Every year, thousands of women choose to foray into the realm of entrepreneurship. But, when do you decide it’s the right time, and how do you make the decision to hang out your shingle and start or buy a business?
Lucy Van Pelt, the famous crabby girl and protector of women’s rights from the Peanuts cartoons, could always be found dispensing psychiatric help for 5 cents. And we’re all familiar with the traditional lemonade stand. As young girls, taking that leap of faith to hang out your shingle was as easy as a piece of cardboard and a pitcher of sour lemonade. But as women, that leap is sometimes the scariest and most thrilling one we can make.
Every year, thousands of women choose to foray into the realm of entrepreneurship. But, when do you decide it’s the right time, and how do you make the decision to hang out your shingle and start or buy a business?
“One of the most important aspects of starting a small business is the business entity you choose to form,” said Heather Hess-Lindquist, an attorney at Farr, Rasmussen & Farr. Common business entities are sole proprietorship, partnership, limited partnership, limited liability company and a corporation.
“Each of these entities have varying degrees of legal protection that they afford the small-business owner,” Hess-Lindquist said. “Currently the most popular business entity for the small-business owner is the limited liability company.”
The owners of the LLC are called members and the organizing documents are referred to as the operating agreement. Hess-Lindquist added, “The advantages of having an LLC. are the ease with which it can be run without the complication of double taxation and having a board of directors that is required as with a corporation.”
Under the formation of an LLC, the owner’s personal assets are protected from those that are used on the LLC if creditors seek to pursue an action against the company.
“Only 44 percent of small businesses survive in the first two years of their existence,” said Hess-Lindquist. “So, statistically speaking, having one’s personal assets protected against creditors is of significant advantage to the business owner.”
Hess-Lindquist suggested visiting the Department of Commerce website, where business owners can research the legal aspects of the formation and maintenance their businesses.
Once the decision is made, there are several ways that women find themselves on the path to small-business ownership. Let’s look at three different avenues women can venture into in the world of self-employment:
Leaving the corporate world to start your own business
You have a stable full-time job. But you’re not fulfilled. You’d like to start your own business. But, how do you know if you’re ready to take that leap and go out on your own? Thousands of women dream of starting their own business. The risks are high and many small businesses fail. But the rewards are high, too. Entrepreneurship is not for everyone, so before you choose to leave the corporate world behind, here are a few questions to consider:
Am I an expert? If you are starting out as a consultant or professional of any kind, you should be an expert. Shannon Miller, co-owner of Twisted Pixelz, said, “You should have a unique perspective of your field that clients will happily pay money for. It’s simply not enough to have a passion for what you do. You need to have the ability to add value to what you do.”
Do I need a boss? Being your own boss sounds nice, but not everyone is cut out for it. Do you honestly have the self-discipline to wake up early each day when no one else is making you do it? Do you have the focus to tell your friends you can’t make a party or lunch because you have to call a bunch of strangers to drum up business? That’s not an easy thing to do.
Do I have a business plan? If you do not have a detailed business plan — one that includes a marketing and sales strategy, a plan to manage cash flow, a plan to raise needed investment income and an exit strategy for when you will sell or retire, you probably aren’t ready to quit your day job yet. “A business plan was crucial for our success,” Miller said. “Without a road map for where we were at, where we were going and where we wanted to be, stops along the way became roadblocks and not opportunities.”
Do I have enough cash and where can I look for funing? Starting a business costs money. Whether you need product development, market research or advertising, you’ve got to spend money to make money. No matter how careful the planning, businesses are almost always much more expensive to start and run than we think they will be. Think about your worst-case scenario — then double it. That’s probably very close to the mark. What happens if sales don’t meet expectations? What happens if you have to spend more on inventory, insurance, technology or staffing than you had anticipated?
“It’s always smart to find ways to mitigate risk,” Miller said. “Juggling business costs and your need for financial security is a tricky balancing act.” Keeping costs low is a good place to start, but small-business loans from your financial institution are another excellent way to get that initial investment. In addition to that, taking loans out [in the name of] the business is another good way to insulate family and heirs from that risk.
Can I price appropriately? Remember, you will be paying for your own benefits, your own retirement plan and your own self-employment taxes. No one will be taking income taxes out of your check, either. So you will have to set aside that money on your own. You may have to charge twice what you think it costs to survive.
Can I sell? As a business owner, you are your own chief salesperson. There is nothing in the world that is so good it doesn’t have to be sold. If sales make you uncomfortable, it may be tough for you to make a business work. You should embrace the chance to do sales.
Starting your own business can be the most scary, most exciting thing you’ve ever done. With advanced planning and mapping, you can minimize your risk and maximize your chances of success. If you can answer all these in the affirmative, you might have the motivation and qualities for entrepreneurship. Just remember, you can have all the desired traits required, but the timing may not be right. The market temperature and climate may not be there yet or you may need to sharpen and develop some additional offerings. But, it’s never too early to start networking and building the foundation for your future success.
