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Business Start-up Frequently Asked Questions Part3
Marketing | Small Business Statistics
Location/Supplies:
- Are some locations better than others?
- Is it better to lease or buy the store (plant) and equipment?
- Can I operate a business from my home?
- How do I find out about suppliers/manufacturers/ distributors?
- Where can I go for help?
Employees:
- How can I find qualified employees?
- How do I set wage levels?
- What other financial responsibilities do I have for employees?
- What kind of security measures must I take?
- Should I hire family members to work for me?
Technology:
Marketing:
- What does marketing involve?
- What is my market potential?
- What about advertising?
- How do I set price levels?
Are some locations better than others?
Time and effort devoted to selecting where to locate your business can mean the difference between success and failure. The kind of business you are in, the potential market, availability of employees and the number of competitive establishments all determine where you should put your business.
Is it better to lease or buy the store (plant) and equipment?
This is a good question and needs to be considered carefully. Leasing does not tie up your cash; a disadvantage is that the item then has no resale or salvage value since you do not own it. Careful weighing of alternatives and a cost analysis will help you make the best decision.
Can I operate a business from my home?
Yes. In fact, experts estimate that as many as 20 percent of new small business enterprises are operated out of the owner's home. Local SBA offices and state chambers of commerce can provide pertinent information on how to manage a home-based business.
How do I find out about suppliers/manufacturers/ distributors?
Most suppliers want new accounts. A prime source for finding suppliers is the Thomas Register, which lists manufacturers by categories and geographic area. Most libraries have a directory of manufacturers listed by state. If you know the product line manufacturers, a letter or phone call to the companies will get you the local distributor-wholesaler. In some lines, trade shows are good sources of getting suppliers and looking over competing products.
Where can I go for help?
The U.S. Small Business Administration has an office in nearly every major city in the country. SBA's operates the toll-free "Answer Desk" at 1-800-8-ASK-SBA (1- 800-827-5722), to give callers direct referral to appropriate sources of information. Sponsored by SBA are a variety of counseling, training and information services including the Service Corps of Retired Executives (SCORE), Business Information Centers (BICs), Small Business Development Centers (SBDCs) and Women's Business Centers (WBCs).
In addition, procurement center representatives can be found at each major military installation. More than 2,700 chambers of commerce are located throughout the country to provide additional assistance.
How can I find qualified employees?
Choose your employees carefully. Decide before hand what you want them to do. Be specific. You may need flexible employees who can shift from task to task as required. Interview and screen applicants with care. Remember, good questions lead to good answers-the more you learn about each applicant's experience and skills, the better prepared you are to make your decision.
Wage levels are calculated using position importance and skill required as criteria. Consult your trade association and accountant to learn the most current practices, cost ratios and profit margins in your business field. While there is a minimum wage set by federal law for most jobs, the actual wage paid is entirely between you and your prospective employee.
What other financial responsibilities do I have for employees?
You must withhold federal and state income taxes, contribute to unemployment and workers compensation systems, and match Social Security holdings. You may also wish to inquire about key employee life or disability insurance. Because laws on these matters vary from state to state, you probably should consult local information sources and/or SBA offices.
What kind of security measures must I take?
Crimes ranging from armed robbery to embezzlement can destroy even the best businesses. You should install a good physical security system. Just as important, you must establish policies and safeguards to ensure awareness and honesty among your personnel. Because computer systems can be used to defraud as well as keep records, you should check into a computer security program. Consider taking seminars on how to spot and deter shoplifting and how to handle cash and merchandise; it is time and money well spent. Finally, careful screening when hiring can be your best ally against crime.
Should I hire family members to work for me?
Frequently, family members of the owner "help out in the business." For some small business owners it is a rewarding experience; for others it can cause irreparable damage. Carefully consider their loyalty and respect for you as the owner-manager. Can you keep your family and business decisions separate?
Do I need a computer?
Small business today faces growing inventory requirements, increased customer expectations, rising costs and intense competition. Computers can provide information that leads to better returns on investment. At the same time, they help you cope with the many other pressures of your business. Computers are not cure-alls, however, and considerable care should be given to:
- deciding if you need one, and
- selecting the best system (or personal computer) for your business.
What about telecommunications?
All small businesses share some common functions: sales, purchasing, financing, operations and administration. Depending on your individual business, telecommunications can support your objectives in any or all of these areas. In its basic form, the telephone (the terminal) and the network (local or long distance) make up the basic components of telecommunications. It is an effective tool that can easily change with seasonality and growth. How you use telecommunications can affect how efficiently and profitably your company grows in the future.
What does marketing involve?
Marketing is your most important organizing tool. There are four basic aspects of marketing, often called the "four P's":
- Product: the item or service you sell
- Price: the amount you charge for your product or service
- Promote: the ways you inform your market as to who, what and where you are
- Provide: the channels you use to take the product to the customer.
As you can see, marketing encompasses much more than just advertising or selling. For example, a major part of marketing involves researching your customers: What do they want? What can they afford? What do they think? Your understanding and application of the answers to such questions play a major role in the success or failure of your business.
What is my market potential?
The principles of determining market share and market potential are the same for all geographic areas. First determine a customer profile (who) and the geographic size of the market (how many). This is the general market potential. Knowing the number and strength of your competitors (and then estimating the share of business you will take from them) will give you the market potential specific to your enterprise.
What about advertising?
Your business growth will be influenced by how well you plan and execute an advertising program. Because it is one of the main creators of your business' image, it must be well planned and well budgeted. Contact local advertising agencies or a local SBA office to assist you in devising an effective advertising strategy.
How do I set price levels?
The price of a service or item is based on three basic production costs: direct materials, labor and overhead. After these costs are determined, a price is then selected that will be both profitable and competitive. Because pricing can be a complicated process, you may wish to seek help from an expert.
