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Essentials for Starting a New Business


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#1 TOGWT

TOGWT

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Posted 22 July 2011 - 06:24 AM

'Plan for the future, because that is where you are going to spend the rest of your life'. Mark Twain


~The Keys to Success~

• PRACTICE ~ learn ‘how to’ use tools and chemicals
• PREPARATION ~ the final finish can only be as good as the prepared surface it’s applied to
• PROCESS ~ learn what products really work and in what order to apply them
• PRODUCTS ~ what’s available and what ‘fixes’ a given paint condition
• PATIENCE ~ it’s the journey not the arriving, so enjoy
• PRIDE ~ in a job done to the best of your ability
• CREDITABILITY ~ is the biggest challenge for small businesses
.


Random success plays a part in all industries; randomness or the ups and downs of luck, both good and bad, sometimes mask for a while anyway; underlying quality. But few people are confident enough to stand by their judgements about underlying quality or character and so remain fixed upon short-term indicators - indicators bedevilled by chance.

Entrepreneurs: born or made?

Made - there is no doubt that here is aptitude involved and some people have more of it and some people have less, just as some people will be adequate entrepreneurs and some extraordinary ones. But all people who are successful need huge amounts of training, learning and support along the way, so by definition entrepreneurs are made.

Born - entrepreneurs are born because you need to have a slightly rebellious streak in you to be an entrepreneur. You must have an innate ability to challenge the status quo. You are someone who likes being in control of your own destiny rather than just joining a company and climbing your way to the top.

You can learn the basics of entrepreneurship, you can learn the steps you need to go through and the rules you need to stick to if you are to make any venture successful. But you cannot teach someone that they have to take all of the responsibility themselves and that they are going to have to provide all the drive themselves to achieve their business goals

Establishing creditability is one of the biggest challenges for small start-up businesses. Success is down to the hunger and passion that you are born with. It is a part of you and it’s instinctive. If you have it, you can’t switch it off. Often they are not driven solely by monetary gain; it’s more usually about independence and proving something to themselves.


Business Acumen

Starting a business is not hard to do, nor does it cost a lot of money. However, just like any business it needs to be done correctly. Many who get started don't set up the business correctly in the beginning stages and end up either loosing or completely folding up; a large percentage of fail within the first 18 months of getting started.

There are two main reasons; they don't know how to run a business and don't have enough knowledge to keep it up. And they are usually much undercapitalized to support their business until they do learn how to make it work. Basically, they run out of capital before they make a profit, this unfortunately is very common in many businesses today

Being good at what you do is 25% the balance is business acumen, client relationships and marketing yourself and your services and product. Strive to offer customer-focused services that differentiate your company from the competition. Ensure that your marketing focuses on customer’s needs as opposed to what you think they want. Making the other person think that they’ve got a good deal; and always exceeding customer expectations


Business Start-up

As a ‘new business if you have no client base or reputation to trade on, in essence you’re a complete unknown. You might be absolutely fantastic at what you do and the business side of things, but at that very moment the hard work begins. Without a client base and repeat business however good you are, you won’t last long in business, regardless of income your business expenses (rent /lease, electricity, etc) have to be met.

There is a so much to learn about setting up and running a business as well as having the knowledge of your profession. Do adequate research on owning and operating your own business first

Adequate insurance, stable finances, available credit, a good working relationship with your banker or business backer, accounting, tax law, properly setting up your business (sole proprietorship, Limited Company etc.) as well as having the necessary discipline and organizational ability to pay bills on time, are just some of the things required and to start maintain business momentum. This is all in addition to sales, marketing, customer relationships, vendor relationships, and actually doing the work.


Company Formation

Talk with a layer that specializes in company formation and company law and an Accountant to help you set-up your bookkeeping, accounts and tax payments

• Company structure - Sole-proprietorship, Partnership, Limited liability (LLC) or an S Corporation? Your decision will also determine how you are taxed.
• Business registration/licensing: local, state and federal.
• Some cities and municipalities do not allow a business to be residence based (home)
• Depending on your state laws, you may need a sales tax license.
• Insurance - how much is dependent on what you plan on doing. I recommend talking to an insurance agent


IRS.gov Starting a Business

Mobile Detailing Business

Mobile detailers operate from a specifically adapted van, truck or trailer that often includes an electric generator and water storage tank. Fully equipped detailing trailers start at $3,500. There are many benefits to this type of operation, including a low initial start-up cost, low running costs and the ability to service clients who prefer the convenience of having their vehicle detailed at their home or office. Dependent upon location and climatic conditions may affect the amount of time available to detail cars.

