. Helped/Watched others as well.

It may take as little as 6 months to "get established"... but generally it takes 2 to 4 years (minimally) and some advice is that it can take 5 to 7 years to become established.

Right now your wife is time-rich and cash-poor. So don't spend extra money on special accountants, etc. There is a wealth (pun intended) of free advice for small businesses.... take advantage of it. Keep records, obsessively. A diary, a calendar, receipts. It may be necessary in a few years time to prove that your wife was doing business related things ... diary of her activities will do that.

Don't fuss the cash flow at this point - you don't have enough to worry about, and it's all outflow anyway (keep track of it, of course, but you don't need to analyse to death. The analysis is going to be "You don't have as much as you want, and it's going the wrong way" There, I saved you alot time ...) Instead, concentrate on bringing cash in - and more importantly, getting her name out there. As mentioned above, networking is key.

In my field (photography) if I need to scrounge up more clients I teach a class. Sometimes I do it on a "for-profit" basis, and sometimes I offer a class to a non-profit group on a break-even basis. The next time the people in the class need photographic services there is good chance that they will call "the teacher"... working with a non-profit can work really well. They will use their mailing list (which can be very large) to promote the class. She can harvest the names of anybody who attends the class.

Never "give" her services away for free. No one values them, and when she does try later to charge, those customers will just go the the next "freebie". However, she can barter services for some other service of value.

If she is going to do a class for a non-profit she can do it for a reduced fee. If they really can't pay anything, have them "pay" her on understanding that she then "donates" the pay back. If they are getting project funding, the non-profit gets to move money from the project to general operating funds and your wife gets to show "revenue" on her books (good for bank loans).

Volunteering her time, even if it's not in her speciality, is good way to network. She is part of the "family" and people like to give their business to people they know.

Keep track of how your clients found you. When I ran a gallery I was able to ask ~80% of the people who walked in the door how they knew about me, and kept track of the answers. Within the year I was able to eliminate 90% of the places I was advertizing. And when the ad sales people were trying to sell me an ad, with their really impressive stats, I was able to decline - and tell them that it was because the last full-page ad they talked me into accounted for .017% of my traffic in the week after it appeared. Shuts them up real fast.

At least in Canada, the tax people don't care if you make good business decisions - just that it was legitimately a business expense. So, if you need to buy something for the business it doesn't have to be the cheapest thing. You can spoil yourself a little bit. For example, if she needs a laptop for the business... as long as the laptop is used for business purposes the tax people don't care if it's a system that is just barely capable - or a 17" MBP.... As long as it used for business.

Later on, when you incorporate... there are some good tax breaks you can get. We were able to mortgage our house personally, and claim the mortgage interest as a deduction on our personal income taxes because we had used the borrowed money to invest in our corporation that was purchasing some property.

Good Luck.

ps Print business cards, now, and both of you should carry them around everywhere (no exceptions!). It is amazing how often people start a conversation with strangers or near strangers, and the topic of "what do you/what does your wife do?" comes up alot. It is the cheapest and easiest way to get her name out there.

 

[rhsgolfer33]

And simply because you're talking about fields like health and skin care, I'd really recommend incorporating. All you need is one jackass deciding to sue you because the makeup your wife recommended gave her a rash... Not tryin' to scare or dissuade you, but you know how people are.

She doesn't need to incorporate to get liability protection. An LLC would provide similar protection, without all the crappy tax consequences and potentially with less paperwork and attorney/accountant involvement. That said, consult your attorney or accountant about it. As TV recommends, some liability protection wouldn't be a bad idea since it is health related and an LLC might be a fairly inexpensive way of providing some level of protection.

It will likely take longer than six months to get established. Not to be a downer, but as snberk103 said, it is usually more like 2-4 years. Just keep at it, if she's motivated and good at what she does, she'll succeed. Its tough out there, but keep at it, take calculated risks, and keep excellent records and she'll give herself a good chance at being successful. Best of luck to both of you!

 

[Corndog5595]

She needs to find a decent accountant and keep them very close for the first couple of years until she gets used to the rhythm of various deadlines, forms and tax payments. Otherwise it's very difficult to predict cashflow, which is essential whilst the business is getting established.

She is so doing the right thing though. Working for yourself completely rocks!! Tell her congrats from me, even if she does respond "Who?"

