Business For Beginners, US Edition: From Research And Business Plans To Money, Marketing, And The Law

338 Pages·2005·1.43 MB·English

by  Frances McGuckin

More than 100,000 entrepreneurs Quick Start
have used Business for Beginners to successfully
Quick Start YOUR BUSINESS
launch their business!
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and the great ideas. You just need to know what it takes to start a business
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Frances McGuckin,successful entrepreneur and bestselling author,helps you ss
answer hundreds of questions,such as:
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business opportunity? you need?
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you need? marketing budget?
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g How do you use financial g What home office tax
statements? deductions can you take?
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g How do you create a brand? g How do you cost inventory? From research and
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money, marketing
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and the law
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Frances McGuckin is an g Knowing where to start g Organizing accounting and
award-winning, best-
paperwork
selling author, business nn g Understanding legal and
management consultant, Business/ $14.95 U.S. tax requirements g Developing a winning
small business expert, Small Business $20.95 CAN
professional speaker and ee g Choosing the right business plan
columnist. She travels
across North America UPC rr business g Surviving a home office
delivering passionate,
powerful, information- ss g Researching the market g Understanding financial
packed and motivational messages to small statements
business owners. Her home-based businesses, g Building entrepreneurial
SmallBizPro.com Services and Eastleigh N skills g Marketing on a budget
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Publications, are in their twentieth year. For E MCGUCKIN
more information, visit her website at
www.smallbizpro.com.
FRANCES MCGUCKIN
Business
for
Beginners
From research and business
plans to money, marketing
and the law
Frances McGuckin
Copyright © 2005 by Frances McGuckin
Cover and internal design © 2005 by Sourcebooks,Inc.
Cover photo credits:Gettyimages and Comstock.
Sourcebooks and the colophon are registered trademarks of Sourcebooks,Inc.
All rights reserved.No part of this book may be reproduced in any form or by any elec-
tronic or mechanical means including information storage and retrieval systems—except in
the case of brief quotations embodied in critical articles or reviews—without permission in
writing from its publisher,Sourcebooks,Inc.
This publication is designed to provide accurate and authoritative information in regard to
the subject matter covered.It is sold with the understanding that the publisher is not
engaged in rendering legal,accounting,or other professional service.If legal advice or other
expert assistance is required,the services of a competent professional person should be
sought.—From a Declaration of Principles Jointly Adopted by a Committee of the
American Bar Association and a Committee of Publishers and Associations
All brand names and product names used in this book are trademarks,registered trade-
marks,or trade names of their respective holders.Sourcebooks,Inc.,is not associated with
any product or vendor in this book.
Published by Sourcebooks,Inc.
P.O.Box 4410,Naperville,Illinois 60567-4410
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Library of Congress Cataloging-in-Publication Data
McGuckin,Frances.
Business for beginners :from research and business plans to money,
marketing and the law/Frances McGuckin.
p.cm.
Originally published:Toronto:Productive Publications,c1997.
Includes index.
ISBN 1-4022-0392-6 (alk.paper)
1. New business enterprises.2. Small business--Management. I.Title.
HD62.5.M387 2005
658.1'1--dc22
2005003351
Printed and bound in the United States of America
VHG 10 9 8 7 6 5 4 3 2 1
More Praise for
Business for Beginners
“McGuckin has crafted a wise and thorough introduction to an exciting but chal-
lenging human endeavor.Some would go as far as to call her book indispensable.”
PAUL LUKE, SUCCESS MONEY, THE PROVINCE
“The most popular book in our resource library is Frances McGuckin’s Business for
Beginners.When our clients are accepted into our entrepreneurship program,they
automatically receive this book as part of their start-up supports.”
SELF-EMPLOYMENT CONNECTOR
“When searching for a well-written financial manual to include with our business
plan software,the obvious choice was Business for Beginners.Frances McGuckin has
produced a thorough,easy-to-read guide to personal finances that even beginners,
with the most basic understanding of business needs,can use effectively.”
DAMIAN CRISTIANI, PRESIDENT, GLOBAL STAR SOFTWARE
“Hallelujah! At last, someone has offered a thorough course in business start-up
that’s understandable by the neophyte. I congratulate Fran, because Business for
Beginners fills the niche that no one seemed to want to fill.”
TONY WANLESS, MONEY AND SMALL BUSINESS WRITER, THE PROVINCE
Praise from college and
entrepreneurship programs
“The book is exactly as promised—a simple step-by-step guide for starting your
own business! The easy-to-read style makes it seem like anyone is able to start a
business.Congratulations on a job well done! We feel privileged and proud we are
able to feature such a wealth of information in our Career Center.”
