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Overview
Small Business For Dummies has been a leading resource for starting and running a small business. Calling upon their six decades-plus of combined experience running small businesses, Eric Tyson and Jim Schell once again provide readers with their time-tested advice and the latest information on starting and growing a small business.
This new edition covers all aspects of small business from the initial business plan to the everyday realities of financing, marketing, employing technology and management—and what it takes to achieve and maintain success in an ever-changing entrepreneurial landscape.
- Write a strategic business plan
- Start, establish, or rejuvenate a small business
- Hire and retain the best employees
- Get a small business loan
If you’re a beginning entrepreneur looking to start and run your own small business, this book gives you all the tools of the trade you’ll need to make it a success.
Product Details
| ISBN-13: | 9781119490555 |
|---|---|
| Publisher: | Wiley |
| Publication date: | 08/07/2018 |
| Series: | For Dummies Books |
| Edition description: | Fifth Edition |
| Pages: | 464 |
| Sales rank: | 83,888 |
| Product dimensions: | 7.40(w) x 9.10(h) x 1.00(d) |
About the Author
Jim Schell has successfully launched and operated several small businesses. He has written other books and numerous columns on entrepreneurship.
Table of Contents
Introduction 1About This Book 2
Foolish Assumptions 3
Icons Used in This Book 4
Beyond the Book 5
Where to Go from Here 5
Part 1: Getting Started with Small Business 7
Chapter 1: Is Small Business for You? 9
Defining Small Business 10
Small (and large) business basics 10
Financial basics: The same whether you’re big or small 11
Small business: Role model for big business 12
Different people and businesses, similar issues 13
Our definition of a small-business owner 14
Do You Have the Right Stuff? 15
Getting started with the instructions 16
Answering the questions 16
Scoring the test 18
Analyzing your results 18
Identifying the Pros and Cons of Owning a Small Business 20
The reasons to own 20
The reasons not to own 21
Exploring Alternatives to Starting a Business 23
Chapter 2: Laying Your Personal Financial Foundation 27
Getting Your Financial Ducks in a Row 27
Cutting the umbilical cord 28
Improving your business survival odds 28
Maintaining harmony on the home front 29
Creating Your Money To-Do List 30
Assess your financial position and goals 30
Shrink your spending 34
Build up your cash reserves 35
Stabilize income with part time work 35
Assessing and Replacing Benefits 36
Retirement savings plans and pensions 36
Health insurance 37
Disability insurance 37
Life insurance 38
Dental, vision, and other insurance 39
Social Security taxes 39
Time off 40
Managing Your Personal Finances Post-Launch 40
Chapter 3: Finding Your Niche 43
Why You Don’t Need a New Idea to Be Successful 43
Choosing Your Business 45
Consider your category 45
Take advantage of accidental opportunities 48
Inventory your skills, interests, and job history 48
Narrow your choices 50
Go in search of fast growth 51
Take advantage of government resources 53
Inventing Something New 54
Say yes to useful invention resources 55
Run away from invention promotion firms 55
Recognizing Your Number One Asset — You 57
Chapter 4: First Things First: Crafting Your Business Plan 59
Your Mission: Impossible If You Fail to Define It 59
Writing your mission statement 60
Keeping your mission in people’s minds 61
Your Business Plan: Don’t Start Up without It 63
Using your business plan as a road map 63
Finding financing with your business plan 64
Writing Your Business Plan 65
Part 1: Business description 66
Part 2: Management 67
Part 3: Marketing plan 68
Part 4: Operations 72
Part 5: Risks 74
Part 6: Financial management plan 74
Keeping Your Plan Current 78
Chapter 5: Making Financing, Ownership, and Organizational Decisions 81
Determining Your Start-Up Cash Needs 81
Using Your Own Money: Bootstrapping 84
Profiling bootstrappers 85
Tapping into bootstrapping sources 86
Outsourcing Your Capital Needs 88
Banking on banks 89
Getting money from nonbanks 90
Exploring Ownership Options 96
You as the sole owner 96
Sharing ownership with partners or minority shareholders 98
Deciding between sole and shared ownership 99
Going public: Cashing in 100
Deciding Whether to Incorporate 102
Weighing unincorporated options 102
Considering incorporated business entities 106
Part 2: Buying an Existing Business 111
Chapter 6: Exploring Buying a Business 113
Understanding Why to Buy a Business 113
To reduce start-up hassles and headaches 115
To lessen your risk 115
To increase profits by adding value 115
To establish cash flow 116
To capitalize on someone else’s good idea 117
To open locked doors 117
To inherit an established customer base 117
Knowing When You Shouldn’t Buy 118
You dislike inherited baggage 118
You’re going to skimp on inspections 118
You lack capital 120
You think you’ll miss out on the satisfaction of creating a business 120
Recognizing Prepurchase Prerequisites 120
Business experience and training 121
Down-payment money 122
Chapter 7: Finding the Right Business to Buy 123
Defining Your Business-Buying Appetite 123
Generating Leads 125
Perusing publications 126
