Opening a business

Hi ENA,

A few weeks ago I quit my job because I was going to change careers. I decided that was not a good idea. Instead of totally changing careers, I decided to go into business for myself in the same field I have worked in for 25 years. I am going to open a bookkeeping and tax prep business. I'm just looking to communicate with someone who has done the same. Is there anyone on here that would be willing to answer questions/ give advice on this subject?

I'm still working, and will probably be here until end of Jan or maybe even February so I will miss this tax season. I would like to have my business up and running hopefully by May 2018. I know I have to get insurance and a license and register my business name and all that stuff. I guess I'm looking for advice on what is it like to go without a paycheck, how long before I should start to get some clients, how long before I am making a decent living. I'm looking for advice on the emotional aspect of owning my own business rather than the how to do it.

Thanks

The simple answer is that it really depends on how good of a salesperson you are. Aggressive marketing correctly targeted combined with your personal ability to close the deal when a potential customer comes in will determine your success. A very generic rule of thumb is you need two years worth of funds in reserve to pay your bills and fund your business. However, I've been fully profitable in as little as 30 days.

So from the emotional standpoint, you pretty much are constantly obsessing about where your next paycheck, aka client, is coming from. Constantly. It can be fun, but it can also be exhausting.

Basically, before you open your business, have a solid aggressive plan on how you will get customers in the door.

The simple answer is that it really depends on how good of a salesperson you are. Aggressive marketing correctly targeted combined with your personal ability to close the deal when a potential customer comes in will determine your success. A very generic rule of thumb is you need two years worth of funds in reserve to pay your bills and fund your business. However, I've been fully profitable in as little as 30 days.

 

So from the emotional standpoint, you pretty much are constantly obsessing about where your next paycheck, aka client, is coming from. Constantly. It can be fun, but it can also be exhausting.

 

Basically, before you open your business, have a solid aggressive plan on how you will get customers in the door.

You had already found clients before quitting your job i imagine?

My brother is a lawyer who, about 30 years ago, left a large firm to go out on his own. Hanging a shingle and going without a paycheck is a tough pill to swallow! He says that the first time he realized his predicament was when he needed a certain law book for a particular case. Working for the firm, he'd just fill out a requisition, hand it to the secretary, and....voila....the book would appear on his desk. On his own, he had to order the book, wait for it to arrive, and pay the pretty expensive bill.

Here's what he did, which would probably apply in your situation: He sent a letter to every. single. lawyer. he knew. Every. Single. One. Plus other people. Basically saying hey, I'm going out on my own, and here's the type of law that I practice, so if you have any clients you could send my way, I'd be most appreciative. He still, to this day, remembers those lawyers who sent him clients, and over the years, he's sent many their way as well. He would never go back to working for a firm again.

It's all dependent on you, as an individual, the market you're going into, what your goals for growth are, whether you want to pretty much be a business in name and not so much in the true spirit of it, pretty much being an independent contractor who's a sole-proprietor, or if you're looking to employ people, rent space, and incur whatever other overhead costs. For instance, someone who runs a business that flips items on Ebay can technically be profitable in a week, whereas someone whose business is a lot more heavy on the overhead or who's going B&M, like a restaurant or, more related to you, maybe opening your own baby H&R block for your neighborhood, can take years to get in the black.

Now bear in mind "profitable" just means you've hit a point your earnings have exceeded your initial investment and subsequent and ongoing costs. You can find yourself in a position where you've got enough revenue coming in relative to your debt to survive with some comforts even while not yet being profitable.

I don't say it to scare you, but rather to emphasize the urgency... it's really not good that these are the kinds of questions you're asking while out an income. Don't know how much you have saved, so maybe you do have a load of time on your hands, but starting a business and depending on it for your livelihood can be as crippling as it is liberating, and, at this point, I'd be networking and workshopping my ass off.

Can you define agressive marketing ?

 

You had already found clients before quitting your job i imagine?

