Business Planning...

I've been hanging out on PM for around 5 years now, and even before that I've had the ambition to have my own business. I finally have a good, workable idea, that allows me to 'ease' into business without spending tons of cash/debt. This is more of a "service" based business, and could possibly dovetail nicely with my current day-job - we'll see. I'm not getting too optimistic, but it should be in their interest as well. (Regardless, nothing puts the smack-down on new-found enthusiasm like querying the PM crowd - so let me have it...)

Anyway, I have an appointment with my accountant next week to discuss the "how to" and "what do I..." issues of a new business. I suspect most of my questions at the start will be related to filing with state & federal? agencies, taxes, etc - mostly legal & tax related questions up front.



There's other things I need to consider as well, and this is where I could use some pointers.

-Book keeping? - Will some entry level software, such as QuickBooks suffice?

-Billing/Invoicing? I understand the nuts & bolts of billing etc, (at least I think I do) but I suppose I need to think about terms & conditions, etc...

-The business would most certainly need to purchase liability insurance, so I could use some pointers there as well. I do know a couple people in insurance sales to reach out to. Even if they don't sell liability policies, they could offer a referral, but I'd still appreciate pointers here too.

-OT but I do have a few friends/family to turn to for "moral support" who own their own businesses too. If there's something I need to discuss with them/ask for advise, I can do so, and I'm sure they'd be happy to discuss.



I'm sure there's 20 other things I need to be thinking about as well, but please shine some light on the areas I'm missing. Thanks in advance.

How about insurance for the company truck, tools, etc. What happens if you are hurt on the side job and can not work for your other job does their health insurance cover you?
Bil lD.

Sounds like you're starting off in the right direction.

Your accountant should be able to get you set up with the required tax authorities.
I would strongly advise setting up as a business entity in your state. (S-corp, LLC, etc)

Some insurance co.s don't do business insurance, others do. They should be able to set you up with a general business policy that covers liability, business assets, etc.

Quickbooks should be fine for bookkeeping, billing/invoicing, etc. You may never need anything more high-end. You may want to customize your invoice format though. I can spot a Quickbooks default invoice a mile away and I think it looks kind of amateurish. Same thing with your checks, envelopes, etc.
If you want to project a professional business image, your paperwork needs to reflect that. I used my local Minuteman Press to design a logo, and print all my envelopes, letterhead, checks, business cards, etc.

Easing into it is how I started too. Best of luck to you.

Repeat after me: "I will never get any work from my current employer".

I don't care what they say. I don't care how much they like you. You cannot ever count on doing business with your current employer. You absolutely will not be able to do it while still employed by them.

I know some people here have done it and it worked out for them, but behind them are a dozen guys who rolled the dice and found out it wasn't going to happen.

On the insurance front, I found it wasn't too hard. I went to a couple of insurance brokers that deal with business insurance, and they did't have any trouble finding coverage. Building the policy was more like ordering from a menu than personal insurance:
Do you need professional errors and omission?
Yes.
Ok, added. Do you have a company owned vehicle?
No.
Ok, we won't add that, etc

On the book keeping, I've been running Gnucash. It seems to have all the basics covered, and isn't cloud based. I do my invoicing on Excel forms, as I just copy/paste the info over from my Excel based quotes. The bottom line and taxes of the invoice get put into Gnucash, but not the detailed line items.

Concerning accounting do you already run a spreadsheet for tracking personal - family expenditure - income at, potentially, daily resolution. If you do beef it up and keep it going to track where the money is, is going to, is coming from right now.

I found mine great help in understanding cash flow when I, after redundancy, set up as a sole trader consultant (primarily) but also offering machining, repair and prototype manufacture services. much easier than proper accounting software when it came to seeing how bills that needed paying by a given date shaped up against income due in the future. Especially handy when exploiting credit cards for up to 6 weeks easy credit without tripping over the pay in full date and having to fork out extra on interest. I found two credit cards with payment dates a couple of weeks apart handy.

My accountant used to dish out a specially formulated spreadsheet of this sort to all his smaller clients and bully them into filling it in daily. Reckoned it was far better than folk trying to use accounting software. Hafta agree. I can do accounts & project management financials but found you've got to be in the zone to keep things clear.

