In 10 Easy Steps

by Joelle Steele

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For many small businesses the sweet smell of success is just around the corner. But for most small, owner-operated concerns the prospects are much dimmer: more than 75% will close their doors before the end of their first year. Of those who hang in there, more than 50% will fail to make a profit during the first five years.

While the outlook is often dismal for a small business, there are a number of ways to circumvent such bleak statistics once you understand that these companies primarily fail not for lack of new business, but due to poor management.

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To avoid the risk of failure one need not have a degree in business or horticulture. What is important is that the small business owner understand the very basics necessary to insure that whatever kind of business he operates will run as efficiently as possible with a minimum of unnecessary pitfalls.


There is hardly a day goes by that an entrepreneur doesn't call me regarding a serious legal matter that is forcing him or her to close up shop. The vast majority of these legal problems stem from the entrepreneur's failure to abide by the law.

There are federal laws and state laws and frequently the state laws take precedence over the federal. Any individual who is even thinking of starting a business should make it his or her business to investigate thoroughly the laws governing that profession. Forewarned is forearmed. What kinds of insurances are mandatory and for what limits? Do you need business licenses for the city in which you are located, the cities in which you perform your services, and maybe even a county license? What about a resale license or seller's permit? Did you remember to file a fictitious name statement? Does your state require that you maintain separate checking accounts for yourself and for your business? Can you legally work out of your home office?

Failure to obtain the necessary legal documentation could cost you your business. In some instances you could lose your home and personal property. That may sound extreme, but consider some of the penalties that resulted recently for an indoor landscaper who who was sued by a client because plant replacements totalling $4,500 wholesale cost were not made. The contract stated that the plants in question were not guaranteed but the client persisted and sued. Once in court, the contractor won the case, but in the process, the judge discovered he did not have a contractor's license as required by the state. The judge restrained the contractor from conducting further business until the proper licenses were obtained. He also slapped him with a penalty.

There are other aspects of the law which should be followed to the letter, namely those involving the payment of taxes, state and federal income taxes and employment withholding tax to name a few. Failure to file and pay these taxes can result in heavy accumulated tax liabilities and expensive penalties that can easily wipe out the small, owner-operator.

The rule of thumb here: Know the law and abide by it.


Insurance is part of owning a business. It is common sense at its best, particularly if you are planning an operation which is considered a high risk. Whether you are an owner-operator, a small business with a handfull of employees, or a large corporation with 500 employees, you need insurance.

It can be expensive to buy insurance but it is more expensive to run a business without it. Another example of an entrepreneur who is now severely in debt and just getting by due, not to lack of insurance, but to being under-insured: This particular entrepreneur ran her business out of her home which she owned. In the back yard she had a small cottage from which she conducted all of her business. A fire destroyed the cottage their contents alone totalling over $30,000 in equipment and inventory. When she attempted to collect from her homeowner's insurance policy she discovered that the buildings were covered but not the contents. When she tried to collect from her household insurance she found that they only covered a $10,000 loss and that only her personal belongings in the house were scheduled and therefore none of her business loss was covered.

Take the time to learn exactly what kinds of insurance you need and in what amounts required both by law and for the good of your business. There are many kinds of insurance necessary for the average business including, but not limited to, automobile, public liability, workers compensation, disability, unemployment, personal property, health/medical, and life.

If you can't afford insurance, wait to start your business when you have adequate finances on which to base it. You will be doing yourself a big favor by waiting until you are truly ready to take your plunge into the business world.


One of the keys to success in business is knowledge. Make it a priority to attend classes and seminars where you will learn how to do those things about which you know little or nothing and where you can expand your knowledge in the more familiar areas. Put trade shows in your budget so that you can see, first hand, what is available to the members of your industry. In the more technical industries there are new products and services being made available every day and many can be of great help to your business.

Take the time to read books about everything that has to do with your business: management, sales, marketing, personnel management, and all the various tricks of your particular chosen trade. Keep up with all your industry's trade publications. They will provide you with up to the minute information about new products, services, conferences, new laws, etc.

Learn from your partners, employees, and associates. When they make suggestions listen with an open mind. Think about what you've heard and see if it will help you or your business. Keep a file of ideas and never toss one aside just because it doesn't work right now. It may be valuable to you in the future.