Him: 'Cheese' sends your their congratulations.
Her: Umm...okay?

 

[SDub90]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_1 like Mac OS X; en-us) AppleWebKit/532.9 (KHTML, like Gecko) Version/4.0.5 Mobile/8B117 Safari/6531.22.7)

I started a business while working and in school. I expected it to be 2-3 years before I started making money - I feel the 6 months youre predicting (just woke up - may have misinterpreted) is very optimistic, then again, I don't know anything about that field.

Don't be afraid to spend money on advertising - it's very important and make sure she's making promises that she can keep, my honesty has brought in more customers even though I didn't provide all te services that they were looking for at the time. This has also brought in more customers through recommendations.

The thing that helped me the most was making use of friends, online forums that in very active in, and work connections. Because of my job, I know a ton of people who would find my services useful - so I provide it for free or very cheap to those im closest with. Odds are they have friends who would be interested as well and they will bring them in. In my case, my friends had no clue what I did (I've been dodging what it is this whole post: web hosting and video game system repairs) when they went onto to school for their masters and law, they met plenty of friends that were looking to create websites.

Last thing, I would go that extra step to form the LLC - I plan on doing this in January when i'll finally have the time.

That's all I feel like typing from my phone right now. Maybe I'll come back to clarify what I'm trying to say (I'm sure I didn't make sense) and add more.

Good luck!

 

[Sirolway]

First off - Congratulations!

Your wife's line of business is rather different to my own (IT Consulting), but ...

• A lot of people seem to start their business when they get 1 really good client. This gets them started while they get other clients established
• Set up a web site, so people can find you. We go to a Pilates class that's a nice small thing, then you see the web site & realise how professional this woman is (http://www.yogainealing.co.uk/)
• I agree with the comment about business cards; you never know where a little casual networking will take you & being able to give people a busines card is priceles
• Once you start earning, watch out for taxes! Make sure you know exactly what your tax liability is & set the money aside in a separate account. I've heard countless stories of small firms folding after 12-18 months when the tax bills arrive
• Every $ you don't spend is a $ you don't have to earn. Anyone who's watched The Apprentice should know how important it is to control costs

Hope it helps - and good luck!

 

[emw]

Thanks to everyone for the continued good advice. Several have mentioned incorporating or forming an LLC, which we likely will in the fairly near future. We'll need to figure out exactly how to do that, but have a friend who can help us out there.

I'm eek setting up our website, which I think is beginning to look pretty good, but not yet ready to be revealed. Still need to get some better images and some more complete information, but hope to have it up and online before Christmas.

We did get business cards, and she's very good at networking and introducing herself and her business, which in some ways could be why she's getting a little frustrated. She expects people to immediately be like "sure, let me buy $500 worth of stuff from you", when in reality they need to get to know her and her product. So she's been providing samples and stuff like that and building those relationships. The added side of going to school 20 hours a week and studying also takes away from the ability to market herself as effectively, although she has garnered some clients from class.

Once her training is finished, we'll do more actual "advertising" since her offering will be complete and she can focus on the entire suite of services. For now, it's been e-mail to contacts, a community event, etc.

I really appreciate all of the good advice and well-wishes. We're trying to be smart about all of this - record keeping, cost control, etc. My background is process improvement, cost containment, etc., so I'm pretty anal about records and money.

 

[snberk103]

Something to keep in mind... imho, a small business does better if it doesn't sell "products", but instead sells "solutions". This doesn't mean changing what your wife is doing.... but if she thinks about the 'problems' that the business can solve - it may help.

People tend to buy products from stores that offer the cheapest prices (and that is a difficult business to be successful at - selling for as cheap as possible. Even Walmart is having problems doing that). However, people will buy solutions from businesses that they perceive as being able to solve their problems. Price is, of course, still a factor.... but not the only one.

One more piece of advice. Your wife should think about whether she wants to sell a lot of products for a cheap price (so profit is based on volume) or sell just a few things for a high price. I've always recommended people stay away from the high volume/low price model. There is always someone willing to sell cheaper than you. Once established in the low volume/high price segment (where people are paying for as much for the personal service as the product) then it's possible to add more volume to increase revenue. But once a business has established itself in the low price market segment, it's almost impossible to raise prices to increase revenue.