Small Business Start Up Advice

Starting a small business is no simple task.

A great number of people have been in the same situation as you, frustrated with their job, ready to take orders from only themselves, and filled with the ‘perfect’ idea for starting a small business.

However, without knowledge of how to actually start a small business and what it takes to manage one successfully, many of them fail.

Failure in a small business is often not because the idea was bad.  Rather, great ideas fail simply because the execution of that idea was poor.

This is largely to blame for the eager entrepreneur jumping the gun and starting a small business before he or she did the right research.

Adequate research will tell you whether or not your small business idea has the potential for success.

Unfortunately, many small business owners make some big mistakes, but well managed businesses have a few things in common.

Let’s take a look at some small business advice worth considering for starting a small business:

Location, Location, Location

The first piece of small business advice a new owner needs to consider is location.

For instance, let’s say you want to open a knitting shop. There may not be very many shops in your area solely dedicated to knitting, but you happen to know that there are a lot of people interested in the craft.

You can’t simply open a storefront and wait for the customers to appear. You first have to choose the right location for your small business.

You will have to scout many options and decide which ones would actually draw a significant amount of traffic.

You’ll have to ask yourself if a specific location is easy to access and if there are other small businesses around that might attract the same type of customers.

But location is only the beginning of your small business management study.

Profit Margin

Next, you have to look at how much your location costs and how much you can really make selling knitting supplies.

In other words you need to look at your profit margin.

As the business owner you will have to pay yourself and your staff. You will have to buys supplies to stock your store and decor to make it look nice.  There will be insurance and licensing you will be required to purchase.

In addition you will have to pay rent and utilities at your location. How much yarn, per day would you have to sell to make enough money to meet all of those expenses and still make a living and save for your goals?

You might find that starting a small business is not such a great idea after all.

Advice from Other Successful Business Owners

But, if you think that you can make enough money to pay your expenses and make a decent living,  the next step is to talk to people experienced in your line of work.

While you might not want to go to your direct and local competitor you can probably find another small business owner in a non-competing area who is willing to give you advice.

Just make sure they have a similar type of small business – someone else with a craft store is a far better mentor then someone who owns a pizza parlor.

Do not be afraid to ask questions.

Find out about their struggles, their mistakes, and the things they wish they had known before starting their small business.

The value of other peoples experiences cannot be underestimated in life or in business management.

These steps are not intended to deter you from your dream of starting a small business or of business management.

They are intended to help you jump into starting a small business being prepared with good research and a great plan for making money and being happy at work.

Just as there are loads of small business failures there are also loads of people who had a good idea, did good research and came out ahead of the game.

Some went on to huge success – others just enough success and a huge amount of happiness.

This article was written by William Eve, a regular personal finance writer for Home Loan Finder, a 100% free mortgage comparison and application service. Visit the Home Loan Finder website for the most competitive investment loans and first home buyer loans on the market.

This was a post I originally did on ChristianPF.com. I’ve adapted it some for my site, but you can check out the original here.

It seems there are more and more people becoming self employed these days - or at the very least, many folks are starting a side business, turning a hobby into some extra income or doing some type of independent contractor work.

In my day job, I am actually an independent contractor so I know quite well there are some things to remember if you’re self employed.

Whether you’ve decided to turn your blog into a business, sell a multi-level marketing product or rent a storefront to start selling your homemade jewelry there are some mistakes you will definitely want to avoid.

Not Having Your Small Business Set Aside Money for Taxes

This seems simple enough, but is probably one of the biggest tax mistakes people make .  The number of people I talk to that haven’t set aside money for taxes is pretty high. 

If you are a 1099 contractor, the company you are contracted with does not pull out small business taxes for you. 

At first, this feels great because your paycheck is higher – then reality sets in when it’s time to file your taxes.

Uncle Sam requires you to make quarterly estimated tax payments.  If you don’t have enough paid in for your estimated taxes you could face some penalties. 

I recently talked to someone who didn’t think they really needed to set money aside for his independent contractor work and figured he could just use his savings to pay the taxes.

He ended up making a little more than he thought by the end of the year and couldn’t pay all the tax liability.  He got whacked with some stiff penalties and is now making recurring payments to the IRS until his debt is wiped out.

Another thing people fail to realize is the self-employment tax that’s due.  This was a kick in the gut to me after my first year of self-employment.

Uncle Sam charges 15.3% tax for small business in addition to your regular income tax!  This is equivalent to the FICA tax on a regular paycheck.  The good news is that you can deduct half of your self-employment tax, but you still have to pay this small business tax! 

What I do to help me throughout the year is any time I get paid, I set aside a certain percentage of my money right away into a separate bank account, which is labeled Uncle Sam’s.  Then each quarter I take that money and make a quarterly estimated tax payment.

In the fourth quarter I do a quick assessment of where I am in terms of income and tax payments and adjust accordingly.  This has worked well for me the last few years.

Small business taxes are an annoying part of being self employed, but it’s a must.

Not Considering Incorporating a Business

Many self-employed folks start out as a sole proprietor.  They themselves are the business and everything (income, expenses and liabilities) gets funneled through their own personal account.