Clive

The paperwork, books, insurance, billing is the standardized part of the business.


I'd be more concerned about making sure your business can pay the bills, grow and put cha-ching in your pocket. I'd start with testing the market to prove there's money to be made...that's the one big unknown you need to figure out for yourself. Most people can get one or two jobs but will they repeat, will those customers offer referrals. After job is done have you made money, broken even or lost some...

My wife started a business some years ago...every sale cost her between .50-$1.00. She was great at seeing the money being handed to her at the end of the transaction but failed to realize all the hidden money put into the product...or take an accounting of time she spent.

After the fun wore off I sat down with her and ran the numbers...it was a try to make it by purchasing in bulk to make a profit, stay small and enjoy OR give it up. In the end it was fun for awhile, but she didn't want to ramp it up and then that was that.

QuickBooks is also available in higher-end versions such as "Enterprise" used for manufacturing and wholesale. If your sales volume dictates going to Enterprise, make sure your tax accountant has it, otherwise they won't be able to open your files.

You're certainly going at it the right way. Most guys plow right into machining parts for customers, spend money on promotion, and put off the accounting until discovering there's no money to get paid (been there, done that, got several of that T-shirt)...

I’d have to +1 the GnuCash, I use it personally (at the shop), use it as a treasurer of a 501c3 charitable corp (all volunteers, NO salaries) and developed (ported) the uniform chart of accounts for a US fraternal order (accounts = 10) pages)…

Gave up quickbooks pro many years before they went cloud.

Good luck,
Matt

Quickbooks is really quite compete and flexible, no your'e not going to run Boeing with it, but you'd have to be a very sizable business to be totally dismissive of it.

It will seem complicated and confusing if you don't know accounting. I've always felt accounting is the language of business, if you don't know it, its like being business illiterate. So if you can, pick up some accounting.

Nevertheless, accounting and its software are inconsequential and will take care of itself (almost) compared to the headlining concerns; can you get customers and making a profit

If you are working in a shop now doing the same thing keep your plans to yourself for a long time. I would be careful about letting my employer and fellow workers know what I was up to. This is how I started 30 years ago and once it got around people at work began talking.

Some had encouraging words others had bad intentions. My employer was OK with it but guarded and never gave me anything to work on, "I never asked" People will make jokes and some will be jealous, some will stab you in the back and you will be suspect #1 should anything go missing in the shop you work at in the day.

Today if a guy of mine comes to me with his plans I'm happy for him but can't help it, he falls out of favor with me on the spot. I know where Ive come from and I know what Ive had to do to get there, it wasn't always pretty and once my own shop started rolling my day job came second. Just telling it like it is and any owner who's been around knows the same.

Make Chips Boys

Ron

lease brokers will buy a machine and lease it to you..then at the end of agreement you buy the machine for a buck or so..Cold turkey with not a first job on the got-it is not so good..IMHO..Keep it on the QT is good advice.Signature loan for perhaps$100k might be had but a loan to start a shop may be hard to find.
Rent space and get a few jobs makes starting easier IMHO.

QT: [a "service" based business,] can you get a few accounts on the side to prove your idea?

I won't be buying equipment, or racking up any debt. At the start, just some relatively inexpensive software mostly. Liability insurance if/when the first contract/PO is signed. No reason to spew into the details now, but just to be clear, I'm not starting a shop or manufacturing business. At the moment, I don't have a specific timeline, but I'm not content to put this off any longer.

Good advice about "matching" the book keeping software to the accountant's. I'll see if that's feasible.

Thanks again. Keep it coming.

You need quickbooks, if you want to look professional, get it. Just to have nice looking estimates and invoices goes far. You don't want to look like the hillbilly new business.

You need a nice looking business card, keep it simple, but to the point. I like the heavy stock, no big pictures. A nice "watermark" looks nice.

Website... Priority.... Only way to have a business anymore. I bought adobe dreamweaver back in 07 and got the dummies book for it. I had a nice looking website in a month of learning it.