MARY ELLEN-KUEHL, TRINITY WESTERN UNIVERSITY
“The easy-to-read formula and back-to-basics approach is just what we have been
looking for in training material.I commend Frances on her excellent book.”
SUSANNA LACHANCE-WATSON, PROGRAM COORDINATOR
“We have found this book to be a valuable resource in business start-up...very
informative and easy to understand.Starting a business has never been the easiest
task to accomplish.Business for Beginners makes the task achievable.”
CAL PURCELL, VP GOVERNMENT RELATIONS, SPROTT-SHAW COMMUNITY COLLEGE
“The book has an excellent format....It’s very easy to read and be understood by the
various ethnic groups whose first language is not English....Please accept my con-
gratulations on your efforts to contribute to the development of entrepreneurship.”
KOFI OHENE-ASANTE, EASE PROGRAM MANAGER
“Business for Beginners is an excellent resource guide for new entrepreneurs....It is
clearly written,concise,and filled with valuable information that both my students
and I have greatly benefited from. I recommend this book to anyone wanting to
achieve success in their entrepreneurial endeavors.”
CRYSTAL FLAMAN, ENTREPRENEUR & PROGRAM FACILITATOR
“Business for Beginners is in the right place at the right time, providing practical,
easy-to-read advice and guidance for start-up companies.Well done,Frances!”
PETER THOMSON, DIRECTOR, BCIT VENTURE DEVELOPMENT CENTER
“It is one of the best,if not thebest,books on small business that I have read—and
I’ve read a lot.Most small biz books are too institutional,which creates confusion,
not clarity.I think it would be safe for me to say that there is genius in your sim-
plicity.”
MIKE PHIPPS, MARKETING MANAGER, DELTA CHAMBER OF COMMERCE
Praise from satisfied readers
“I would like to thank you for Business for Beginners....I have used it extensively and
it’s a great reference.”
“I would like to compliment you on this excellent book.I teach entrepreneurship
at U.S.public schools and at a university.Iwould like permission to use part of this
text in my classes.”
“I just purchased Business for Beginners.It is terrific! Now my future business part-
ner is reading it,taking note of everything I underlined.”
This book is dedicated to all new entrepreneurs.
The road to success is paved with speed bumps and potholes.
Some prefer a smooth ride and turn around to find an easier route,
but those people never experience the satisfaction
of realizing their dream.
There is no easy route when you are self-employed,
but the rewards of hard work, perseverance, focused goals,
and dreams will be yours if you travel this road
equipped with knowledge, drive, a true
entrepreneurial spirit—and a plan.
Follow your dreams.

Contents
ACKNOWLEDGMENTS OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOxi
PREFACE OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOxiii
• Follow your entrepreneurial dreamOOOOOOOOOOOOOOOOOOOOOOOOOOOOxiii
CHAPTER 1: Where Do You Start? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO1
•Are you ready to be an entrepreneur? OOOOOOOOOOOOOOOOOOOOOOOOOO2
•Why are you starting your own business? OOOOOOOOOOOOOOOOOOOOOOO4
•The downside of self-employment.OOOOOOOOOOOOOOOOOOOOOOOOOOOOO7
• Seven skills for success OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO12
• Do you have management skills? OOOOOOOOOOOOOOOOOOOOOOOOOOOOO18
•Why do businesses fail? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO19
CHAPTER 2: How Do You Find the Right Business? OOOOOOOOOOOOO25
•What types of businesses are available?OOOOOOOOOOOOOOOOOOOOOOOOO26
•Which business is right for you? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOO38
•Why are businesses sold? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO40
•What is a business opportunity? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOO41
• How do you assess a potential business? OOOOOOOOOOOOOOOOOOOOOO44
• Seven rules for a successful purchase OOOOOOOOOOOOOOOOOOOOOOOOO50
CHAPTER 3: What Is a Financial Statement? OOOOOOOOOOOOOOOOOOOO59
•Why do we need accounting?OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO60
• How do the figures get there? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO62
•What information is in a financial statement? OOOOOOOOOOOOOOOOOO64
•Accounting terms and definitions OOOOOOOOOOOOOOOOOOOOOOOOOOOOO66
• How to analyze a financial statement OOOOOOOOOOOOOOOOOOOOOOOOO73
•The five-minute financial test OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO79
CHAPTER 4: How Do You Research the Market? OOOOOOOOOOOOOOOO81
• Does your idea have market potential? OOOOOOOOOOOOOOOOOOOOOOOO82
•Will your business solve clients’ problems?OOOOOOOOOOOOOOOOOOOOO82
• My top ten home-based businessesOOOOOOOOOOOOOOOOOOOOOOOOOOOO83
