HOW TO START A BUSINESS FOR FREE The Ultimate Guide to Building Something Profitable from Nothing SILVER LAKE PUBLISHING LOS ANGELES, CA ABERDEEN, WA How to Start a Business for Free The Ultimate Guide to Building Something Profitable from Nothing First edition Copyright © 2003 by David Caplan Silver Lake Publishing 111 East Wishkah Street Aberdeen, WA 98520 For a list of other publications or for more information, please call 1.360.532.5758 Visit our Web site at www.silverlakepub.com All rights reserved No part of this book may be reproduced, stored in a retrieval system or transcribed in any form or by any means (electronic, mechanical, photocopy, recording or otherwise) without the prior written permission of the copyright owner Library of Congress Catalogue Number: pending How to Start a Business for Free The Ultimate Guide to Building Something from Nothing Includes index Pages: 308 ISBN: 1-56343-856-9 TABLE OF CONTENTS INTRODUCTION: Getting Started CHAPTER 1: CHOOSING A BUSINESS CHAPTER 2: MEETING THE CUSTOMERS…AND 11 THE COMPETITION 47 CHAPTER 3: THE NUTS AND BOLTS OF BUSINESS OWNERSHIP 67 CHAPTER 4: GETTING MONEY FOR FREE 99 CHAPTER 5: MOVING FROM THE PLAN TO OPERATIONS 137 CHAPTER 6: OFFICE SPACE, EQUIPMENT & OTHER SUPPLIES 171 CHAPTER 7: BUILDING A WEB SITE FOR YOUR BUSINESS 207 CONCLUSION: The Free Mentality 251 APPENDICES: APPENDIX A: WHERE TO GET A BUSINESS LICENSE 253 APPENDIX B: LIST OF PATENT & TRADEMARK RESOURCES 257 APPENDIX C: LIST OF RESOURCES 261 APPENDIX D: LIST OF BUSINESS PLAN TOOLS 277 APPENDIX E: LIST OF SBDCS 281 APPENDIX F: LIST OF WOMEN’S MENTORING ORGANIZATIONS 285 APPENDIX G: LIST OF BUSINESS INCUBATORS 293 INDEX 303 Introduction: Getting Started INTRODUCTION: GETTING STARTED There are many reasons to go into business for yourself Maybe you want to expand your earning potential or you want flexible work hours and the best parking spot Or, maybe you’re just tired of working for someone else and commuting two hours a day Some people want to start their own business because their current employer is downsizing and it seems easier than pounding the pavement looking for a new job Others want to start a business to gain the freedom they’ve always dreamed of because being “self-employed” affords you the freedom to control your own destiny Let’s face it, everyone—from newspapers, magazines and TV to radio, Learning Annex seminars and the Internet—is touting why you should go into business for yourself You’ve probably seen the signs on freeway onramps that entice you to think about self-employment Have you ever wanted to be your own boss? Set your own hours? Work from home? Want the freedom to work when you want? Are you thinking about starting your own company but don’t know where to start? The list goes on and on Being in business for yourself, however, isn’t always what it’s cracked up to be Being in business for yourself often means working long hours— starting early in the morning and working late into the evening most days and even putting time in on weekends Being in business for yourself means How to Start a Business for Free postponing that vacation to Jamaica because there is no one else to run the business when you’re not there And, the little things, like movies, golf, hiking or catching an occasional ball game, are no longer recreation when you own your own business They become luxuries Whatever the reason, starting your own business requires an independent spirit and a strong sense of self-motivation to stand out from others in your marketplace And there are plenty of other entrepreneurs in the United States willing to take that risk and prove to the world that they have those qualities Why not? According to the U.S Department of Labor, firms with fewer than 500 employees employ 55 percent of the private, non-farm work force, contribute 48 percent of all sales in the country and are responsible for 51 percent of the private gross domestic product In addition, small business-dominated industries produced an estimated 68 percent of the million new jobs created during 2000, according to the U.S Departments of Labor and Commerce If that’s not enough motivation to get your business plan up and running, according to the Small Business Administration, small businesses: • represent more than 99 percent of all employers; • employ 52 percent of the private workers; • employ 61 percent of the private workers on public assistance; • employ 38 percent of the private workers in high-tech occupations; • provide virtually all of the net new jobs; • provide 51 percent of the private sector output; • represent 96 percent of all exporters of goods; • receive 35 percent of federal contract dollars; and • are home-based 53 percent of the time and are franchises percent of the time This means if you decide to start your own business, you will not be alone…not by a long shot! Moreover, as you start to plan what kind of business you will start and how you will finance it, it’s a good idea to find Introduction: Getting Started other entrepreneurs in your community to help you keep your head above water Other entrepreneurs can help you avoid some of the common pitfalls tied to owning your own business They’ve been down the same road you are about to take, so find them and ask as many questions as you can We’ll go into greater detail on mentoring resources in a later chapter, but it’s never too early to ask for direction As you begin to talk to others who have made the small-business leap and look at other businesses that are operating in the economy around you, you’ll see that the opportunities for entrepreneurship are abound, waiting for the taking You can turn anything you love into a money-making opportunity, and this book will show you how Hundreds of businesses can be started for little or no capital at all For example, a housesitting or tax-preparation business Or maybe you’re more into the doggrooming or diversity training business Take the founders of Nantucket Nectars for example, otherwise known as the “Juice Guys” who took a sloppy boat business and turned it into a multimillion-dollar company Tom