Small Business question?

[Jetdriver]

Does anyone here own a small business? Did you buy complete or did you build? What does one need to do to purchase a small business? I realize this is fairly personal, if you would like to PM that would be fine. I would just like some ideas and suggestions.
Thank you
Shawn

[totenhosen]

I work for a Bank in the SBA division. (I also do R/E on the side) But if you need any questions in regards to financing for the business let me know what your plans/ideas are and I can tell you what you need to do.

[HighRoller]

You really need to expand on what kind of business it is. Retail? Manufacturing? Will you provide a service or a product or both? I will tell you from experience, any time you start a business, have at least enough of an emergency fund to survive the first year with no profits.(Breaking even) It's better if you take on little or no debt, even if you have to rent or lease a building. That way if it goes wrong, you can get out of the lease instead of owning a building you can't use.

[Jetdriver]

TOT, check your PM's. Highroller, we are looking at a Tanning salon.

[sigepmock]

Be cautious when buying or setting up a small business. If it goes south creditors can take all your possesions, house, cars, etc. Look into a small corporation, Nevada and some other states ahve business laws which help protect small corporations from taxes, etc. Just some ideas.

[Jetdriver]

Well for sure we would want to be an INC. Im not having anything taken from me. Thank you guys for the replys. We have been sitting on the idea for quite some time now. I think maybe its time to do something about it.

[Scream]

Definately want some sort of asset protection, like LLP, LLC or INC. but don't think that will obsolve you of all obligations. Many Universities and Colleges are happy to help develope business models for new entrepeneurs, so give them a call.
Hide all the liquor, and take the step...A failure is only a failure if you don't learn from it.

[Jetdriver]

Nice to know! Thanks Scream!

[HighRoller]

Don't get too reliant on corporate protection, there are a lot of things that will pierce the corporate veil. Incorporating is a good idea but for a really small business you can also protect yourself by paying yourself a regular dividend. Anytime the cash in the business account builds up to a level more than what you need, pay yourself a dividend or bonus. It's harder for an attorney to go after your personal assets than your business accounts. Again, Emergency Fund!!!I can't stress this point enough. It's not IF things will go wrong, it's WHEN! 78% of businesses have an unexpected event within the first two years that requires emergency cash. I know I'm being redundant, but that one thing will eliminate your stress and let you operate from a position of confidence instead of fear. Finally, start a bank account just for your quarterly estimated tax payments and put 25% of your revenue in it. That way you won't be caught with your pants down when it's time to pay your quarterlies. You'll have enough in the account to pay the taxes plus your accounting/book keeping fees too.

[Jetdriver]

This is all really great advice. Im actually learning something on the boards today. Thanks again guys

[Stupid Fast]

Originally posted by Jetdriver
TOT, check your PM's. Highroller, we are looking at a Tanning salon.
A few years back, I looked int buying one for my wife.
Very Very competitive around here. All the ones around here that were forsale had a reason. Some were harder to uncover than others. Good luck, but be careful.

[EricU]

I am in the fifth year of my second business.
I do engineering and construction in Northern California.
A lot of things have changed since my first business; most of them cost more money. The main increases have come from the cost of insurances (general liability, workman's comp. etc), and employee salaries. If I can find a good employee, I need to pay them enough so that they can live. Also for some reason most employees think that I need to pay for their tools, truck, travel & gas!
Both of my businesses I was able to start our small and grow. I always put money back into my business to grow it, and try to keep my debt down. Depending on what type of business you are looking at will decide whether or not you can do that. You don’t want to go into too much debt because it is YOUR BALLS on the line. And don’t ever forget that, especially when you get a whiney, bitchy employee. If you get a “cancer employee” as I call them, get rid of them immediately! Don’t hire friends or another employees spouse or cousin or whatever, causes too many problems when one of them turns out to be a “cancer employee”.
Anyway I don’t know if I helped or if I am just ranting, but do make sure that you LOVE the type of work that you will be doing. You will be eating, sleeping & shitting your business, you have to. Don’t get me wrong, I couldn’t imagine doing anything else, but it is not for everyone.
Good luck, Eric.

[Daryll Anderson]

My momma always said, When it comes to advice - you get what you paid for.
Call a professional - worth every penny.
Or you could take the advice of some truck drivers or machine shop guys - they have the market cornered on making money.
totenhosen probably has a couple of good refferals for you to call.

[Jetdriver]

WIll do Daryll!

[HighRoller]

EICU is right, if you want good advice, go to the source. Travel out of your area and talk to people who are successful in your potential business. Make sure you let them know you're from out of town so you're not competing with them. Be friendly, offer to buy them lunch etc... And no, contrary to the rumors, truck driving is not the "hidden" money tree everyone thinks it is. If you like to work 300 days a year 18 hours a day for 70-100K, go for it. I added up my per hour wage and vomited after two years. The truck received more money than I did when it was all said and done!!!

[HOSS]

Watch an LLC. The personal loop holes aren`t what they use to be.