Bricks & Mortar Detailing Business

Before opening your doors for business there are some major costs involved. But there are benefits of a fixed location detailing over a mobile business, in that you can locate your business in a natural traffic area that will attract ‘walk-in ‘business.

Each type of professional detailing business has its own list of pros and cons that should be carefully explored and understood. Mobile detailing can be both a lower first cost option compared to a fixed location type operation and a viable business in the southern regions that enjoy mild winter; as it can be operational most of the year.

However in northern regions that experience snow and freezing daytime temperatures, a mobile business would see a significant slowdown and a substantial loss of revenue in winter.

The first thing you should do is contact the community's city/town clerk building department to see what permits are required, and then City Hall is the Department of Public Works water and sewer division and Conservation Commission to see what the storm water/wastewater reclamation, sewer back up prevention, back-flow devices, etc regulations are. Check with the building department's division of code enforcement to see if any changes affect the use of the building. Finally have a fire safety inspection prior to taking possession check with the Fire Department for any requirements for fire alarm/sprinkler systems and fire extinguishers.


Business Name or DBA (Doing Business As)

Is a Fictitious Business Name is the legal name, other than the owners name, you decide to give your business.

Do I need to have a DBA?

The answer is probably "yes", and you definitely want to take the time to find out. Most states require that you get a DBA. Sole proprietors and general partnerships operating their businesses under fictitious and or assumed names may need to apply for a DBA certificate in the county where the business is physically located. You will not be able to enforce any contracts you sign under your business name unless the name legally belongs to you. Another important point is, unless you register your DBA, other businesses will not know that you exist and may take the name.

What are the benefits to establishing a DBA?
• Here are some of the more important benefits to establishing a DBA:
• Operate and advertise under your business name.
• Prevent other businesses from using the name within your state.
• Operate with a bank account under your business name.
• Accept checks written out to your business name.
• Gain a more professional image.


What is the process of getting a DBA?

Contact or visit your local county clerk's office and ask about the specific requirements and fees. There typically is a small registration fee. The county clerk's office will often conduct a complimentary name search for the intended business name to make sure it's not already taken. There are several online resources available to conduct searches on your intended business name as well.
Some states may require you to place a fictitious name notice in a local newspaper for specified period of time. The costs for this are usually small, and the newspaper may even file the necessary papers with the county. Consider checking with different local newspapers to see what they offer.

For the majority of states, corporations are not required to file fictitious business names unless they do business under names other than their own. The incorporation documents have the same effect that fictitious names filed for partnerships and sole proprietorships do.
Banking under your business name

The vast majority of banks will not allow you to open a bank account unless you have shown them proof of a filed DBA. It is important to have a business bank account so that you can accept payments written out to your company name. You may consider checking with different banks to see the differences in services they will offer you and the requirements they have to set up a business account.


Local Licenses and Permits

Search for Business Licenses and Permits - Search for Business Licenses and Permits | SBA.gov

Should I trademark my business name?

You are not required by law to do this but registering your name as a trademark is always a good idea. It provides you with protection in case another business tries to use your business name or a name that is likely to be confused with your business name. It may be smart to file an application for a federal trademark if your company is doing business in several states. Run a search with the government or through a service to determine if your name is taken.

How to Name Your Business

What's in a business name? Not only must your name reflect your brand and be memorable, there are also a host of legal issues to consider. Business small and large can suffer losses from infringement of intellectual property rights. These rights include Copyright, Trademarks, Patents and more. At Stopfakes Home Page you will find more information, articles and training modules to help protect your business

• Research your intended business name to make sure it is not taken.
• Determine if it will be to your benefit to pursue a trademark for your business.


Seller’s Permit

Sometimes a seller's permit is called a "certificate of resale" or a "certificate of authority." This permit lets you collect sales tax from your customers, which you in turn pay to the state. Keep in mind that a seller's permit is different from a business license. Are you engaging in retail sales? If the answer is "yes", then you probably need to register for and get a sales tax license or a seller's permit. You still would need this permit if you are also selling goods that are exempt from state sales tax. If you are selling both products and services, it is important you keep sales organized separately. Sales of services are not usually taxed in most states. Sales tax is imposed at the retail level and will vary depending on your state.

Where do I get a seller’s permit?

