Posts Tagged ‘starting a business’
Business Incorporations and Start-Ups Surge…and Boost Hiring
The difficult economy has certainly changed the way Americans view jobs. Those who have them are hanging onto them dearly and those who don’t are turning away from traditional corporate jobs in favor of starting their own businesses. New start-ups and business incorporations are reported at a 15 year high which is boosting hiring in some studies, but the results may depend on what group you talk to.
Here are some fast facts:
- Last year, 565,000 start-ups were created each month
- Business incorporation numbers have risen steadily since 2006
- Immigrants, particularly Latinos, are twice as likely to start a business as someone who is American born
- High School dropouts are among the most likely to start their own business
- Construction businesses consistently rank at or near the top for new start-ups
So what does this mean? “It certainly appears that the recession and its resulting high unemployment are driving the majority of this trend” said Scott Weddle, Manager of an online business filing firm. “Our customers are largely driven out of necessity. They simply can’t find employment in many cases.” Businesses started out of desperation don’t typically drive hiring growth. Instead, these new business owners tend to stay self-employed and hire few, if any, employees.
Small business as a whole, however, is continuing to improve. This sector of the economy lost around 2.7 million jobs since last March, but has added around 100,000 in each of the last three months. While I wouldn’t call that a recovery, I would be willing to call it a start.
Business Incorporation 101: Estimating Cost and Profit
For anyone considering starting or buying a business, incorporation (or forming an LLC) can keep you safe from many liabilities, however, underestimating costs or overestimating profits are much more likely to cause your business to fail. This means it is vital for you to take as much time as is needed to consider what must be included in your costs and to carefully (and honestly) review what will be your profit.
There is ample evidence that as much as 90% of businesses fail within the first five years. This number is staggering. It is scary. It may even cause you to question starting a business, and it should. The number one reason for a new business to fail has nothing to do with how good an idea it is or how talented the individual is who may be starting it. The number one reason is underestimating costs and not being prepared for how long it will be for the company to make money. We’ve all heard about the latest .com millionaire who launched his business and immediately had thousands of ‘hits’ and Time Magazine is calling him the next big thing, but the truth is that for every story like this there are thousands or maybe millions of businesses that struggle along for years before they begin to realize success.
Fortunately, there are tools available to help you with this task. Here is a list of some of the more commonly helpful calculators that we have found:
Business Start Up Cost Calculator: http://www.businessknowhow.com/startup/startup.htm
Cash Flow Calculator: http://www.bplans.com/business_calculators/cash_flow_calculator.cfm
Break Even Calculator: http://www.entrepreneur.com/calculators/breakeven.html
Earlier, I said that as much as 90% of new businesses fail within the first 5 years. If you are looking into starting your own business, there is a strong clue in that statement. You should be prepared to the odds, meaning that if you are prepared to weather the storm of the first 5 years, you chance of success goes way up. The largest majority of these failures happen within the first 3 years, so it might stand to reason that if you can’t survive without a paycheck for three years or if your funding source isn’t strong enough to last that long, you may want to consider another option. Too many businesses are started with the owner looking for profitability in months rather than years and the odds are stacked heavily against them.
Also, don’t forget…if you get through this part of the planning, don’t forget that this is only step one. Choosing a business incorporation strategy is step two and shouldn’t be overlooked.