[Scream]

Oh, Yea, and don't forget that having employees is sometimes a nightmare. Listen to EricU on that one, try not to have close family members working together. I've got 50 employees and a lot of "family" members and let me tell ya, when one's pissed off all of the others are as well and bad employee morale will hose you in the productivity department.

[totenhosen]

I'm assuming you will keep your engineering job? The wife will run/work the business? How much you looking to get/start with? I can have an application sent to you. Typically SBA loans they'll take a 2nd on your primary residence for collateral should the business fail and they can't recoup their losses.
I wanted to PM you this but for some reason I keep getting error messages. email me at stefandrinks@hotmail.com if you want!

[Mandelon]

Whatever the business is, I guarantee its going to be harder than you think, take more time than you think and make less money than you think.
Running a small business is hard. All the damn bookkeeping, taxes, workers comp, insurance, rent, audits and OSHA regulations make it harder and harder all the time.
I say go work for the Government. You can never get fired, you get great benefits and you hardly have to work......;)

[OGShocker]

Originally posted by totenhosen
I wanted to PM you this but for some reason I keep getting error messages. email me at stefandrinks@hotmail.com if you want!
Your PM will go through but you won't know it. You will receive one but, you will not know it.
Mandelon is right on the money. Take your time. Think about this move and most of all have fun working HARD!
I read in Inc Mag the SBA had stopped funding start up loan programs.... Is Inc blowing smoke?

[Daryll Anderson]

Originally posted by Mandelon
Whatever the business is, I guarantee its going to be harder than you think, take more time than you think and make less money than you think.
Wow, you are so inspiring!! Perhaps you should be a motivational speaker? I love the way you look a the bright side!
Why don't you just convince him to get fired and collect welfare?
Why don't you site that 95% of all small businesses fail in the first 2 years, and of those left, another 90% fail within the next 5 years? In fact, why even bother to live in this cruel world?

[SoCalOffshore]

your percentage success of bussines is correct. Most do fail, especially retail, food/beveage and anything in a strip mall. I have had soo many clients open a retail business and everyone has failed eventually. Do allot of research.

[ChumpChange]

If you can, try not to go SBA. SBA is a bunch of collateral whores! If you want to lose your house, they'll be happy to take it. Depending on your Personal Financial Statement, you may be able to go conventional. If you are looking to borrow less than $250,000, some convential lenders will look at the deal even with no experience in the industry. I do business financing for one of the largest banks in the nation and if you can go conventional, do it. They require a Personal Guarantee just like SBA but don't put a lien on your house. If you are looking at a tanning salon, there should be enough equipment to finance that alone without having to put up your house. Just say NO to SBA!

[Mandelon]

The truth hurts doesn't it. Small business is no simple trick.
I think most new business do fail within the first five years, construction and restaurants have the worst failure rates of all.
If the tanning salon is making money or breaking even with some poor management maybe he can do better with some additional marketing and some side sales.
He could bring in a new clientele with stuff lilke flavored tea, protein drinks, herbs, supplements, massage, hair products etc.
As long as he keeps the DVD players showing the porn in the waiting room out of the sight of kids he's gonna be alright. ;)
After 8 years of running my own business, I like having the ability to tell a customer that I don't want the job, I like being able to take time off when I want. I can't go away for more than a week at a time, which kind of sucks, but its enough for me to get few long weekends in.
I have had loyal employees, some have been with me for years. We have 8 now, had up to 15 for a while. Some days I think about packing it in or selling.......but other days....like when a big check comes in...I am quite satisfied and proud of what we have accomplished.
Owning your own business can be really rewarding. If someone knows how hard it is and they STILL want to do it, then they just might have what it takes.

[OutCole'd]

Shawn, go buy the book " The E Myth" and don't look back.

[Mandelon]

I recently read that. We are putting it to practice right now. Sure makes sense.

[Sportin' Wood]

I'm in my 6th year. Construction,(plumbing) above mentioned faliure rate.
I have a S corp but don't plan on that for protection, you will still have to personally gurantee every loan and account you get.
Meaning that they will take your shit.
That being said don't put up your house. You'll be out of a job and homeless if you fail.
For me year 2 was the hardest. Everyone told me to save about $50,000 I had $20,000 saved and needed every penny.

[Mandelon]

True, I had forgotten about that. I have a C corp figuring it had the most protection and possiblities for diversification. But at the beginning I had to guarantee everything. After a few years you can stuff in the corporate name once you get a Dunn and Bradstreet profile established.

[SoCalOffshore]

All you small business guys should look into a S Corp. You can take a small salary and the balance as profit via a K1 and pay NO self employment tax (social security). then can save you some 16% of taxes up to the SS limit. I switched a couple of years ago from a C Corp, check with your CPA

[OutCole'd]

I agree with the S corp thing, that is the way to go.

