jghhghghg
fhfhhhfh
“Becoming our own boss means more than just sacrifice. It means having clarity around who we are, what we want, and where we are going—and then actually creating it.” ― Michelle Jacobik
gjngjjgjjg
hjjhjhh
Self Employment
Since the consolidation of thirteen colonies into the United States of America, one of the components of the American Dream has been business ownership. Starting, owning, and managing a business has been considered a sign of success and accomplishment.
In the last couple of months, I’ve had several requests to create a blog and podcast about the rewards and challenges of startups. I started, owned, and managed a solo dental practice for over thirty-five years and experienced firsthand most of the rewards and problems that are part and parcel of self-employment. I also had a chance to consult recently with a friend about a startup, and immediately realized the business was destined for an uphill battle to survive. The business hadn’t opened yet, and my assessment gave it less than a twenty percent chance of survival.
How could I quickly surmise that this new business (which I’ll name Business “A“) was destined for problems, and what was my mental checklist for this startup? Let’s find out!
Starting my own business was one of the scariest and most exciting times of my life. I was in a comfortable position as an associate dentist, making money with very little stress and no management responsibilities. Did I want to trade the safety, salary, and security of my associate position for the uncertainty of a new practice startup? After three weeks of very little sleep, I decided to make the jump to a new practice startup. Once the decision was made I experienced an unexpected calmness. I shifted focus from decision-making to the steps necessary to open my practice. And, there were many, many steps necessary!
Instead of creating a laundry list that I needed for my startup, I’ll contrast and compare this new business (Business “A”) to the business I created, explaining the relevance of each bullet point. It will also be important to note that when I started my practice, I already had two years of business experience as an associate in an existing dental practice. The potential owner for Business A has no previous experience as a business owner and all previous work experience was as an employee of a different business in a field unrelated to Business “A”.
In general order of importance, they are:
- Good idea, concept, or skill– the starting point for any new business is an idea or concept. Is the business idea new, or will the business mirror an existing business? Does the potential owner have a unique or special skill? One of the luxuries of practicing dentistry is that the entry portal is limited. Before opening a dental practice the owner must successfully navigate grade school, high school, college, and dental school. Then each dental school graduate must complete a comprehensive licensing examination. This means that each dentist has unique skills and limited competition (the failure rate for dental practices is less than 1%.) Business “A” is entering an existing field and will be providing no innovative ideas or products. The one bright spot is a good location for Business “A”.
- Business plan– second only to coming up with a business idea, or business type is having a formal written business plan. A formal written business plan is usually necessary to secure a commercial loan. A formal business plan is also the first step in taking an idea or concept and beginning the framework for an actual business. If the business is going to mirror an existing business, what better or different product type or service will the new business provide? In what manner and in what form will the product or service be provided? How much money do you expect to make annually? How long before the business will generate a profit? Other than Bank funding, are there any other funding sources? The answers to all of these questions are relevant and necessary when starting a new business. I was very fortunate that I did not have to provide a formal business plan as a part of my commercial loan process. Because the failure rate for dental practices is so low (less than 1%), the underwriting scrutiny for dental practice loans is less strenuous. In contrast, restaurants, bars, and food service industries like Business “A” have a failure rate of approximately 80%. This means that only one and five survives long-term. Due to this poor success rate, banks are much more hesitant to lend money, and underwriting requirements are much stricter. Having a written and formal business plan shows you are a serious business applicant.
- Break-even analysis and profitable date– two information sets have been combined. A break-even analysis lists all monthly fixed and variable costs to produce a monthly debt load. More simply stated- how much money will be needed to pay monthly bills? A profitable date means creating a reasonable projection of future monthly income and a future date when the business will generate more income than debt load (make a profit.) Business A has no idea about overhead and profitability data. I had two years as an associate in an established dental practice before opening my practice and had a solid projection on both overhead expenses and profitability date before opening my practice.
