Start-up costs for a new business?

[ferrytale]

Does anyone have any experience with starting/financing a new business venture? DH and I have been tossing around ideas of starting up a new business - but just cannot figure out how to get started with funding/financing. I am not talking about a franchise or home based business, this is something new for our area(though I have researched and there are numerous one throughout the country). We need start-up for a small storefront & equipment.
We have a *small* amount of savings that is supposed to be used for neccessities/emergencies only. Our credit isn't great. Someone suggested I look into grants.
I am just looking into seeing what other people have done to get an idea of things that worked/didn't work. Any helpful hints would be greatly appreciated.

 

[*pixie*dust*]

I work for a financial intitution that works with small businesses frequently. Lately we have seen a lot of potential small business owners use their homes as collateral to secure a loan for a business start up, as it is very difficult to get financing in this economy since so many start ups don't last more than a year. If you don't have a strong credit score and a comfortable savings you will probably need to wait and work on those things before starting a new business.

 

[Cheshire Figment]

I would also suggest going to www.irs.gov and order the following publications which will probably help a lot.

334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)
463 - Travel, Entertainment, Gift, and Car Expenses
535 - Business Expenses
551 - Basis of Assets
552 - Recordkeeping for Individuals
560 - Retirement Plans for Small Business (SEP, SIMPLE and Qualified Plans)
583 - Starting a Business and Keeping Records
587 - Business Use of Your Home
946 - How to Depreciate Property

And also, if the time can be spared and at and minimal cost take a first semester Principles of Accounting course at a local Community College. Not necessarily to keep the books, but to get an understanding of what the business is doing.

Note that most small business fail within the first few years not because the owner did not know his subject but because they did not understand the accounting.

Mike (CPA Retired)

 

[10dedfish]

You could try to operate out of your house, until you get a good customer base built up. This would also allow you to deduct the cost of your business on your taxes. But, if you are going to go the route of a storefront, always use someone elses money. That way if things dont go well, you still have your house and nest egg, you just have alot of debt. Dont know if this will help, but its my 2 cents.

Matt

 

[erincon23]

Our local community college has a small-business service, where you can go for advice on topics just like this. My DH has worked for this service as a consultant -- he goes into small businesses, reviews their books, gives them suggestions on saving money, collecting, receivables, etc., and gets paid by the college, not the client. They also have seminars and advisers just for small business, and can help you create a business plan, develop marketing plans, etc. Check out resources like this in your area -- you'll be surprised what you'll find.

Also, you can get help from some retiree organizations -- I can ask my DH, but one organization is called Gray Hair Management. You can find retirees who will volunteer their time and offer their expertise.

 

[mistysue]

Look into how unemployment insurance works in your state. My parents opened up with 2 employees and they had to pay in a huge deposit for their account at the start. It's been 15 years and they keep changing the rules but that was a huge stress to them and one of their biggest startup costs.

 

[ferrytale]

Well, as far as taking courses in accounting goes, I have a 2yr degree in marketing and management - and I am currently an office manager & bookkeeper. I know there are going to be hidden costs that I didn't think of (especially since it's a different industrythan what I am doing now), but I do have an understanding of the principles of business and bookkeeping.
I am NOT comfortable using our house as collateral, simply b/c of the failure rate of small business - while I am confident we could run a successful business, NOTHING is a sure thing these days and I refuse to risk my family's home on a gamble. We're trying to bring our credit up and saving, but it's a long slow process. We've thought about doing it as a mobile service, but that raises a whole other list of things to work on - therefore changing the business plan, which is fine, we're flexible - and it would be a lot less overhead.

Just a lot to think about, thanks for ideas and suggestions...keep em coming if anyone has anything else!

 

[nilseks]

Do you have your heart set on operating a certain kind of business? If not, research businesses with low start up costs. I own a pet sitting business that I started with absolutely NOTHING. I'm talking a few hundred bucks to pay for insurance and some marketing materials, and that was it. I operate out of my home so no expense there. It is a business where if you do your job well, word spreads. I now sometimes have more business than I want or can handle. My main competitor in town is also very busy and expanding rapidly (we are friendly and 'talk shop' a lot). I don't want to expand because my kids are still young and I'm focusing on them, but the opportunity is certainly there if I wanted it.

I'm not suggesting you become a pet sitter (you have to really love it b/c it can be grueling!), I'm just giving it as an example of something that can be lucrative with very little start up. I'm sure there are other such opportunities out there, you just have to find them.

Good luck to you!