You can register for a sellers permit through state’s Board of Equalization, Sales Tax Commission, or Franchise Tax Board. The following is a useful link from the Irs.gov Web site to help you locate the appropriate offices in your state. IRS.gov - Register Seller's permit

Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a federal tax ID, is similar to a social security number for your business. This nine-digit number is important because it allows you to identify your business on important government forms and official documents. Oftentimes, wholesale distributors require either a federal tax ID or a seller's permit from a retailer.
You are required to have an EIN in some, but not all circumstances. We recommend you get an EIN instead of using your social security number. It is safer to give out your EIN than it is to give out your personal social security number. There is no fee for receiving this from the IRS. A benefit to having an EIN is that it can help you establish credibility with whom you do business.


An EIN is required if-

• Your business has employees.
• Your business is a Corporation or a Partnership.
• You file any of these tax returns: Employment, Excise or Alcohol, Tobacco and Firearms.
• You withhold taxes on income, other than wages, paid to a nonresident alien.
• You have a Keogh plan.
• You are involved with: trusts, IRAs, exempt organization business income tax returns, estates, real estate mortgage investment conduits, nonprofit organizations, farmers' cooperatives or plan administrators.
• If you provide health insurance for your employees, you may need a National Standard Employer Identifier (NSEI) for your electronic health transactions
.

How do I apply for an EIN?

Fortunately the Internal Revenue Service (fortunately and IRS in the same sentence???) makes it very easy to apply. You can apply by phone, fax, mail, or online. Please have a look at the links to the IRS Web site below. It is important to note that your business may also need to acquire a tax identification number from your states department of revenue or taxation.

Top Ten Do's and Don'ts

TOP TEN DO'S
• Determine if you need a zoning compliance pemit.
• Verify with your health insurance carrier if you need a National Standard Employer identifier number.
• Check on the zoning laws for your business location.
• Check if you need a special license to do business out of your home
• Check to see that the business name you have chosen is not already taken.
• Get a DBA by going to your local county clerk's office.
• Get a business license and a federal tax ID number.
• Open a business banking account in your business name.
• Get a seller's permit if you need one.
• Consider registering your trademark.


TOP TEN DON'TS
1. Go into business without a business license.
2. Start building without a building permit.
3. Proceed without first consulting with a business attorney.
4. Use your social security number as your tax ID number. Get an EIN number instead.
5. Choose a business name without first checking to see if it is taken.
6. Begin business without verifying zoning requirements.
7. Operate under your business name until you have successfully filed for you DBA.
8. Forget to check if your business requires state and/or federal licensing.
9. Use your personal checking account for your business.
10. Fail to collect sales taxes when required


Start-up Costs

Here are some basic cost assumptions:

• Incorporation fee (attorney) - $1,200
• Accountant or bookkeeper - $1,000
• Office equipment - $3,500
• Office supplies - $550
• Detailing equipment - $5,500
• Initial stock of detail supplies - $1,500
• Air compressor - $1,000
• Washer and dryer - $1,000
• Tools and Equipment - $1,500
• Miscellaneous shop requirements - $2,500
• Shop Signage - $3,500
• Initial promotion and advertising - $2,500
• Business licenses - $1,000
• Cash on hand (always available) - $5,000


Total estimated start-up costs - $25,000

These cost need to be incorporated into both your Business plan and Cash flow


1. Monthly Expenses

• Rent – $3000
• Business Insurance – $100
• Liability insurance - $80
• Automobile insurance - $200
• Telephone service (inc mobile) - $250
• Utilities (Water, Elect, Broadband etc) - $550
• Employee’s wages (2 x 40 hrs x $10.00) - $1,000
• Office supplies - $100
• Marketing - $200
• Detailing supplies – $1,500
• Maintenance - $100

Total estimated monthly expenses - $7,000

2. Tools and Equipment

• Rotary polisher – $200
• Orbital polisher – $150 - 300
• (2) Washing buckets + GritGuard – $150
• (10) Micro fibre towels - $150
• (10) Wool and Foam pads – $70
• Assortment of brushes – $35

3. Required for each operative $ 1,000

• Electric pressure washer – $800
• Hose reel – $75
• Hot air gun – $25
• Heated carpet extractor- $1,400
• Air compressor (100 PSI) – $500
• Pad washer – $150
• Halogen work lights (2x 500 Watts) - $50
• Heavy duty Vacuum (4 HP, 95-inch lift) - $200

4. Total shop equipment $3,250


These $ numbers are given as a guide only, replace with your own estimated costs to arrive at a start-up cost

Insurance

Obtain business liability coverage; specifically Garage Keeper's Insurance (fixed location) or a Commercial General Liability policy (Mobile detailer’s).

