Tag Archives: Self-Employment

Starting a Business

Know the Ropes Before Starting Your Lifestyle Business

Leave a comment

Are you considering an exciting new lifestyle business idea and wondering if it will work?

Perhaps you’ve been to visit your banker, accountant or lawyer. Maybe you’ve wandered into a couple of the agencies that help new business owners get started. Hopefully, you have learned that you will need to do some market research and that you may need a business plan.

In researching your business idea, you need to prove there is demand for your products or services and that you can supply them at costs that leave enough money for you and your fledgling business to survive and hopefully, to thrive.

If you hope to shepherd your concept from mild curiosity to the action stage, here are some points to consider.

Evaluate whether you are ready to own a business.
Do you have the knowledge and skills? Do you have the financial muscle to nurture the business until it can support you? Are you motivated to get yourself to work each day without a big bad boss cracking the whip? Are you ready to be your own boss?

Learn all you can about your business idea.
Are there competing businesses already selling products and services you’re considering? Is your idea new to the area? How is your idea different from the existing businesses? Why would people buy from you instead of the competition?

Determine if there is demand for your goods.
Can you sell enough products and services to sustain your business? Learn about demand by talking to potential customers and competitors. Talk to anyone knowledgeable about the industry and who will take the time to educate you about the business.

Identify your supply costs.
If you’re buying and selling products, this means communicating with suppliers, learning their prices, their terms and shipping costs. If you’re providing services and doing the work yourself, you will need to set your rates high enough to sustain you. If you’re hiring others to provide the services, you will need to know how much they will charge you.

Decide what you need the business to provide for you.
Will it be money, lifestyle, or the pleasure of working at something you love to do? If money is a motivator, the starting point is to list your personal expenses and calculate how much you need to earn each month. Once you know that amount, you can then determine whether your hot new business idea will pay enable you to sleep nights without worrying about where the next meal will come from.

Market research is an opportunity to learn about your business. Be curious, ask lots of questions, and evaluate the answers. If you can prove there’s enough demand, and if you can provide your goods at prices that leave enough money to meet your needs, you might well be on your way to making a living doing something you truly enjoy.

Are you starting a lifestyle business? What lifestyle business would you like to start?

Do you have any helpful hints on lifestyle business?

Business Killers

How Debt Can Become a Small Business Nightmare

Leave a comment

It starts out innocently enough, usually with a small loan or a couple trade accounts, but by the time the bailiff puts a lock on the door, the amount of debt has become one of the nails in the failing business’ coffin. Here’s how easily it can happen.

Imagine that you’re starting a venture with limited funds and eager to get the doors open and succeed.

A startling number of new businesses fail in the first five years. Lenders know new business is risky, and manage their loan portfolios accordingly. However, with the right security, such as equity in the family residence or a willing co-signer or guarantor, it’s entirely feasible to nail down a start-up loan for a risk-laden small enterprise.

So, congratulations are in order; you’ve got the loan and started your business. Let’s say the borrowed funds pay for leasehold improvements and enough operating money to see you through the start-up period.

Life is good, but you still need supplies. In the early days of business, suppliers can be an uncooperative lot—nobody wants to extend credit until they develop a relationship with you. So, following “Supplier Development Rules Of The Road”, you proceed to build relationships and apply to establish a couple trade accounts with enough headroom to enable you to order a month’s supply, as long as you pay within 30 days.

Because the business isn’t yet churning out enough margin to provide you with a paycheque, you might find yourself nicking the corporate credit card to buy a few groceries. Every new business owner knows this is evil, but most do it anyway. After all, you’ve got to eat. You intend to pay the card to zero at the end of each month, but as you bang it up with personal knick knacks, and the money just isn’t there to pay it down, the carryover gets higher each month.

You discover that you need a couple more trade accounts and use your newly-honed skills to set up a few more accounts. In the meantime, your responses to pre-approved credit card marketing campaigns procure you a couple more credit cards.

With trade accounts and other random sources of debt like credit cards, the trap is that none of them know what the others are up to, they rely on your diligence and integrity, and also hedge their bets on their expertise at extracting payment from you like bad teeth, regardless of how you’re managing your other debts. So, by cherry picking and presenting a small part of your financial picture to the disparate players, it’s entirely possible for a clever operator to outsmart the entire bunch, including yourself, and tilt the financial chariot so far off centre that you wake up one day with no hope of ever getting your business back into the black, and no possibility of ever repaying the amount you owe.

All it takes from there is a small disaster to tilt the financial house of cards into pandemonium. Perhaps one morning as you’re about to head off to work, your aging vehicle coughs and refuses to take you anywhere. A flurry of repairs and a yelling match later, you owe a mechanic $900, and the corporate credit card takes yet another hit.

That’s how debt can destroy a business. Credit can be evil. Just because you can borrow, doesn’t mean you should. Treat debt with respect.