Create an image for yourself and live up to it. Decide what you want to be and then strive to become just that. Don't settle for second best. Set and maintain high standards for yourself, your employees, and your business. Shoot for the best in everything and never give up.

Evaluate and re-evaluate. If it ain't broke don't fix it, but do evaluate it on a regular basis. Look at your image, at yourself, your employees. Are you still maintaining the standards you set for your company? What do you need to do to get yourself back on course if you have strayed from your original ideals?

Whatever you do, do it the best way possible. Have your business cards, letterhead stationery, brochures, and other advertising materials done by a professional to reflect your professionalism. Remember that your clients and customers are a reflection of your business also and evaluate them regularly to see that they are reflecting your high standards.


Setting goals is the mark of a professional. The individual who achieves those goals is a winner.
Set short term, middle, and long range goals. Put these goals on paper and post them where you will always see them and be aware of them. State your goal in its exact terms. For example, "closing $50,000 in new sales by September 1st," as opposed to just "increasing sales." When you don't meet a specific goal, modify it to reflect your new goal.

Short term goals are your daily and weekly goals. They help you get through the mundane routine work that, if neglected, can become overwhelming and insurmountable. As an owner you should set these short term goals for yourself and help your employees to set theirs as well.

Middle range goals are those that cover a year or so of time. These goals can include your sales quotas, the completion of your new brochure, getting your ads in the yellow pages, hiring a new employee, painting the office, etc. When these goals involve other members of your company, be sure that they are constantly aware of these goals by mentioning them at meetings and posting them on bulletin boards.

Long range goals are the ones which will change the most and will most closely reflect your company's growth. Such goals should be handled in the same manner as your other goals, but they should be taken very seriously as they are indicators of where you are going as an individual and as a business. In order to achieve them you must never lose sight of them and must set smaller goals which will ultimately help you achieve the greater ones.


An owner of a small business doesn't have to play the role of the Lone Ranger. There are many professionals in your community who are there to help and advize you before you try to do everything the hard way or worse yet, the wrong way (translated: the expensive way). So, before you make a complete idiot of yourself, (or worse yet, a pauper) take the time to find the right advisors — lawyers, bankers, management consultants, insurance agents, accountants, etc., who can help you make the right decisions.

The time to hire these professionals is before you need them. Shop around and find the person or persons with whom you can establish a sound professional rapport. Don't wait until there's an emergency to find the right person. You won't have the luxury of time in such an event and may hire the wrong person.

Be prepared to pay the price of good advice. It isn't cheap and the hourly rates can appear to be exorbitant at times but it is money well spent. It is an investment that can usually save you much more in the long run where it really counts. To avoid wasting your money and your advisor's time, be prepared in advance with questions you want to ask about information you require and have all the necessary paperwork and documents in hand when you meet.

Here's an example of how easy it is to accumulate a large bill with an advisor when you are not prepared. I met with an entrepreneur who told me again and again how strapped she was for money and how concerned she was that the consultation not be too long. I advised her to write down all her questions and concerns and to have on hand all the written documentation that she wanted me to review.

Two weeks later she said she was ready and wanted me to meet with her at her office. I went there at the appointed time. She was not ready. My fees, like most advisor's, start at the appointed time regardless of whether the client is ready. This client answered the phone, had people in and out of her office several times during our meeting, left to go who knows where for five and ten minutes at a time. Helping her was difficult because not only was her train of thought being constantly disrupted, but so was mine. When I left, she had incurred a four hour consultation that could easily have been handled within about 45 minutes (over the phone no less) had she been organized — the topic of our next step.


Organization is the key to efficiency. Unfortunately most small business owners neglect to be organized. They get wrapped up in "being your own boss" and reveling in not having to punch a time clock. They do things when the mood strikes them because there's nobody there to answer to. But, these individuals who march to their own drummer day in and day out risk losing control of their business.

Organizing your time and that of those who work for you, can put an immediate end to such phrases as "I can't believe it's already noon and I'm still not done with –––" (fill in the blank with your favorite unfinished task). If you find yourself repeating that phrase it's time for you to start planning your days and weeks and sticking to those plans.

Every day of the week you have specific duties and tasks to accomplish. Do them at the time of day and on the actual day when they can be most expediently accomplished. For example, if you have business "downtown" and you have a client in that area that needs to be checked in on, schedule that stop in your daily calendar. Think about who and what is "downtown" and accomplish those tasks that must be carried out in that area.