Networking with advisors 126
Knocking on doors 126
Enlisting business brokers 127
Considering a Franchise 130
Franchise advantages 130
Franchise disadvantages 131
Evaluating Multilevel Marketing (MLM) Firms 132
Being wary of pyramid schemes 132
Finding the better MLMs 133
Checking Out Work-from-Home Opportunities 134
Chapter 8: Evaluating a Business to Buy 137
Kicking the Tires: Doing Your Due Diligence 138
Examining owners’ and key employees’ backgrounds 138
Finding out why the owner is selling 141
Surveying the company culture 142
Inspecting the financial statements 145
Uncovering lease contract terms 151
Evaluating Special Franchise Issues 151
Thoroughly review regulatory filings 151
Evaluate the franchiser’s motives 152
Interview plenty of franchisees 152
Understand what you’re buying and examine comparables 153
Check with federal and state regulators 153
Investigate the company’s credit history 154
Analyze and negotiate the franchise contract 154
Chapter 9: Negotiating Terms and Sealing the Deal 155
Valuing the Business 156
Exploring valuing methods: Multiple of earnings and book value 156
Getting a professional appraisal 158
Tracking businesses you’ve explored that have sold 158
Tapping the knowledge of advisors who work with similar companies 159
Consulting research firms and publications 159
Turning to trade publications 159
Enlisting the services of a business broker 160
Developing Purchase Offer Contingencies 160
Allocating the Purchase Price 162
Doing Due Diligence 162
Think about income statement issues 163
Consider legal and tax concerns 164
Moving Into Your Business 164
Part 3: Running a Successful Small Business 167
Chapter 10: The Owner’s Responsibilities in the Start-Up and Beyond 169
Dotting Your i’s and Crossing Your t’s: Start-Up Details 170
Buying insurance 170
Paying federal, state, and local taxes 172
Negotiating leases 172
Maintaining employee records 173
Getting licenses and permits 174
Signing the checks 174
Outsourcing: Focus on What You Do Best 174
Surveying the most commonly outsourced tasks 175
Figuring out what to outsource 176
Simplifying Your Accounting 177
Introducing some common systems 178
Choosing the system that’s right for you 184
Controlling Your Expenses 185
Looking at fixed and variable expenses 186
Understanding zero-based budgeting 187
Managing Vendor Relationships 188
Dealing with Bankers, Lawyers, and Other Outsiders 190
Bankers 190
Lawyers 192
Tax advisors 194
Consultants 195
Governments 196
Chapter 11: Marketing: Products, Pricing, Distribution, Promotion, and Sales 197
Marketing in a Nutshell 198
Tackling Product and Service Development 199
Pricing: Cost and Value 201
Developing your pricing strategy 201
Picking the right price 204
Distribution: Channeling to Customers 205
Direct distribution of products 205
Indirect distribution of products 209
Deciding on distribution 210
Promotion: Spreading the Word 210
Networking (It’s not what you know . . .) 211
Recognizing the power of referrals 212
Online marketing 213
Media advertising 219
Publicity 225
Sales: Where the Rubber Hits the Road 227
Pitting in-house versus outsourcing 227
Becoming a sales-driven company 229
Chapter 12: Tapping Technology 233
Making the Decision: Cloud-Based versus Internal Server 234
Improving Your Business’s Efficiency 235
Managing your time 235
Providing supplemental web services 236
Lowering your administration costs 237
Scanning and managing inventory 238
Managing finances 238
Expanding Your Research Possibilities Online 239
Brainstorming business ideas 239
Finding and obtaining financing 240
Buying a business or franchise 241
Chapter 13: Keeping Your Customers Loyal 243
Retaining Your Customer Base 244
Getting it right the first time 244
Continuing to offer more value 245
Remembering that company policy is meant to be bent 245
Learning from customer defections 246
Recognizing and practicing customer service 248
Dealing with Dissatisfied Customers 252
Listen, listen, listen 252
Develop a solution 253
Chapter 14: Managing Profitability and Cash 255
Cash Flow: The Fuel That Drives Your Business 256
Making Sense of Financial Statements 259
The profit and loss statement 259
The balance sheet 262
Turning the Numbers into Action 265
Understanding Key Ratios and Percentages 266
Return on sales (ROS) 267
Return on equity (ROE) 267
Gross margin 268
Current ratio 268
Debt-to-equity ratio 268
Inventory turn 269
Number of days in receivables 269
EBITDA 270
Managing Your Inventory 270
Collecting Your Accounts Receivable 272
Finding paying customers 272
Managing your accounts receivable 273
The Three Ways to Improve Profits 274
Decreasing (or controlling) expenses 275
Increasing margins 278
Increasing sales 280
Chapter 15: Learning from the Experiences of Others 281
Utilize Mentors 282
Finding your mentor 282
Building the mentor-mentee relationship 283
Network with Peers 284
Form a Board of Advisors 285
Reaping the benefits of a board 285
Forming your advisory board 286
Find a Partner 287
Join a Trade Association 289
Find a Business Incubator 291
Locate a Small Business Development Center 291
Give SCORE a Try 292
Tap into Small-Business Information 292
Part 4: Keeping Your Business in Business 295
Chapter 16: Finding and Keeping Superstar Employees 297
Assembling a Top Team 298
Hiring hints 299
