Tips on Starting a New Business

As a successful business owner, I have had some experience with what works and what doesn’t when trying to start a new business. Here’s a brief list of what I’ve found to be the most important considerations:

1. Create a business plan. This is arguably the most important part of starting a new business. A business plan lays out everything your business intends to do in a clear, concise manner. Referring back to your business plan can help you stay focused and on track.
A well written business plan will also improve your chances of securing loans from lenders. Lenders want to see professionalism and organization. Having a business plan shows the lender that you are prepared and will be spending the loan money wisely.

2. Start small and work up from there. When you’re first starting your business, work with as few expenses as possible. If you can work out of your home, do so. Only hire as many employees as you absolutely need. You can adjust as your business grows, but in the beginning, keeping expenses low will keep you out of debt.

3. Make sure you have the right small business insurance. Consult an insurance specialist, or a website such as businessinsurancenow.com to determine what type of insurance your business needs. An insurance agent can help you understand the differences between business liability insurance and errors and omissions insurance, among others.

It’s important to have the proper amount of coverage, buy too much and you’ll just be throwing money away. Buy the wrong type and you’re wasting money and uninsured! Don’t buy any at all and you will be completely on your own to cover mistakes, something a new business invariably makes.

If you need more information or assistance in getting your company started, visit the small business association website.

Pros and Cons of Being an Independent Contractor

Being your own boss is great.  We can all make long lists of the benefits, especially before we get into business for ourselves.  What are the risks?  What do I need to be aware of before I get in too deep?  These are the questions we should be asking ourselves.  Often we get distracted by those lists of benefits that are just too great to even stop and think about the negatives.

It is great to be able to start the day whenever I want or put in the hours I feel like.  The reality of is that the day is never guaranteed to end at five and I cannot think of the last time I did not put in fifty or sixty hours in a week.  Vacations when I want them are great but I’m on my computer at least three times a day to make sure I haven’t missed anything from clients or prospective clients.

Sure you can make more money on a job to job basis as an independent contractor.  In the long run you are going to have to pay higher taxes and it can get confusing in a hurry when you have to figure out your tax return with a hundred or so clients on a yearly basis.

Maybe that company health plan will start looking better when you are footing the entire bill and still not receiving the coverage you should be.  Finding good health insurance is difficult.  Finding good health insurance that is willing to take on the liability of just one person or just one family is next to impossible without spending an arm and a leg to get it.

If the extra money you are making on a per job basis hasn’t been eaten up by higher taxes or more expensive health care it is almost assuredly gone after you factor in retirement planning.  When you are on your own, there is no employer supported retirement package, unless you count your own payments twice.

Beside your own health insurance, you have to also pick-up the tab on liability insurance.  I think most independent contractors go with little or no liability coverage.  Depending on your specific technology field, at times it is a necessity.

One of the worst parts of being an independent contractor is the risk of not actually collecting payment on a job.  The first time that ever happened to me was for a little $500 web site.  I was so floored that someone wouldn’t actually pay I hadn’t even thought of it as a possibility.  Since then I have wised up and taken steps and measures to make sure I collect my entire fee on all of my projects.  With the exception of being stiffed once, I have always been 100% on my collection rate.  Nevertheless, nonpayment is always a real possibility.

With all of these and many more potential pitfalls facing private contractors, one has to really question why anyone would choose that career.  I guess being able to set my own hours and not having a boss is still worth it for me.  The question is, is it worth it to you?