Scott and Tom First didn’t want the corporate job with the corporate car or the morning commute They had flunked accounting, the only business-related course under their belts, but knew when they graduated from Brown University in 1989 that they wanted to live on Nantucket year-round and make something work—on their own Scott had already worked in the harbor the previous year as a taxi driver He didn’t want to work for someone else, so he started Allserve, a floating convenience store, on a 19-foot Boston Whaler that drove around the harbor servicing the Nantucket boating community Scott sold muffins, delivered newspapers, disposed of trash and even did some people’s laundry—and he loved it because he was working for himself, outside, on a boat and making money The following summer, First joined Scott and the two expanded the business to include boat towing, repairs and rescue Getting through the cold and slow winter, however, was rough One night, First made a juice blend for dinner and within five minutes, the two Toms were joking with one another, “Let’s sell this off the boat next summer We’ll call it Nantucket Nectars.” How to Start a Business for Free The rest is history But it’s not history without a few low points and some major hits In the start-up phase, the two Toms did everything they could to stay afloat They sold their juice concoctions off their Whaler and eventually out of a little storefront on the Straight Wharf of Nantucket (which is still there) They never lost sight of their goal to survive on Nantucket year-round and maintain a business And, knowing that their floating convenience store was too seasonal to work in the long-run, however, the Toms settled on making the juice company work Without fancy funding, the two Toms resorted to making money elsewhere until the business got going They performed oddball jobs here and there, including shucking scallops, painting houses, bartending and pumping waste They also focused on the quality of their juice product (innovative bottle design and flavors) The two Toms paid bills slowly, collected receivables as fast as possible and paid themselves nothing At one point, Tom Scott lived in his car or in a group house with no heat to make ends meet Eventually though, the business grew and an angel investor (coincidentally a client they had serviced in the past) kicked in some money to help move the company along In 1999, Nantucket Nectars reported $60 million in sales One thing, however, did have to change with such rapid growth: the company grew too large for Nantucket and moved to Cambridge, Massachusetts But by then, the Juice Guys had made their mark in the juice world They could sail over to Nantucket in their own boat whenever they needed some island healing.1 The lessons from the two Toms are clear: Success in business doesn’t necessarily start with an expensive MBA or a windfall of venture capital It starts by asking yourself the most basic of questions: What you want in life and where and how you want to live? Focus on those essentials and other things will likely follow And it’s always key to make friends, even in bars and harbors, whom you can call when you need some cash Ocean Spray Cranberries, Inc bought a large piece of the company in early 1998— which was later sold to Cadberry Schwepps—but Scott and First retain a large piece of the company’s ownership and remain active in its management Introduction: Getting Started Never underestimate your own financial power Between boot-strapping your business and asking Aunt Betty for a loan to start your company, digging deep into your own pockets first is a step toward getting what you need Raising capital outside your close network of friends and neighbors is a hard thing to these days Capital is scarce The late 1990s had people wrongly believe that venture capital is easy to snatch up—for even the rookie entrepreneur in need of start-up cash (to also finance a fancy car and lavish parties.) That may have been the case back during the heady dot.com days, but those days are over and the current venture capital market is closer to how it usually works It takes a lot more of a sales pitch to get noticed In reality, the vast majority of successful new businesses are self financed Among the honored businesses that made Inc magazine’s 500 list over the past 20 years are Microsoft, Domino’s Pizza, Oracle, Jenny Craig, Pete’s Brewing, Jamba Juice, The Sharper Image, Princeton Review and Patagonia When those companies made the list, all were privately owned and at least five years old Few, if any, started with institutional capital And, in 2001 only percent of the Inc 500 companies received venture-capital funds at start-up.2 This book answers the questions you may have about starting and running your own business, and attempts to resolve those fuzzy lines between writing a business plan and actually putting the plan into action Starting and running your own business takes hard work You need the wisdom, discipline, courage and persistence to know how to best protect your investment whether you’re running a carpentry business or doing consulting work as a motivational speaker This book explains in simple terms the types of business structures that exist, and provides a working knowledge of how to develop the financing, marketing, product development and operations of your own business Whether your idea for a business is big or small, you’ll want to “Brief Profiles of 2001 Inc 500 Companies”; Inc magazine, 11/01 ... Business for Free ensure that they are able to retire comfortably As a financial planner, you can work with individuals, families and small businesses to analyze, set and achieve financial goals If... florists and car/limo rentals to bridal shops, venues, nail/hair salons and party rentals suppliers Start by informing potential referrals about your business and ask them to send you ma33 How to Start. .. money to hire a larger agency with its attendant cost 25 How to Start a Business for Free As a communications consultant, you can offer counseling or coaching for the senior management of an organization