Mastering the interview process 303
Training: An Investment, Not an Expense 305
Motivating: Pay and Performance Issues 306
Designing a compensation plan 308
Get SMART: Goal-setting that works 310
Writing performance expectations 313
Reviewing an employee’s performance 314
Parting Company: Firing an Employee 317
Designing Flexible Organization Charts 319
Valuing Employee Manuals 321
Turning the Tables: Characterizing Successful Employers 323
Flexibility: The bending of rules 323
Accountability: Where the buck doesn’t get passed 324
Follow-up: The more you do it, the less you need it 325
Chapter 17: Providing Employee Benefits 327
Seeing the Real Value in Retirement Plans 327
Getting the most value from your plan 329
Convincing employees that retirement plans matter 332
Deciding Whether to Share Equity 333
Stock and stock options 334
Employee Stock Ownership Plans (ESOPs) 335
Buy-sell agreements 336
Including Insurance and Other Benefits 336
Health insurance 336
Disability insurance 340
Life insurance 343
Dependent care plans 343
Vacation 344
Flexible hours 344
Flexible benefit plans 345
Chapter 18: Handling Regulatory and Legal Issues 347
Navigating Small-Business Laws 347
Suffering through Start-Up Regulations 349
Complying through licensing, registrations, and permits 349
Protecting ideas: Nondisclosures, patents, trademarks, and copyrights 356
A business prenup: Contracts with customers and suppliers 359
Laboring over Employee Costs and Laws 360
Chapter 19: Mastering Small-Business Taxes 361
Getting Smarter about Taxes 363
Reading income tax guides 363
Using tax-preparation software 364
Hiring help 364
Keeping Good Financial Records Leads to Tax Benefits 367
Knowing (And Managing) Your Tax Bracket 368
Staying on Top of Employment Taxes 369
Be aware of your benefit options 369
Stay current on taxes 369
Report your work with independent contractors 370
Hire your kids! 371
Spending Your Money Tax-Wisely 372
Take equipment write-offs sensibly 372
Don’t waste extra money on a business car 373
Minimize entertainment and most meal expenditures 373
Grasping the Tax Implications of Your Entity Selection 373
Chapter 20: Cultivating a Growing Business 375
Recognizing Growth Stages 376
The start-up years 376
The growth years 377
The transition stage 377
Resolving Human Resources Issues 379
Identifying important HR concerns 379
Dealing with HR issues in three stages 380
Addressing Time-Management Issues 381
Choosing Your Management Tools 383
Management by objective 385
Participatory management 385
Employee ownership 385
Quality circles 386
Total Quality Management 386
Reengineering 386
Open-book management 388
Troubleshooting Your Business Challenges 388
Filling out a troubleshooting checklist 388
Taking the five-minute appearance test 389
Redefining Your Role in an Evolving Business 391
Making the transition to manager 392
Implementing strategic changes 393
Part 5: The Part of Tens 397
Chapter 21: Ten Mistakes You Don’t Want to Make 399
Failing to Use Financial Statements to Manage Your Business 399
Failing to Prepare an Annual Budget 400
Failing to Utilize Your CPA 401
Failing to Understand How Marketing Applies to Your Business 402
Hiring Too Quickly 403
Taking Too Long to Terminate Nonperforming Employees 403
Assuming That Your Employees Are Motivated by the Same Things You Are 404
Considering Training to Be an Expense and Not an Investment 405
Failing to Take Advantage of Available Resources 406
Failing to Maintain an Up-to-Date Organization Chart 406
Chapter 22: Ten Tips for Small-Business Success 409
Focus on the Execution 409
Assemble a Team of Superstars in Game-Breaker Positions 410
Work Hard, Get Lucky 411
Realize the Difference between Profits and Cash 412
Hire for Attitude, Teach Skills Later 413
Create an Exit Strategy 414
Grow or Die — There’s No In-Between 415
Prepare for the Transition to Manager 415
Develop an Insatiable Appetite to Learn 416
Do What You Love 417
Chapter 23: Ten Ways the 2017 Tax Reform Bill Benefits Small Business 419
Corporate Income Tax Rate Reduction 420
. . . and (Some) Simplification 420
Individual Income Tax Rates Reduced 420
20% Deduction for Pass-Through Entities 421
Better Equipment Expensing Rules 422
Increased Maximum Depreciation Deduction for Automobiles 422
Limited Interest Deductions 423
Reduced Meal and Entertainment Deductions 423
Elimination of Health Insurance Mandate 423
Revised Rules for Using Net Operating Losses 424
Index 425
What People are Saying About This
This comprehensive and practical guide addresses how to find your business niche and time a start-up, figure out approximate costs, identify legal and tax issues, market products or services, and learn bookkeeping basics. Also recommended: Steven D. Peterson and others' Business Plans Kit for Dummies (3d ed. Wiley, May 2010.) (Library Journal, May 1, 2010)
Interviews
Cheat Sheet for Small Business For Dummies
By Eric Tyson and Jim Schell
From managing to marketing and everything in between, the world of small business can be both exciting and overwhelming. It's a place where no two workdays are exactly the same and where unpredictable things happen. If you're thinking about starting (or you already run and manage) your own business, check out the following list of tips to improve your chances of success.
