"Kathy Moats has several decades of experience in small and independent business, from working in her dad's company as a teenager to being an instructor in emergency medical services to running a part-time consulting business with her husband. Today she is director of the Small Business Development Center at Eastern Kentucky University. Moats and her staff have all been in business for themselves. "We have seen the good, the bad and the very bad," she said.
There's a lead SBDC in every state (Kentucky's is at UK) and 1,100 service centers throughout the country. The EKU SBDC serves a 15-county area, all from the modern comfort of the newly built Business and Technology Center. The building, which was dedicated September 9, houses the SBDC, the school's business classes and faculty, a business incubator for startups, and a professional golf management program (EKU is one of 18 schools certified by the PGA).
The SBDC offers free individual counseling for people who are thinking about going into business for themselves and for existing small businesses. They also have training sessions, for a nominal fee, on topics such as advertising, financing, government contracting, human resources and taxes. "We like to be involved in economic development and help people get started right," Moats said.
So, what's the right way to get started? Moats suggests talking to an SBDC counselor and working on the planning process. It's all about the business plan. "Whether you need (seed) money or not, you need planning to be successful," she said. The most common mistake she sees people make is deciding they want to go into business for themselves but not taking time for planning. "Then they find out they need this license or that permit or they're not zoned properly." Proper planning includes market research. "It takes six months to two years to get a customer base to support the business," said Moats. Sometimes researching your potential market is just observing what's going on and seeing what your competitors are doing or not doing.
"Sit down and write that business plan," said Moats. Fancy forms aren't necessary. A business plan helps a potential business owner decide "what I need to do to get to my ultimate place in business," she said. Gathering information is one of the most important parts of the process. A typical business plan has three sections. The first is general information about your business, including products and/or services, the market, location and competition. The second section deals with financing: where the money is going to come from, a projection of income for the next two or three years, cash flow, balance sheet, break-even analysis. The third part of a business plan contains supporting documentation, such as charts and graphs, resumes of the owner(s) and managers, and industry statistics. "If the price you'll charge for services is based on industry standards, include those industry standards," Moats said. A common business plan looks at the next three years. "Every year you update it to keep three years ahead."
When is it time for independent professionals to outsource? Moats says it comes down to two things: "Can you afford to, and can you afford not to." If accounting isn't your forte, for example, you have to decide if it's more economical for you to spend the time learning it and then doing it or hiring a professional to do it for you. "The initial expense may look like a lot," said Moats, "but if you figure the time involved, you could be out selling and not stuck in the office doing bookkeeping you hate." When you do outsource, make sure both parties' expectations are clear and realistic. Moats has seen several people try to cut corners by having "Joe Blow down the street" set up their Web site. "They end up spending more money and not getting anything serviceable (rather than) if they had hired a professional in the first place," she said.
Figuring out what to charge for services is a common conundrum for independent professionals. "You have to look at your expenses and at what the competition is charging for the same type of thing," said Moats, "unless you're offering something really special, stay in a competitive range." Very few self-employed people have a 40-hour billable week, due to administrative work, research & development, marketing and all manner of things for which we can't directly bill clients. "How many hours can you work a week without killing yourself?" is a question Moats suggests for IPs. "You get burned out if you don't take the time to regroup."
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