Nope. Aggressive marketing is really industry specific in terms of what, where, when, how much, etc. In OP's case, aggressive means saturating the local market so that wherever the customer turns, there is your company name in their face. It's not just paid marketing like online or billboards and ads, but also visibility in the community. Volunteer your time to do educational seminars for free - think churches, community programs, local business associations. Professional visibility - participate as a speaker at continuing education seminars. Then there are small business fairs. Then there is networking and word of mouth. You literally need to be everywhere. One of the first and fastest things I did was go around my competitors and simply ask for help, offer to take their worst and most hated clients off their hands or to take on those who can't afford their higher fees. Some laughed, but many actually started to refer quite a bit. Particularly those who were comfortably established and could afford to be more picky about who they take on. They were actually happy to "partner" that way where they can send the client elsewhere and still get a referral fee while the client still feels like they got taken care of. In OP's kind of business, referrals are huge. So I would emphasize getting involved heavily in the local small business community by offering educational how to seminars. You'll get clients out of that every single time you do it.

It's all dependent on you, as an individual, the market you're going into, what your goals for growth are, whether you want to pretty much be a business in name and not so much in the true spirit of it, pretty much being an independent contractor who's a sole-proprietor, or if you're looking to employ people, rent space, and incur whatever other overhead costs. For instance, someone who runs a business that flips items on Ebay can technically be profitable in a week, whereas someone whose business is a lot more heavy on the overhead or who's going B&M, like a restaurant or, more related to you, maybe opening your own baby H&R block for your neighborhood, can take years to get in the black.

 

Now bear in mind "profitable" just means you've hit a point your earnings have exceeded your initial investment and subsequent and ongoing costs. You can find yourself in a position where you've got enough revenue coming in relative to your debt to survive with some comforts even while not yet being profitable.

 

I don't say it to scare you, but rather to emphasize the urgency... it's really not good that these are the kinds of questions you're asking while out an income. Don't know how much you have saved, so maybe you do have a load of time on your hands, but starting a business and depending on it for your livelihood can be as crippling as it is liberating, and, at this point, I'd be networking and workshopping my ass off.

Hi. I've been looking for a traditional job for a while. I can't find one which is primarily the reason I am going to start a business, so that I have some sort of income as opposed to nothing.

Nope. Aggressive marketing is really industry specific in terms of what, where, when, how much, etc. In OP's case, aggressive means saturating the local market so that wherever the customer turns, there is your company name in their face. It's not just paid marketing like online or billboards and ads, but also visibility in the community. Volunteer your time to do educational seminars for free - think churches, community programs, local business associations. Professional visibility - participate as a speaker at continuing education seminars. Then there are small business fairs. Then there is networking and word of mouth. You literally need to be everywhere. One of the first and fastest things I did was go around my competitors and simply ask for help, offer to take their worst and most hated clients off their hands or to take on those who can't afford their higher fees. Some laughed, but many actually started to refer quite a bit. Particularly those who were comfortably established and could afford to be more picky about who they take on. They were actually happy to "partner" that way where they can send the client elsewhere and still get a referral fee while the client still feels like they got taken care of. In OP's kind of business, referrals are huge. So I would emphasize getting involved heavily in the local small business community by offering educational how to seminars. You'll get clients out of that every single time you do it.

That's for the ideas. I will work with the local chapter of Small Business Assoc. to offer free training of some sort.

That's for the ideas. I will work with the local chapter of Small Business Assoc. to offer free training of some sort.

Look into joining your local chamber of commerce. Might be a good way to network. Also, if they have a publication or directory, getting a listing or ad placed in it would be good.

That's for the ideas. I will work with the local chapter of Small Business Assoc. to offer free training of some sort.

You are very welcome. Go to meetup.com and join professional networking groups and start going to the meetings. Usually they will be only once or twice per month, so you want to start out now so you start getting some traction with building up some connections. Doesn't matter that you are still working right now. You need to start building relationships within those groups today. Besides, you can always start moonlighting on the side.

SBA is going to be more formal and take more time to get into that or they might only do one seminar of that type per year. So you really need to look for more venues and even be brave enough to do a solo tax seminar for example. Get a mailing list from the SBA and advertise a small seminar for a good topic for small business owners.

You really have to be very energetic and dedicated to this.

Consider gaining community exposure by working through AccountTemps or a similar agency. You can manage your hours to start devoting more of your time toward your own business as your customer load demands. Meanwhile, you're still earning a paycheck while no longer working in the environment you've hated enough to quit.

Well, this is a wide area to cover, but I'll try to give you a few pointers. The best way to start a business is to stay with what you know, and with 25 years experience, you certainly know the field. So that's good. It increases the chances your business will succeed.

You should check into whether you had to sign a non-compete when you were hired or at some point in your career. We had one that said we couldn't open a business within 25 miles and we had to wait six months or we could pay a penalty. We paid the penalty to have the business open basically the day we left the old company.