Start-up

Starting a new business demands much more than a good idea, a new business needs seed capital, which means that you must also convince a wide range of people that your idea is a good one and that you can successfully generate profits in the future.

Some general rules of engagement before you start should include:

• Be as brief as possible, short, sweet and to the point.
• Place financial data in an appendix at the end of the document
• Demonstrate respect for your competition
• Mix in a spell and grammar check before you send your plan
• Justify any projections you make for your business
• Focus on your profit potential
• Include a risk analysis for the business and a realistic diagnostic for its survival
• Go easy on industry and technical jargon
• Be honest about any major claim
• Talk about relevant experience of your executive team

A start-up business may spend more than it earns for two or three years. The amount of financing needed may continue to go up through this time. For example, millions of people owned mobile phones and the networks became known internationally long before they made a profit

Many businesses have seasonal sales patterns that lead to predictable cash flow peaks and troughs For example detailing ; faces heavy material costs Car care chemicals, etc) in the summer with a much reduce demand for products / services in the colder months
Here are four key steps you need to take


Financing your business

A solid financial base is essential when you are starting up a new business. The right financing package will carry you through any temporary difficulties yet still allow you to make the most of growth opportunities when they arise. This briefing focuses on four areas:
There are a number of options if you need backing to start a new business:

• A bank loan
• Venture capital
• Investment from family and/or friends
• 'Business angels' - independent, wealthy individuals looking for investment opportunities

Allow for some contingency funding. How much extra finance might you need?
Consider worst-case scenarios to help you decide how much finance you should have available. What if a product launch is delayed, you lose your best customer, costs overrun or interest rates go up?

How accurate is your forecast? If you are unsure, you may need to set up substantial contingency funding

Even if you don't need all the money at once, don't wait until your need for the extra finance becomes urgent. For example, borrowing £20,000 in January and then asking for £20,000 more in April may alarm your bank manager. Let the bank know the total amount in the first place - even if you ask to borrow it in stages
.

Other finance

• Trade credit (paying your suppliers after 30 to 60 days) and bank finance may be all that a small business needs. Suppliers keen to enter a new market may offer extended credit. But other options are worth considering, especially for vehicle finance.
• Leasing is used to finance equipment you do not need to own
• Instead of buying the item, you rent it for a fixed period - usually three to five years
• Payments are spread out over the period, helping your cash flow
• You get full tax relief on most lease payments

In addition, there is the option to fix maintenance costs as part of the agreement (contract hire)
So how do you prepare your detail business so it is attractive to potential investors?


Here are some suggestions:

1. Have audited financial statements available for the past 2- 3 years
2. They will only want to invest in a profit making concern, so anything you can do to add profit to the bottom-line is critical. Eliminate as many unnecessary costs as you can to increase the profit of the business.
3. 3. Insure that you stated objectives for taking on an investor (s) matches your business objectives.
4. Have a well-laid out business plan that reflects a new strategy to grow the business with additional funding
Each option has advantages and disadvantages - a bank loan can be expensive, for instance, but allows you to keep a greater control of the business.

Before you go about raising capital, it is also worthwhile exploring whether your business may qualify for a grant from a local or national source. Businesses that are likely to employ workers from deprived areas could qualify, as could those that will have a beneficial effect on a deprived area or section of society.
Similarly, grants and tax breaks are also available in specific locations, such as enterprise parks section of society.


Business Loan Application

A Financial Plan is usually a requirement of a lending institution or investor; specify the amount of capital which you expect to put into the business. Provide specific information as to how the loan will be used; purchase of new equipment, a building, inventory; supplies or working capital. Identify what items will be purchased or leased, name potential suppliers and estimated costs.

Show return on investment (ROI) for this capital and estimated profit. In the event the loan or investment cannot be made, describe what changes, if any, must be made in order that the business would still be operational.

a) Financial Data: Sources of funding; Mortgage Loans, Term Loans, Personal Equity Investments. Applications of funding; Purchase Building, Purchase Equipment, Renovations, Inventory, Supplies, Working Capital
B) Balance Sheet; Assets- Cash, Accounts Receivable, Inventory, Supplies. Fixed Assets; Fixtures, Vehicles, Equipment, Building, Land. Liabilities- Accounts Payable, Bank Loans, Net Worth; Owners Equity
c) Operating Expenses: Salaries, Wages, Commissions, Payroll Taxes, Marketing, Advertising and Promotion, Office Administration, Legal and Accounting Operating Supplies, Bad Debts, Rent, Repairs and Maintenance Utilities, Insurance, Taxes and Licenses, Depreciation, Interest
d) Break even Analysis: Sales Cost of goods / services sold Gross profit Fixed expenses Net profit (loss) Gross profit as % of sales Divide Gross Profit by Sales (To show percentage relationship) (Break even) divide fixed expenses by Gross Profit (As % of Sales expressed as a decimal)
e) Supporting Documents: Personal Resume Job Descriptions Financial Statements Credit Reports Letters of Reference Letters of Intent Copy of Lease Copy of Agreements Copy of Contracts Copy of Proposals Quotations and Estimates Census and Demographic Data and Industry Surveys
3. Write a business plan: The first and most important step in raising finance is a solid and convincing business plan. Competition for the attention of banks, venture capitalists and other investors is fierce and potential investors receive many hundreds of business plans every year.