•What do you research? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO84
•Where do you find research material? OOOOOOOOOOOOOOOOOOOOOOOOO96
CHAPTER 5: Why Do You Need a Lawyer? OOOOOOOOOOOOOOOOOOOO101
•What does a lawyer do? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO102
• How do you find the right lawyer? OOOOOOOOOOOOOOOOOOOOOOOOO106
•What is a buy-sell agreement? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOO107
•What if legal problems arise?OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO113
•What do all those legal terms mean? OOOOOOOOOOOOOOOOOOOOOOOO114
CHAPTER 6: What Start-Up Expenses Will You Incur? OOOOOOOOO123
•What type of building should you lease? OOOOOOOOOOOOOOOOOOOOO124
•What communications systems should you use? OOOOOOOOOOOOOO128
•What office and computer equipment do you need? OOOOOOOOOO132
•What office supplies do you need? OOOOOOOOOOOOOOOOOOOOOOOOOO136
•What types of insurance might you need OOOOOOOOOOOOOOOOOOOOO138
•What is risk management? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO143
• Step-by-step start-up checklistsOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO144
CHAPTER 7: What Is a Business Plan? OOOOOOOOOOOOOOOOOOOOOOOOO149
•Why do you need a business plan? OOOOOOOOOOOOOOOOOOOOOOOOOO150
•Where do you find help with business plans? OOOOOOOOOOOOOOOOO150
•What is in a business plan?OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO152
• How do you prepare projections? OOOOOOOOOOOOOOOOOOOOOOOOOOO160
•Who will lend you money? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO164
• Doing it right:Your business plan checklists OOOOOOOOOOOOOOOOOO170
CHAPTER 8: Should You Incorporate Your Business? OOOOOOOOOO173
•What is a proprietorship or partnership? OOOOOOOOOOOOOOOOOOOOO174
• Is a partnership a good idea? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO177
•What is an incorporated business? OOOOOOOOOOOOOOOOOOOOOOOOOOO179
• How do proprietorships and corporations differ? OOOOOOOOOOOOO183
• Comparing balance sheet differencesOOOOOOOOOOOOOOOOOOOOOOOOO185
• Should you incorporate your business? OOOOOOOOOOOOOOOOOOOOOO187
CHAPTER 9: What Are You Required to Do By Law? OOOOOOOOOO189
• Local government approval OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO190
• Name registration OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO192
• Incorporation and licensesOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO193
• Bank accounts OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO193
• State and local taxes OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO194
• Employer Identification Number,forms,and payroll OOOOOOOOOO194
•Workers’ compensation or state disability insurance OOOOOOOOOOO199
• Other licensing agencies OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO200
• Is business as simple as A-B-C and 1-2-3?OOOOOOOOOOOOOOOOOOOOO202
CHAPTER 10: How Do You Market Your Business? OOOOOOOOOOOO205
•What is a marketing plan? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO206
•What are the four Ps of marketing? OOOOOOOOOOOOOOOOOOOOOOOOOO207
•What is branding? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO213
• Put your plan together OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO218
• How do you promote a business? OOOOOOOOOOOOOOOOOOOOOOOOOOO219
•Which advertising media should you use? OOOOOOOOOOOOOOOOOOOO229
• How do you plan a marketing budget? OOOOOOOOOOOOOOOOOOOOOO232
CHAPTER 11: How Do You Organize Your Accounting,
Time, and Paperwork? OOOOOOOOOOOOOOOOOOOOOOOOOO237
• How do you organize your files? OOOOOOOOOOOOOOOOOOOOOOOOOOOO238
• How do you organize your time and paperwork? OOOOOOOOOOOOO240
• How do you set up your accounting? OOOOOOOOOOOOOOOOOOOOOOOO244
•What is a chart of accounts?OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO246
•What does your accountant require? OOOOOOOOOOOOOOOOOOOOOOOOO257
• How do you cost inventory? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO259
•Which business expenses are tax deductible? OOOOOOOOOOOOOOOOO261
•What is a break-even point? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO262
• How do you record vehicle expenses? OOOOOOOOOOOOOOOOOOOOOOO265
• Be nice to your accountantOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO267
CHAPTER 12: Your Home Office—Heaven or Hell? OOOOOOOOOOOO 271
• Is a home office for you? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO272
•What’s heaven about a home office? OOOOOOOOOOOOOOOOOOOOOOOOO272
•When is a home office hell?OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO275
•What home office tax deductions are available? OOOOOOOOOOOOOO281
• Can you handle the home office challenges? OOOOOOOOOOOOOOOOO283