To set the record straight, not everyone should incorporate a business. 

If you’re not planning on going “big time” with your small business or you’ve decided you just want your hobby to make enough to cover expenses, it probably doesn’t make sense to pay the fees associated with incorporation.

It does make sense, however, to at least consider whether incorporating a business is right for you.  One benefit of incorporating is that you can get around the self-employment tax.

The biggest benefit however is limited liability.  This means that the business - not the owner - is personally responsible for its obligations. 

In other words, if the business gets sued, only the business assets are at risk, not all of your own personal assets like in a sole proprietorship.

So incorporating a business can be a pretty big advantage – definitely one worth considering.

Not Keeping Track of Income and Expenses

This is one of those mundane tasks that most owners hate, but every business must do in order to maximize deductions as well as protect themselves from an IRS audit.

A business owner should really be organized when it comes to keeping track of income and expenses.  Don’t write down your mileage on a napkin each time you travel.  

Your bookkeeper will thank you for that.  Or, if you are acting as bookkeeper you’ll appreciate your organization as your business grows.

Get a notebook, use a spreadsheet or some budgeting or personal finance software to track the amount of your expenses, the category (i.e. office supplies) and a brief explanation of what you purchased etc.

Don’t rely on your memory to come through for you when you need to report an expense.  Keep your receipts, develop a system and keep up to date.

I typically store all my receipts in one place for the week and then each Friday I pay bills, track my expenses in a spreadsheet, review my income and take a look at profit and loss statements. 

This may be a bit much depending on what type of business you are in, so just be sure you come up with a system that works for you.

Avoiding these mistakes as a self-employed person will help free up time, save you money and protect your business so you can maintain a long and profitable career.

What are some other mistakes you would avoid?

In 2 Cor. 6: 14 (NIV), Paul states: “Do not be yoked together with unbelievers.  For what do righteousness and wickedness have in common?  Or what fellowship can light have with darkness?”  

God wants Believers to be “equally yoked” and not “unequally yoked” with unbelievers.   But does this apply to Christian business?

Unfortunately, many Christians think this verse only pertains to finding a marriage partner and then form business partnerships with the world. 

The Small Business Administration tells us that over 650,000 businesses are started in the US every year.  Of these new businesses, 80% will fail in their first three years and only 9% will make it beyond five years!  

Although it’s impossible to tell, I have to believe that a “few” of these might have been Christian businesses. 

Why Does a Christian Business Fail?

There are a number of answers to this question that will be addressed in coming posts, but the main one we’re addressing here is being “unequally yoked”.  As mentioned above, God wants His people to be “equally yoked” in ALL things, especially involving the stewardship of His resources. 

I’ve watched fellow Christians enter into promising business partnerships with non-believers, only to suffer major loss at a later date.  I thought about these failures for many years and wondered why they had occurred.   As in many things we ponder over time, the answer suddenly “hit me” one day while studying His Word.  The answer was simple. 

In each case, these Christian businesses had been “unequally yoked”.  God had answered my question concerning business failures, but then gave me the inspiration to ask another question.  “Why don’t Christian investors and entrepreneurs to consciously seek each other out?” 

Just as stated in Prov. 13:20 “…iron sharpens iron…”, I believe that Christians helping Christians in the startup stages of a business can help lay a solid foundation resulting in Godly stewardship of all corporate assets. 

Don’t miss another post!  Get Redeeming Riches delivered straight to your inbox!

This includes planning, capitalization, budgets, staffing, facilities, products/services development, manufacturing, sales and marketing, distribution, etc.

As a Christian business, we are to obey Him by acknowledging the following:

1 Chron. 29:11 “Everything in the heavens and earth is yours, O Lord”

We know that God will hold us accountable in the stewardship of all of the resources He has given us, large and small. 

How Should a Christian Business Proceed?

As in any major decision, especially involving finances, Christians should only proceed after following these steps:

• Prayer – Seek God’s guidance though daily prayer;
• Studying His Word – John 1:3 “…and the Word was God.”  Allow God to speak to you through His Word.
• Seeking wise counsel – Prov. 12:15 “…But a wise man is he who listens to counsel”.
• Asking a simple question – “Do I see God’s Hand in action?”  Is God opening doors, such as bringing His people into your life as potential partners or by overcoming potential obstacles?

If God has called you to start a business, He has blessed you!  He is there to guide you, equip you, encourage you, and to provide resources you need.  Let Him be your CEO!

He will also form relationships with fellow Believers in terms of co-founders, financiers, suppliers, employees, advisors, mentors, coaches, etc.  When God wants you to succeed and you’re obedient to Him, how can you fail?

This is a guest post by Bill Murray, founder of the Christian Angel Capital Network. We are in the pre-launch stage of an online service that will match Christian angel investors with Christian entrepreneurs. We think of our service as “where eHarmony meets the Sharktank for Christians!”. Our current website is a blog and we welcome all comments, ideas, critique and of course, prayers. Find us at http://christianangelinvestors.com

Side Note From Jason

Readers – what do you think!?  Is business partnership with a non-Christian wrong?  Should Christians view those relationships as opportunities to demonstrate the love of Christ? 

Let’s hear your thoughts!