Self-Employment, Starting a Business

Nine Reasons To Charge More Than Your Old Boss Paid You

Leave a comment

By Dan Boudreau

Congratulations! For anyone with the slightest trickle of entrepreneurial blood flowing through their veins, it’s a glorious day when the boss offers to pay you as a contractor rather than as an employee. As an employee, you worked hard to gain your employer’s trust, earned your stripes, and got the contract.

Then comes the agonizing chat about how much to charge. This is when budding contractors need to sharpen their pencils. When it comes to business expenses, the boss will have a clearer view. Unless he is willing to share financial details, most employees will be ill prepared when it comes to figuring out how much to charge for their services, and most tend to bid too low.

Here are nine expenses that need to be covered in your hourly rate, if you’re going to survive the transition from employee to contractor.

  1. Employer Payroll Burden. This amalgamation of costs is often referred to as Mandatory Employee Related Costs (MERC’s). It includes the employer’s portion of employment insurance, pension, holiday pay and any other employee benefits.
  2. Insurance. You’ll need liability insurance and, as a contractor, you’ll be responsible for paying premiums for your own Worker’s Compensation coverage, as well as providing mandatory insurance for all workers under your employ. To learn about WCB costs, go to www.worksafebc.com and lookup rates and classifications.
  3. Rent and Utilities. Your business will have to have a home, and for many budding contractors that will be somewhere at your personal residence.
  4. Bookkeeping and Accounting. As a small business owner you’ll need to keep accurate records and complete year-end financials for tax purposes. Equally important, you’ll need to know, as owner, where you’re at financially at all times throughout the year.
  5. Legal. You’ll want a lawyer’s help in developing your agreement with your former employer, and there will be other legal purchases, such as licenses and permits.
  6. Marketing, Advertising, Sales. Even though your first contract fell into your lap through the good relations you’ve built with a current employer, you’ll soon be buying business cards and learning how to get the word out about your services.
  7. Tools and Equipment. As a contractor, you may need to supply tools and equipment that previously were provided by your employer. You’ll need to factor in the purchase cost, as well as the cost of repairing, maintaining and replacing equipment.
  8. Office Expenses. In today’s work environment, it’s difficult to imagine a business without a telephone, internet access, some sort of mobile, and a computer-fax-printer. There will also be a desk, chairs and something to store files and documents in.
  9. Bank Charges and Interest. A business needs its own bank account, independent of your personal account. If you borrow funds for business purposes, you’ll be paying interest on those funds until they’re repaid.

The Canada Revenue Agency is the final authority when it comes to deciding whether you’re an employee or a contractor. To locate tests that help to determine whether or not you’re an employee or a contractor, do an internet search using the keywords “employee vs. employer.”

As a contractor, if you’re charging anything less than double what the employer paid you as an employee, you’re probably not charging enough to cover your costs. Your appetite for contracting is more likely to grow if you start out with a healthy pricing strategy.

Related Articles:

Are You in Business or Enslaved to Self-Employment?

Business Needs More Than Passion

Business Owners Go the Extra Mile

Entrepreneurship, Self-Employment, Starting a Business

Keep Business and Personal Lives Apart

Leave a comment

personal_business_livesWhen it comes to owning a business, newbies often make the mistake of combining their business and personal affairs. As a business owner, it’s healthy to separate yourself from your business and treat your business as a separate entity.

A little investment of energy early on can bring huge dividends later in the life of your business. For example, set up a business bank account, rather than mixing your business and personal expenses – your accountant and bookkeeper will both be thankful. You will also enjoy the benefits: less confusion and lower accounting and bookkeeping costs, particularly when your friendly neighbourhood tax auditor comes knocking.

New owners have a tendency to dovetail their personal and business lives, usually in an effort to save a few dollars. I have done this in the past and it only leads to difficulty. Any savings quickly evaporated when it came to sorting out the mess later.

Think of your new business as a separate entity, like having a baby, building a house, or hatching an egg.

Here are some ways to separate your business from your personal life.

  1. Separate your personal time from your business time.
  2. Coach your customers to contact you during your business hours.
  3. Train your friends to contact you during personal hours.
  4. Consider yourself to be an employee of your business and pay yourself a wage.
  5. Open a business bank account, pay business expenses from that account and pay your personal expenses with your wages.
  6. Establish separate telephone and fax numbers for the business.
  7. Create a separate Internet and email presence for the business.
  8. If you’re home-based, create a separate space for the business and if possible, have a separate entrance for customers.
  9. Even if your business is a proprietorship for which the tax authorities view you and your business as the same entity, set-up your business with its own bookkeeping and accounting systems.

There are some great payoffs for separating your personal and business affairs. You will:

√      Know your personal and business expenses

√      Be more effective at calculating costs and setting prices

√      Find it easier to deal with auditors

√      Lower your bookkeeping and accounting costs

√      Be better prepared if you decide to sell the business or bring in a partner

√      Have more peace of mind

With much to gain and little to lose, I urge you to consider your business to be a separate entity from yourself.

Related Articles:

Reality Check: A Pre-Business Physical for Business Planners

Isolation Not Always the Entrepreneur’s Best Friend

Myths About Owning Your Own Business

Pros and Cons of Being Self Employed