You shouldn't need a cc machine. If you absolutely have to, get one of those like square things that you only pay per transaction. Always take check to save the 3%

I don't buy what I need, and I don't buy what I want. I buy what I need +1. Like if your choosing between 2 lathes with the same thing but 1 is a little better for a little money and you will work into it... Buy the better one and cry the next day. Also in the same aspect, don't buy the large that you just want because of the nice flyer that came with it.



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-Book keeping? - Will some entry level software, such as QuickBooks suffice?

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"Entry Level" is a legal pad and a check book.
I did it this way for several years before Mamma took over and 'putorized the whole deal.

You won't think that Quickbooks is entry level when you price it.
At least they seem proud enough of it that they don't seem to think that it is entry level.

I for one would like to see some upgrading in the catagorizing of the item list, but ....


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Think Snow Eh!
Ox

Ox said:

"Entry Level" is a legal pad and a check book.
I did it this way for several years

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My dad still has "books". Works fine for him. I used an excel sheet for the first 3 years before quickbooks. Two things I like about quickbooks: The ability to write checks and have it auto populate the address. Just jam it in a window envelope and off it goes. The other is generating quotes. It's really nice to have quotes stored in the software for future reference. Plus you can transfer the quote over to an invoice if you get the job.

You really don't need your accountant synced up. All the accountant needs is total sales, direct expenses (utilities, rent, materials, parts, consumables), and capital expenses (anything you can depreciate like machines, durable tooling, structures, etc). When I go to the accountant, I just pull up a report for each of those categories for the last year and write it on some paper and hand it to them. No issues.

If you are going to have payroll, it's more involved. For a sole proprietor, it's pretty easy. The biggest thing is to write things down. Everything you buy on ebay. Every time you run to the hardware store. Every McMaster Carr order. You have to write it down. Every expense you do not deduct is money you will have to pay in taxes. And don't forget about shipping. Some companies are bad about disclosing what you paid for shipping.

Doug said:

Statistically, the business won't make it so no point in going to a lot of trouble and expense to get going.

Really, the only thing you have to worry about is the IRS. If you should happen to make some money pay taxes on it.

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Pretty cheery outlook. But, I suppose you are correct.

Don't stress too much about the IRS. Penalties for filing late and even paying late are pretty small unless you made a ton of cash. And you can fix your taxes later. I filed my own taxes the first few years and I didn't know anything about depreciation schedules or anything like that. My accountant refiled my old returns and got me several thousand dollars back.

One of the first questions is the scale of business you hope to run.

With a service business, you're essentially selling knowledge, maybe some specialized equipment or processes, and TIME. Pretty much the same if you're a plumber or a gastroenterologist in private practice. You're limited by the time you have to sell -- and hopefully your time is worth many multiples of a typical hourly salary to someone else. A guy with a lathe and a mill -- not so much. Someone with the only wire EDM in town and enough business to support it -- maybe more.

Some of us like the idea of doing much of this ourselves. Others hope of have dozens of people working for them -- potentially far more lucrative but also riskier and maybe not the work you love?? Sometimes the market itself will dictate what scale you need. Maybe a solo practitioner can't compete (that's happening to doctors). Maybe there isn't enough work to support more than a handful of people in your chosen area?

So, try to answer those questions first. First, what do you want to do -- the actual work or managing the work of others? Second, what scale of business is likely optimal to serve the market?

Anyhow, if you're planning to scale you need to be thinking quite seriously -- from the beginning -- about everything from a registered trade name, through local licenses, to an accountant and lawyer. If you're planning to go solo then maybe a separate checking account, the simplest version of accounting software, and your own name on the business card may be enough.

I'd add that it's usually pretty easy to be a solo sole proprietor. It's also not especially difficult to run a 100+ person company IF the market and your expertise will support that, since you can hire someone to do the accounts, someone to head sales, etc. What's tougher is being a very small business, with yourself doing sales, accounts, R&D, strategic planning, HR, and, oh yeah, the work -- and trying to abide by all the regulations of a somewhat larger business. A lot of companies that make it through this stage have to cut corners along the way -- and many just don't make it.

The joy of self employment & payroll taxes

I used intuit (quickbooks developer) payroll. It worked out good until I was real busy, then I forgot to file a lot and got my accountant to do it. It was very, very simple, but it's still accounting.

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