Plan ahead and anticipate interruptions. Schedule weekly meetings with employees. Publish an agenda for the meeting so everyone knows what will be covered. Stick to those topics at hand and get them handled right then and there so that you can eliminate interruptions on the same subject while you are trying to do something else.

Stick to business. Don't try to mix your personal routine with your business routine. I know, there are always exceptions, but as a rule of thumb, try to keep the two separate. If you have a spouse and children, get the spouse off to work and the kids off to school or day care before you try to attack your business for the day. If that means going to bed earlier and getting up earlier then so be it. Getting organized means being able to maintain your priorities.

If you have a system or procedure that is taking you more time to do than you would like, evaluate the procedure and see if there is a more organized and efficient method for accomplishing the same end.

It's not hard to be organized. It just takes time. You might think that you don't have any more time to sit down and plan your activities, but once you get in the habit of setting aside some time each day to organize your day and your week, etc., you will find that you save time in the long run.


It often appears that only the "big guys" are active in trade associations. This is not so, but there are a lot more "litle guys" than "big guys" and too many of these "little guys" make excuses for not participating in their industry by saying that they don't have time because they don't have anyone working for them who can fill in for them while they go to meetings and join committees.

Industry participation is important. It is one of the ways in which small businesses become big businesses through mergers and acquisitions and through joint ventures. Going to industry functions will allow you to meet your fellow tradespeople and form lasting professional relationships. Through this kind of participation you will learn how other companies like your own deal with the same problems you encounter every day. You will learn how the "big" guys got big.

In addition to your in-person participation, there are the financial aspects of association dues which fund the speakers who appear at your local meetings, your association newsletter, industry research projects, etc. The dues are minimal in most cases and they contribute to the betterment of your industry of which you are an integral part. And you are a part of it — no matter how small your business is — whether or not you participate in its activities, so why not make it official?


There's a saying, "if you don't advertise it's like ing in the dark; you'll know what you're doing but nobody else will." If you want your business to go anywhere you've simply got to let people know what you're doing.

To really spread the word about your company you need more than just an ad in the yellow pages. It takes you actively networking in the community, meeting new people, finding new sources of business. Join formal networking groups, join trade associations for industries in which you would like to promote your services, join community social and volunteer groups, join the chamber of commerce, or join any special interest group such as a ski club or a photography club — and participate in them to the fullest. You'll enjoy yourself, help others, and meet people who will become part of your circle of business friends and associates.

When you're out there meeting people you will get a chance to establish credibility with them as an expert in your field. When they need your kind of services, or if they know someone else who does, they will think of you. This is a fun way to meet people and expand your business at the same time.

Target your market so that you know exactly who you want for your clientele and then set about marketing your services to them. You can try direct mail or you can join an organization that represents that group. For example, if you want to cover a certain geographical area you should find out what community organizations are in that area such as Kiwanis, Rotary, Quota, the Red Cross, the SPCA, Garden Clubs, etc. If you're looking to spread the word to a specific type of clientele such as hotels then join a hotel trade association or rent a mailing list of hotels in your area or of a certain size, etc., and do some direct mail. (Try to avoid sending flyers because they make you look like a tacky, fly-by-night outfit.)

The important thing is that you reach as many people as you possibly can. Another advertising saying is, "Shhh..... don't tell anybody — that's right, if you don't tell anybody, no one will know." If you want your business to grow you have simply got to tell everybody.


No, I'm not joking. Being an owner-operator or owning a small business with employees is no laughing matter. Owning a business of any size or description can be very stressful. It's a big responsibility and if you succumb to workaholicism you will lose sight of your personal life and drive your employees crazy, not to mention your friends and family members.

If you find yourself working twelve hour days, every day, take a day off. Take a week off if you can do it. Think of your health. If you work yourself into a frenzy you will be headed for a physical breakdown and when that happens, and it always does when you overdo anything, your business will suffer.

Keep yourself healthy by eating right, getting enough exercise, working hard, and getting enough rest. Moderation in all things will keep you from getting burned out and will help you maintain the positive attitude necessary to close sales and motivate your employees.


It takes more than just a good idea to make a business work. Deciding to own your own business can be worse than opening a can of worms, it can be more like living in a can of worms. But with some careful planning and some common sense, owning your own business can be an enjoyable, satisfying, and profitable venture.

This article last updated: 02/25/2002.