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What You Need To Know Before Starting a Business
by Karen West

Women-owned businesses are growing at a rate nearly twice the U.S. average for all firms, but for many women, starting a business is akin to leaping off a cliff without a parachute. The key to a successful landing is to do your homework before taking that leap. The reward is an empowering lifestyle – being your own boss, having more control over your time, and transforming your dreams from whims to realities.

One in 11 women nationwide own their own businesses today, according to the Center for Women’s Business Research in Washington, D.C. About 41 percent of all privately held U.S. companies – 46 percent in Washington state – are owned 50 percent or more by women.

While a growing number of women are starting their own companies, experts say many of those ventures fail because of inadequate planning, and a lack of marketing, focus and funding. “The biggest reason a business fails is lack of information,’’ says Wilma Goldstein, director of the office of Women’s Business Ownership for the Small Business Administration in Washington, D.C.

To successfully make the transition from employee to entrepreneur, you need to be a risk-taker, says Melody Biringer, who recently started her fourth successful business, Startupjunkie.com. She says many women shy away from starting their own businesses because they are afraid to fail. “I’ve talked to so many people who sit on a business plan for eight years,’’ she says. “Women seem reluctant to jump off and do it.’’ Biringer got her entrepreneurial start at age 18 by merchandising her family’s berries into more than 50 gourmet food products. In 2000, she launched Crave Party, which has spread to 15 cities. She also brought Ladies Who Launch (a business that assists women entrepreneurs) to Seattle.

Here are some tips from Biringer and other business owners and experts on what you need to know before starting your own company:

Don’t quit your day job yet. It’s better to plan your business while you still have a steady income. Seattle Woman publisher Marianne Scholl, who launched her magazine with business partner Karen Reed-Matthee in October 2004, suggests attending networking events to find out what other women are doing and to see how people react to your business idea. Scholl got her networking start at a Women Business Owners of Seattle event about six months before launching the magazine.

Develop a business plan. Whether it’s a one-paragraph summary of what you are going to do or a 20-page proposal, writing a business plan is a must, says Goldstein of the SBA. “Be clear, concise and brief.’’ There’s no one template to follow when creating your business plan, but it should not exceed 20 pages. Scholl also suggests: “Know how to run Excel and plug in all kinds of scenarios. If the business takes twice as long to get going as you thought, what happens to your bottom line? Can you stay in business if your forecasts are off by 25 percent? 50 percent? Will there be ways to cut costs?"

Test the market. Biringer says you need to come up with a clear focus of what the business is going to be, then test it with friends, family and potential customers. “I call together 10 people in my life and run the idea past them,’’ she says. It’s important to understand the market and what kind of competition you’ll have, says Scholl. She also suggests finding a mentor or talking with others who have experience starting or running a similar business. If it isn’t possible to do that locally, find someone in another location. You can learn from their mistakes and successes.

Obtain funding. Decide whether you will need start-up money and if so, where will you get it. “Money is the mother’s milk of any start-up,’’ Goldstein says, noting that access to capital often determines whether a fledgling enterprise succeeds or dies. Estimate what you will need to launch and sustain your business equipment and supplies, inventory, office or manufacturing space, franchise fee, etc. Then, consider what portion you can reasonably provide from your own resources (savings, contributions from family or friends). Be careful. “You don’t want to over- or underestimate your needs, nor do you want to endanger your family’s financial security and relationships.” Scholl says to keep expenses as absolutely low as possible. “It’s really true what they say about start-ups: You’ll probably end up doing more work than you imagined. Are you prepared for that?’’

Location, location, location. Decide the location of your business. Will it be home-based? If it’s a retail outlet, will it be in a desirable area with easy access? And don’t forget to develop marketing and advertising strategies to let customers and clients know how to find you.

Business structure. Determine the legal structure of your business: sole proprietorship, limited liability company or LLC (a company that has limited liability for business debts), partnership or other form. Make sure you have the proper licenses from the city and state. If you have employees, you’ll need a federal employer ID number and will need to withhold income taxes and pay payroll taxes. If you have partners, you’ll need an agreement with them. Other factors to consider are insurance coverage and a name for the business. Washington state’s Web site provides a comprehensive resource for starting a business: www.access.wa.gov.

Karen West is a writer who lives on Bainbridge Island. She is a former business reporter for the Seattle Post-Intelligencer.

©2007 Caliope Publishing Company