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How to be your own boss

/ Source: Forbes

Building and running a small business is a great dream. It allows you to use your talents, gives you a shot at financial independence and frees you from the yoke of bosses whose IQ is smaller than their shoe size.

But without detailed planning, flexibility, boundless energy, accurate financial records and enough cash to cover personal expenses for about three years, the dream is almost certain to become a financial disaster.

In short, you've got to outdo Captain Ahab for monomania. But total devotion to the business shouldn't slide into tunnel vision.

"I often see people commit to an idea for a business much too impulsively," said Jeffrey R. Cornwall, director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn., and author of “From the Ground Up.” "Committing to a business is like falling in love — you get all excited and develop a blind romance for the idea. Think the business plan through with discipline and objectivity. If it's not right, walk away and go on to the next — some people just can't let go of a bad idea."

A solid business plan is the key to a successful launch, because it serves as a road map for the future. The plan forces you to define your business and understand the competition. If you can't define your niche and don't understand who you're up against, polish the nameplate on your cubicle and practice your toe wiggling, because you'll get crushed in the entrepreneurial world.

A good business plan should include:

  • A detailed description of your business
  • A marketing plan
  • A financial plan
  • Management

Remember: A clever name won't make you competitive with Starbucks. You don't want to try to wrap your business around a product or service that's sold by the truckload at muscular discounters such as Home Depot, PetSmart or Staples. Some dream of specialized bookstores, but even with enough ambience to gag a horse, it's hard to knock heads with, Borders or Barnes & Noble.

You must clearly define your niche to survive. If there is no demand for your business, or if the sector is better served by others, you're cooked.

After defining the basics of your business, it's time to think about daily operation and personnel. Hiring will lead to training, taxes and insurance — and don't forget the care and feeding needed to retain good employees.

The business plan is also the key to securing financing. Without it, no bank or sane relative will lend you a cent.

A good business plan isn't carved in granite. It should be used to track the progress of your business and underscore the need to make mid-course corrections as needed. Think of it as a planning tool.

The business plan should be read and critiqued by those who will have a hand in launching the business: your banker, insurance agent, financial adviser, certified public accountant and lawyer. They have no emotional stake in the business and should be objective because, unlike your mother or your dog, they don't love you simply for who you are.

Plan to meet quarterly with your informal board. The group will have no legal clout, but the shrewd entrepreneur will listen carefully to their comments and make changes as needed. Be prepared to pay for their time--the promise of future billings from your business won't cut it.

It's also important to determine the legal status of your business — a sole proprietorship, partnership or limited liability corporation. Each offers advantages, but a corporation will provide greater legal protection than a sole proprietorship. The meter is always running when talking to a lawyer, however, and drafting articles of incorporation, while routine, isn't cheap.

There's usually an unexpected twist in launching a new business. It could be a regulatory wrinkle, a personnel issue or an illness. There's no way to anticipate the X Factor or to prepare for it. Just realize something unexpected is bound to bite you at the worst time.

Small businesses, or those with fewer than 500 employees, represent more than 99 percent of all employers and employ about half of all private sector workers, the U.S. Small Business Administration reported.

The lure of running a small business is clear: You get to be your own boss, and you can use your talents to do things the way you think they should be done. The business will be your creation — and building something from the ground up is a great feeling.

But don't ignore the smallest detail: If you think running a small business will free you from mundane tasks and paperwork, you will fail.