If you are to win backing for your new company, your business plan must stand out from the pack. Make sure your business plan follows these guidelines:

The front cover should be clearly dated and should identify ownership of the plan:

A clear index:

An executive summary previews the main points of an in-depth report; it is written for nontechnical people who don't have time to read the main report. The executive report contains enough information for a reader to get familiarized with what is discussed in the full report without having to read it

An executive summary, providing the reader with a brief (no more than a single page) but thorough idea of the proposal: organisational information, which should include: contact numbers; the company's legal form, registration number and incorporation date; directors and shareholdings, if appropriate; employment numbers and the projected increase in staff over a specified time scale; the names and addresses of the company's advisers.

a) The main section - which should provide a history of the organisation with a mission statement, clear details of the project being proposed for funding, a thorough analysis of the market, customers and competition, management details and finance details.
Management details should include the CVs of main management and an analysis of the team's ability to manage marketing and sales, finance and administration and technical issues.

The finance section should include projections for monthly cash flow, and profit and loss accounts and balance sheets covering a minimum of two years. An assessment of the project's long-term financial viability should also be included, along with a realistic statement of the total funding requirement (split between capital expenditure and working capital).


Security for borrowings

For any borrowing you need to show that you can afford the capital and interest payments. In addition, a bank usually wants security to ensure the loan is repaid if things go wrong. There are a number of different possibilities:
• A personal guarantee is a guarantee from an individual
• If supported by a legal charge over your personal assets, these assets (including your house) can be at risk if the guarantee is called upon.
• A guarantee from a third party, who will be liable to pay the debt if you default
• Directors of limited companies are often asked to provide personal guarantees in case the company fails.
• Sole traders (and partners) are already personally liable for all business debts
• You may need to take out insurance that will pay out if you suffer an accident, sickness or death.This will also protect the bank if you are unable to work

A good source of information is ‘Business Panning Made Easy - Business Plan Templates and Free Sample Business Plans - Bplans

Business plan software - Business Plan Pro UK — Business Plan Software to Write Effective Business Plans - Palo Alto Software UK

As the business expands and changes are made, the business plan will need to be amended and revised to fit the new business environment. The business plan should be treated as an ever evolving document, don’t get caught up in following the plan rigidly or you may end up missing new business opportunities


Find an office / detailing space:

Once your funding is in place, the next step is to find a base for your company. Again, there are a number of options:
• Be conservative. Take your time and set priorities.
• Choose a location with easy access: This can be a personal residence, mobile rig, commercial building, or rental space in an existing automotive-related business (car wash, lube shop, stereo shop, window tint, etc.)
• Shop-around for financing: Interest rates vary. You might also consider alternative financing.
• Leasing a property - Points to look out for include: break clauses, which give you the option of leaving the premises before the end of the lease; that the responsibility for maintenance and repair of the building is clearly defined; and that the terms for rent increases are laid out in the contract.
• Buying a property - should be seen as an option for the future.
• Purchase adequate insurance: This includes full coverage on customer vehicles in the shop, and off the premises during pick-up and delivery.
• Invest in a good phone system: If you cannot be reached directly, you should be able to return a customer's call within 15 minutes.
• Set-up a credit card accounts for business purchases: Some suppliers do not offer credit terms or C.O.D.
• Set-up credit card accounts for retail sales: Electronic credit card machines offer financial safeguards and convenience for your customers.
• Investigate state and city tax laws: Some require sales tax on services.
a) Get equipped: The final step is to find the right equipment and software for your needs and to stock up with stationery and other office goods. You'll also need to find yourself legal, tax and accounting advisers.



Related Articles

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2. http://www.autopia.o...tml#post1447579




Constructive criticism and comments are always welcome as it helps me improve

Edited by TOGWT, 04 June 2012 - 06:14 AM.





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