If you don't have a non-compete, I would advise you to start working on setting up your company now. Don't wait until May, (unless you already have tax jobs lined up on your own). I'm sure most of your business will be based on taxes, including filing extensions which last throughout most of the year. You want to get work immediately finding customers now.

This may sound a little unethical, but I would copy your company's customer list if there's no non-compete, and especially take your Rollodex with you and try to keep the clients you already have. If you don't want to copy the list, take a look at the type of clients your company has and go after them. If you're doing the books for a real estate company, for example, look for other real estate companies. A personal visit to business offices is usually appreciated when you're drumming up business and people are always impressed by someone who wants their business versus companies that do nothing to keep their business.

You should also be putting together a Website now and over the holidays. Most consumer hosting companies have apps that help you put together a simple website. You want to buy a domain name with the name of your company with a .com address now. Everyone who hears about you will want to check you out on the Web, so you need one. Write about you, your company, what services you provide, etc. If you have a picture of you, put it up on the site. People like to see who they're dealing with. Also, sign up for a Google+ account. Google tends to index Websites of their Google+ members pretty quickly. And a lot of other websites take information from Google, so you'll be found by customers. Also get your friends to add a link to you on their websites and Facebook pages. In fact, you may want to create pages with FB, Instagram, etc. where you can talk to people and answer some simple basic questions. These things will help you get higher placements in the index services.

Get a cell phone number now for your business and get your business cards printed up VistaPrint now. You can get great looking cards for as little as $10. You should start handing them out starting now. You need to give out about 100 cards to get a customer, so don't get discouraged if no one calls you back immediately. It takes time.

You only need a DBA to start a business. You can get one at City Hall. That will allow you to open up a bank account so you can cash checks. An independent insurance agent can get you a $1 million umbrella policy for fairly cheap money. Don't get a business policy from The Hartford. They take your money and don't give you anything back in return. If you hire part-time employees, you will need unemployment insurance. Your insurance agent should be able to get some.

We were off and running right from the start because our biggest client came with us to the new company. They actually urged us to go out on our own. More and more of the old customers found us because the old company was screwing up their accounts. That's certainly the reason you need to start marketing your company now and not wait, and especially go after clients before Tax Day, not after.

Some people say join your local Chamber of Commerce, but for me it was a big waste of time. Everyone was trying to sell services to everybody else. It seemed only the insurance agents got any business from joining. But my chamber of commerce did put together a group health insurance plan so members got lower rates for their health insurance. That would be the reason to join. Otherwise, go to a few meetings, drink the coffee, eat the muffins and talk to other self-employed people about their experiences. You can ask for advice if you need help in a certain area.

If your business doesn't take off immediately, the average company isn't profitable for 2-3 years. You should budget your money carefully and basically don't buy anything you don't need to live. Eat mac & cheese dinners until you get clients and live off your savings. Too many people start renting offices and buying office furniture before they have any clients. That's costly Do your work at the kitchen table if you don't have a desk. Use index cards to track your clients until you get some money coming in. Use a local coffee shop to meet clients, but better yet, meet them in their offices. You don't need a conference room.

You didn't say what kind of person you are, but you have to be outgoing enough to go around to commercial businesses and knock on doors to sell your services. Don't expect customers to just come to you. You've got to shake hands and talk to people. Always make sure you have a couple of business cards on you and take a flyer or a fact sheet on why you're better than everybody else to do their finances.

As for the emotional side, running your own company is very fulfilling and there is a great feeling in being the owner and president of your own business. You can schedule your time the way that serves you best. If you want to exercise in the middle of the day or work until 2 am. it's up to you. The flexibility is great. But if you're successful, you might find yourself working 7 days a week.

On the other hand, you could wind up with times when there are no jobs. If you're a sole proprietor, it can be very lonely and isolating. It helps to have a support structure of friends, relatives and a significant other. Also slow times are an opportunity to polish up your website, get new business cars printed and check out the local hometown paper to place a business-card sized ad. People like to support local small businesses. Have flyers printed up for your services and place them in retail businesses like coffee shops and dry cleaners. You also might want to write a weekly financial column for your local newspaper to make your name in the community. The advice I heard is that when starting a company, 50% of your time should be involved in marketing yourself. That's e-mail, phone call, office visits and so forth.

The biggest thing when you're fist starting out is knowing what kind of customers you're looking for and asking them for their business. Hope some of this helps.