Copyright © 2012 Eric Tyson, Jim Schell. All rights reserved.
20 Tips for Small-Business Success
1) Realize that not everyone is cut out to be a small-business owner. Take the time to explore whether you're compatible with running your own business. Some people are happier (and better off financially) on the other end of a paycheck.
2) Get your personal finances in order. Before you jump into the entrepreneurial fray, get your own money matters squared away.
3) Pick your niche. Take stock of your skills, interests, and employment history to select the business best suited to you. Choosing a niche that you can be passionate about will help improve your chances of succeeding. Remember: Many small-business owners succeed in businesses that are hardly unique or innovative.
4) Benefit from your business plan. The exercise of creating your business plan pays dividends. Answer the tough questions now, before the meter is running.
5) Don't think you need bankers and investors at the outset. The vast majority of small-business start-ups are bootstrapped (self-financed). Consider your own savings, investments, and salable assets and then talk to your friends and family before you look to outside sources.
6) Know which hats you wear best. In the early months and years of your business, you'll have to acquire many skills. Gain the background you need to oversee all the facets of your business, but also determine what tasks you should outsource or hire employees to manage.
7) Remember that nothing happens until a sale is made. How many good products go nowhere because they don't reach the shelves? Sales are what drive your business. You need a crackerjack marketing plan that details how you intend to package, promote, distribute, price, and sell your product or service.
8) Pay attention to your customers. After all, you have to see a customer to know one. No matter how busy you are, especially in the early years of your business, be sure to spend at least 25 percent of your time with customers. You can't make the right business decisions without understanding the customer's viewpoint.
9) Solve your customers' problems. The best way to satisfy your customers is not by selling them products or services but by providing solutions to their problems. Understand the difference and market your products and services accordingly.
10) Keep in mind that quality takes only moments to lose and years to regain. Quality isn't a destination but rather a never-ending journey. After you've strayed from quality's path, your journey may be sidetracked forever.
11) Put profitability first and rewards second. Beware of the small business that treats itself to hefty salaries, high-priced consultants, and waterfalls in the lobby. In small business, profitability must come first. To understand profitability, you must first measure your cash flow and understand your key financial ratios.
12) Hire superstars. If you intend to create a growing business, your number one duty is to assemble a team of superstar employees in your game-breaker positions. Game-breaker positions are key positions, such as the president/CEO (that's you), the financial person, the sales manager, the marketing manager, the production manager, the office manager, the purchasing agent, the art director, and so on, that will make or break your company.
13) Don't go it alone. Tap into resources, such as small-business peers, mentors, and trade associations, that can help take some of the energy-draining trial and error out of starting and running your business.
14) Remember that vendors are partners, too. A good vendor is as important to your business as a good customer. Treat your vendors like customers and watch the partnerships grow.
15) Make use of benefits. The most valuable long-term benefit you can offer yourself and your employees is a retirement savings plan. In addition, find out how to provide insurance and other benefits and reduce your tax bill at the same time.
16) Pay attention to all small-business-related regulatory issues. Federal, state, and local government agencies require an array of licenses, registrations, and permits. Obey them or face stiff penalties, including possible closure of your business.
17) Know the tax laws. Invest in understanding tax issues that affect your small business. You can avoid trouble and, at the same time, legally slice thousands of dollars off your tax bill if you know the ins and outs of small-business tax law.
18) Keep your focus on the people. Whatever happens to a small business happens at the hands of the people who work for it.
19) Fast, good, or cheap — pick any two. Serious trouble awaits those business owners who attempt to be all things to the marketplace. Focus on what you do best.
20) Develop a passion for learning. As your business changes and grows, you need to change and grow along with it — particularly as you transition to manager. The one common denominator you find in all successful business owners is a passion for learning.
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