Growth through merging
Companies look for other businesses to merge with for several reasons. These include eliminating competition, market share growth, supply chain pricing power, product and service diversification and sharpening the business focus.
When starting a company, entrepreneurs can be assured their bank accounts reflect their hard work, their diligence and ideas — and theirs alone. When one merges with another company, it’s a different game altogether.
“Signing the paperwork is where it begins — the learning, the frustration, the excitement and the growth,” said Asenath Horton, principal at City Launch PR. “Adaptation to change throughout the company must happen: responsibilities shift, a new look and feel to a brand and culture, and of course, the ability to better leverage time by focusing more on the strengths the leaders bring to the table. It is an exciting time.
“When I started looking to merge with another company, I didn’t start with this question, but with a more rudimentary need: to get the work done. Over the course of the last few years, I have needed and sought out highly qualified companies to take on bits of client work that needed more than what I could do within my company. When I realized I wanted to really grow my business, I knew merging one of these other small businesses with mine was the next natural step. So I made a proposition and they accepted. Loud Mouth Marketing is just about finished with the merging process. In the end, we will maintain the City Launch PR label, with a brand refresh coming soon. Although we are still ironing out details, we are growing and projections look great.
“Getting business mentors and my legal and accounting team involved early on was crucial,” continues Horton. “I rely on these individuals for sound advice, another set of eyeballs on financial projections and, of course, to make sure the deal happens with the best possible outcomes for every party involved. There is not one right way to merge a business.”
Inheriting a small business and the challenges that come with it
Anyone who has been through the death of a close family member knows how emotionally difficult the days and weeks that follow can be. But when the owner of a family-led business passes away, there’s also a complicated host of issues for those designated to inherit the company.
There is a deep level of trust for a person to put the future of their life’s work in your hands once they’re gone. There are important immediate decisions to be made and when everything settles you must ask yourself, “Are you ready to give it a go — or are you prepared to sell?”
Once the family business becomes your business, what you do with the opportunity in those early months will set the course of this new adventure for generations to come.
In an ideal situation, such as that of Bonnie Kier-Herrick and Kimi Kier-Noar of the Kier Corporation, you’ve had plenty of exposure to the business and the transition.
“When I was managing dad’s business as a young woman, he made sure Kimi and I knew our financial partners, accountants and other key associates,” Kier-Herrick said. “During our time with Dad, we were able to cultivate relationships with clients and employees so when a change in leadership came, it would be seamless.”
Not every passage of a family-owned business is this prepared. There are situations where it is just not possible and even then, every situation is different. No matter what the circumstances surrounding the succession, the bottom line is: The business is now yours and it is imperative to get started on the transition right away.
The Kiers suggest beginning with a discussion with your current team of experts, including financial, legal, accounting and investment individuals. During that initial meeting, you will want to have available important documents, including tax returns; bank statements; insurance (business and personal); bylaws and articles of incorporation; trusts; LLC paperwork; registrations; licenses; balance and income sheets; a current budget; the most recent business plan; and documentation for loans, lines of credit, mortgages and any other types of debt.
“If you didn’t have the chance to be a part of the business, this review can provide you with a snapshot of the current affairs the business,” Kier-Noar said. “And, if you have had the opportunity to be engaged in the management and operations, you can use this process to look at any current issues and new avenues for growth and for the future.”
After these important foundational meetings with your experts, your next priority should be your employees and ultimately any customers or clients. With any change in business leadership, employees may be concerned about how the change will affect them and their future with your company.
One of the most important things Kier-Herrick said is “Don’t make promises you can’t follow through on, always be honest and show that you are excited about the opportunities that lie ahead.”
Keeping the communication open will go a long way to show employees and clients that you are considering the next steps thoughtfully and that you will do everything you can to keep them informed. Taking the time to have discussions with essential department leads will give you a greater understanding to the business’ current market position, strengths and what they see as opportunities for improvement and growth.
It is tempting to put your own signature on things and make the business your own. Kier-Noar said, “Always keep the history, brand and family legacy of the business at the forefront. Try not to make too many changes too soon.”
If you find yourself in a position that requires you to make major changes or modifications in leadership or strategically, keep your team of experts involved. They are a crucial piece of you growing and maintaining your business.
According to the Family Business Institute (www.familybusinessinstitute.com), only about 30 percent of family businesses survive into the second generation and only 12 percent are still operational into the third generation. Research indicates that a lack of strong business planning can play a major role in this decline. A strong business plan is essential if you want to be one of the companies that survive and continue to thrive. Again, consult your team of experts and now is a great time to start creating your own succession plan.
“Some of the biggest challenges of taking over will happen within a short time,” Kier-Herrick said. “Start early assessing business, employee and clients needs. The more time and planning you dedicate now, the more legacy you will have to leave the next generation of owners.”
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