[Jetdriver]

Thank you all for the input. We have been kicking this around for awhile now. Im getting the book as we speak. Thanks again.
Shawn

[126driver]

Before you get any farther, get yourself a program like Business Plan Pro, and make a business plan. Be realistic, ask yourself a lot of questions, and put a lot of thought into it. Don't build your plan on optimism, build it on realism. Look at the numbers, then decide if your idea is realistic. I never believed in a business plan until I got in-depth into one. Sure, you can build Excel spreadsheets, but a prog will take all of the math out of the equation and let you concentrate on the task at hand. Business Plan Pro had an estimated time to complete, let me just say that it took about 500% longer to come up with a realistic model, and I know my field inside-out. You'll probably find yourself making fifty revisions. be realistic, almost pessimistic. Good luck, I'm kinda in the same boat as you right now, ramping up my business. And take the business failure rate very seriously. Personal guarantees, no way around them unless you are solvent, must startups are not. I've had the unfortunate opportunity to see the destruction of a thirty-three year old company after 9/11 hit, and it's a very personal hit. It is not a pretty thing. But, still, I'm going start-up. Look at your plan, be realistic, believe in it, and believe in yourself.

[C-2]

Wow,
A lot of good information is coming from this thread. To expand on a couple of things;
Due Diligence
It’s up to you to make sure the business you are buying is solvent and does not have any other items the owners might forget to tell you about…such as tax liens, judgments, civil lawsuits and existing lease terms. (I can help you with this portion, PM me if you go forward).
Valuation
Just because they say it’s a good price doesn’t mean so. But the value of a business is an age old question with no clear valuation formula. There are companies that specialize in the field…problem is the current owners might not tolerate your insulting counter offers and the whole deal goes south.
Nolo Law is an excellent source for business startup material;
http://www.nolo.com/
And lastly, IMO, a tanning business is volatile. Not only is it mostly seasonal…but a lot of them, like hair salons, cell phone and sandwich shops, are fronts used to help launder money from the person’s illegal business. If it “doesn’t add up” to their lifestyle…stay clear.
Congrats on your ambitions and motivation! :)
And oh yeah, like others have mentioned TAXES TAXES TAXES. Numero Uno priority.

[SummerBreeze]

Business is the best thing you can do for yourself.
I have dad 3 others and now own a internet business. If you are looking to own your own job. Then start a company and you will be a slave to it.
I belive if you educate yourself in the difference of having money work for you or working for money. There is a big difference of having a business or being self employed.
Save yourself a lot of time and educate your mind before being self employed.
Read this book "Rich Dad Poor Dad" The web site is
www.richdad.com also pick up the book " Cash flow Quadrant"
The web site is full of education type of products to help you in your quest.
I am a business developer if you would like more info on starting a business have a look at my web site www.ecominfo.com/metcalf :)

[SummerBreeze]

sorry forgot this info for you www.ecominfo.com/metcalf
you will need this number 1374277 to enter the site

[Jetdriver]

I already read Rich Dad Poor Dad, great book. I thank you all for your input. Im not looking to go out and make a million with a tanning salon, Im looking for a small bit of extra income and the experience. Again thank you all for your input. Im sure I will be talking to some of you personally!
Thanks again
Shawn

[Sportin' Wood]

Originally posted by Jetdriver
I already read Rich Dad Poor Dad, great book. I thank you all for your input. Im not looking to go out and make a million with a tanning salon, Im looking for a small bit of extra income and the experience. Again thank you all for your input. Im sure I will be talking to some of you personally!
Thanks again
Shawn
The rich dad book helped me feel good about all the choices I had made over the years. The hardest part for me was not blowing the money on all the toys. Its depressing when your peers are all out buying new boats and trucks and You are investing your money in your future. By far I work harder now then ever and have less material items. I think of self employment as being part of an elite group of people that see the way the world really works.( technicaly I'm an employee)
I have also found that most people are happy to share advice, and enjoy talking about how to make money work for you. The S corp is where its at right now.IMO. Its not about how much you make, its about how much pay!

[totenhosen]

Originally posted by ChumpChange
If you can, try not to go SBA. SBA is a bunch of collateral whores! If you want to lose your house, they'll be happy to take it. Depending on your Personal Financial Statement, you may be able to go conventional. If you are looking to borrow less than $250,000, some convential lenders will look at the deal even with no experience in the industry. I do business financing for one of the largest banks in the nation and if you can go conventional, do it. They require a Personal Guarantee just like SBA but don't put a lien on your house. If you are looking at a tanning salon, there should be enough equipment to finance that alone without having to put up your house. Just say NO to SBA!
You have got to be a sales person because I can tell you going conventional on a tanning salon most likely will not happen. Honestly the collateral (tanning beds) have very little resale value to a bank.
Thing with SBA is there is a reason that the loan is SBA and not under a conventional program. They are far riskier. So what is a lender to do? Remember banks are in the business of making money not to lose it. The SBA entices banks to make the loans with the 75% guarantee. Without it 99% of banks wouldn't do the deal unless they charge you numerous points and/or high interest rates.
And to the other poster. Yes the SBA put a hold on the 7a program for awhile. They reduce the amount from $1MM down to $750M. The White House had vetoed a bill to icnrease it back to $1MM.
Reason behind this is companies were taking advantage of the $1MM limit for real estate purchases when they should go into the 504 program which is specific to R/E. (Going 7a saves them a bunch of money)
Government is contemplating reducing their guarantee from 75% to 50% meaning banks will be less likely to lend to so called risky business'.