You don’t require a loan. You don’t need an investor. You don’t have to max out a credit card. If anyone tells you that you must borrow money to start something small and successful, they are either misinformed, or they are trying to sell you something.
The Tax Error That Hits You In The Face Later On
Before we even discuss your customers or business ideas, let’s talk about something that blindsides most new business owners: taxes.
When you work for someone else, tax deductions from your paycheck happen without you noticing. When you start your own company, there is no one who will hold back the taxes you owe. You are fully responsible for paying them.
If you ignore your tax deductions, it’s possible that you may be hit with a huge tax bill in April and wonder how to work that out.
All you need to do to avoid tax issues is save 25% of your profit every month and deposit it into a separate savings account. Don’t touch the funds!
Then at the end of each quarter, remit your estimated quarterly tax payment from your savings account to the IRS.
It’s boring. It’s not going to be a source of excitement in your life. However, it will help alleviate a great deal of anxiety during tax season.
Step One First: Identify One Individual You Can Help
There was no need to have a logo, website, or business cards printed on heavy paper.
What you require is one client.
In almost every instance, this first client typically comes from within the circle of individuals whom you already know.
You can tell individuals within your family about this service, friends, coworkers, casual acquaintances, and whoever else you consider can potentially help your efforts.
It is unbelievable how powerful word-of-mouth advertising is. Also, it is free and has been proven to work.
If you want to reach beyond the people who know you, you will first need to use free methods to get started; examples could be online marketplaces, local classified ads, and community boards. All you need to do is invest time.
You can wait for the paid advertising and avoid taking out loans to advertise your business.
Finding a Viable Business Concept
Now, let’s return to the beginning.
There are two things that your concept must offer:
- It must provide a solution for a problem.
- You must enjoy doing it.
If you can’t find any consumers for your product/service, you will not be able to generate revenue. If you have no enjoyment providing a product/service to others, you will tire quickly of the work.
To provide some ideas to consider in developing your business, you could use examples of dog walking and walking alligators. Dog walking can provide many customers. Walking alligators? Not likely!
Take stock of what you have before trying to create or buy something new. Think of your skills, equipment, experience, and connections.
What you have on hand is your starting point. There is no need to buy anything new until you have used what you already have.
You will always be able to reinvest profit back into the business to continue its growth.
Now let’s look at the legal side.
Most of the time, starting your own business means choosing between two legal options, which are as follows:
A sole proprietorship is the simplest of the two choices. There is no paperwork to file (in most states), and you pay no fees to establish a sole proprietorship. You just start your business and go!
But, if you choose to operate as a sole proprietorship, it means that there is no legal distinction between you and your business. If something goes wrong with the business and a lawsuit is brought against the business, you could be personally liable for all debts or legal judgments against the business. Thus, your personal property could be at risk.
The second option is to create a Limited Liability Company (LLC). An LLC requires the filing of paperwork with a state (and possibly in other states); it requires a small amount of money to establish each year; and it creates a legal entity separate from you as an individual.
Choosing to operate as a sole proprietorship may be fine if you are only testing an idea casually. If, however, you have any assets you want to protect, you should consider forming an LLC before starting your business.
Sleeping soundly is worth it.
You must always create a separate bank account for your business. This is one operational step that you absolutely must do.
If you mix up personal and business money, you will create chaos in your business. Tracking your expenses will be impossible. Tax time will be a nightmare. Your stress level will increase exponentially.
Open up a dedicated business bank account for your business.
You need one place to receive cash (all income) and one place to pay bills (all expenses). When you pay yourself, transfer money from the business account to your personal account.
This will keep your finances separate, provide a clean set of records, and help you to have a clear head.
To open the new business bank account, you will likely need an EIN (Employee Identification Number). Getting an EIN is easy and FREE.
Pricing: This is the part that nobody is ever comfortable with!
When determining your charge, consider all aspects of delivering the service, including e-mails, administrative duties, phone calls, planning, scheduling, research, and improving processes.
Research your competition to determine average rates, particularly in areas other than yours, so as not to simply copy their values. Check on websites and forums, and engage other professionals for further input.
Stick to your pricing if it is fair and supports the market. People that want a discount will not have value for what you offer.
They are looking for a customer to value your time.
Unexpectedly Starting From Zero
When you’re low on budget money, you have to become resourceful.
You consider:
- True customer needs
- Effective processes
- Organic advertisements
- Reasonable pricing
- Watch cash flow
Developing this way builds a better business.
Using a lot of money to buy solutions is usually hiding the weakness of your business.
When you start out scrappy, you will create systems faster.
The bottom line: you do not need to take out a loan to start a small business; you need clarity, action, and consistent effort.
You must:
- Create the idea
- Create the structure
- Separate your money
- Price accordingly
- Create an awareness of your business
- Be responsible for tax compliance.
None of this requires debt.
It requires effort.
Debt is a form of fuel; however, in the beginning stages of running a small business debt creates more pressure than it does progress.
Start small, start lean; serve one customer at a time.
Growth funded by profits is a much different result than growth funded by debt.
The difference is vast.
