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Small-business Start-up Strategies

A sputtering economy and uncertain job outlook are combining to encourage hundreds of Kentuckians to start an in-home business.

Turning your plan into reality takes business skills and personality traits that aren’t all that common: Do you like to work ahead and plan for the future, then work to make it happen? Are you in good physical health and able to endure long hours? Can you obtain the money you will need to start and keep the business running without getting into cash-flow problems? Are you prepared to wait several months before you make a profit?

Do a business plan
Work out your business plan. What type of business are you starting? Is your area large enough to support another similar business?

Business consultants urge entrepreneurs to think “outside the box” by looking for a niche that’s not now crowded, such as pet services.

A San Diego couple has established a luxury dog and cat resort that offers massages, hydrotherapy, and hairdos to their four-legged guests. A horse massage therapy operates in south Florida, southern New Jersey, and Alabama.

Laws, technology, and health
If you are serious about having the business in your home, you will need to check into how state and local zoning laws will affect it, so you may want to call in an attorney with corporation expertise.

Don’t overlook getting both federal tax identification and a state sales-tax identification number.

If your in-home business will require heavy use of computer equipment, make sure your electrical system is able to handle it. Small businesses last year boosted spending by nearly 50 percent on information technology from their outlays in 2004.

Are you in good health and able to work long hours? Small firms are open, on average, about 11 hours a day, according to a survey by the National Federation of Independent Businesses. Although five days a week is the operating schedule for the majority of small businesses polled, more than a quarter of firms polled are open seven days a week.

Financing your business
Eight out of 10 new businesses are financed via credit, says the Small Business Administration. The remainder use equity or by selling shares in their enterprise to investors.

In funding your dream business, consider borrowing from your home by refinancing and taking out some cash or setting up a line of credit with the house as equity. Interest rates are in the range of 6 percent.

There are other options, such as borrowing from a cash-value life insurance policy, tapping friends and family, or charging it with the help of Uncle Visa.

There are pluses and minuses to all.

The life-insurance option is good if you are nearing retirement, your children are on their own, and you believe your spouse could get by with a reduced benefit.

Borrowing from friends and family puts your finances and your relationships on the line. Make sure investors know they could lose every penny, and then take only what you know they can afford.

Getting your start-up money from plastic isn’t unheard of, and making only minimum payments lets you stretch out payback for months, if not years. Be sure to make those payments on time because if you ever try to borrow a larger sum later, you don’t want a poor credit rating standing in your way.

Will you be successful?
It may take a while for financial success to appear. But according to a survey by the Gallup Organization, 76 percent of owners polled say they believe they are better off financially than they would have been if they had worked for another company.

Just 30 percent of start-ups survive more than five years.


On the Internet
Small Business Administration

Service Corps of Retired Executives

National Association of Women Business Owners

Credit cards with low rates

Getting in tune with customers, business coach Paul Lemberg

Reading material
The Legal Guide for Starting and Running a Small Business, by Fred S. Steingold

The E-myth: Why Most Small Businesses Don’t Work, and What To Do About It, by Michael Gerber

A Profile of the Entrepreneur, by William E. Jennings

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