- Good team of professionals– having a good team of professionals to assist with business planning is crucial. A short list of professionals should include an attorney, CPA (certified public accountant), banking professional, realtor specializing in commercial property, financial and business planner, and someone in the business community who can act as a mentor. I’m unsure about Business A, but when I established my solo practice I already had an attorney, CPA, banking, real estate professional, and a mentor on my team.
- Business financial account and business credit card– both a dedicated business account and business credit card speak to the need to separate personal income and expenditures from business income and expenditures. Many beginning business owners don’t understand the need to keep business and personal expenses separate. Having a dedicated financial account and credit card makes the separation of business and personal expenses easier.
- Business corporate structure– although business structure is not written in stone, it is much easier to start a business and maintain the same corporate structure than it is to change the corporate structure of an existing business. Different types of business structures include sole proprietorship, limited liability companies (LLCs), and different corporate structures such as C corp, S corp, B corp, and nonprofit corporations. Again, I am unsure about Business “A”, but I started my practice as a solo practitioner and eventually transitioned into an LLC status.
- Business name (check domain names available, LLC names available)– business names make a difference! Major corporations spend considerable time, money, and effort in creating the optimal corporate identity. A business name should say something about the business’s product, identity, or corporate position. Businesses fiercely guard their names and business identities, with many being trademark-protected. A new business should verify that the new business name does not infringe on the name or identity of an existing business. Domain and corporate names for the business should be verified to be available, and then secured. Business “A” will be using a name that is partially descriptive of his business type but is also confusing. My business name was my name, followed by the designation of general Dentist, which was straightforward.
- Business location– businesses that require a physical location will need to find and secure a business location before opening the business. Business “A” will require a physical location and has done a great job with location selection. The business is located on a busy street with a very high traffic count and associated increased visibility. My dental practice was located in a medical center complex, which also enhanced visibility and professional status.
- Licenses and permits– Depending on the type and scope of the business, many types of licenses and permits may be needed. Most municipalities have occupational license requirements that are paid on an annual basis. New businesses may have to satisfy zoning regulations, may need special permits for certain business types, and may need a liquor license if alcohol is served on the premises.
- Insurance policies– because I worked as an associate for approximately two years, I had already procured needed insurance like dental malpractice, life, and medical insurance. When I opened my practice I had to purchase several additional policies such as general liability, general business, overhead protection, disability, and workman’s compensation insurance. I certainly hope Business “A” purchases the necessary insurance policies and provides adequate insurance coverage. Being underinsured is almost as bad as having no insurance. During the startup process, most new business owners don’t realize how much insurance, and how many different types of insurance are needed. A good general insurance agent can provide expertise and knowledge in an area unfamiliar to most new business owners.
- Business software– many software providers bundle business software to provide all-inclusive solutions for accounting, staffing, tax, business tracking, etc.
- EIN (Employer Identification Number)– this seems to be a minor concern, but is very relevant and needed for payment of employer-related taxes. As an associate dentist, I did not need an EIN.
- Online presence– an online and social media presence is almost imperative in today’s business environment. According to a report from Hitwise, nearly 60 percent of all Online Searches are now carried out on a mobile device, with some sectors (Food and Beverage) reaching 72 percent.
- Understand and be prepared to pay business and employee taxes– employees have Social Security and Medicare taxes automatically deducted from paychecks (the taxes paid directly by employees represent one-half of assessed social taxes, as the employer pays the other half.) Once you become the employer, you now become responsible for half of the Medicare and Social Security taxes paid by employees, and all of the Medicare and Social Security taxes owed personally.
- Hire the right employees– even though this appears near the bottom of the list, it’s high in overall importance! In my practice, new patients usually interacted with two or three staff members before meeting me personally. These staff members created an initial impression of my practice and set the tone for my interaction with the patient. In most businesses, staff represent the tone and philosophy of the business. Any employee who doesn’t properly portray a business is a negative force that inhibits growth and success!
- Know your competition– My dental practice never competed against other practices. My staff was aware that we always competed with ourselves to make our practice the best practice possible. But, it’s also important to be aware of what similar businesses are providing, selling, or creating to elevate your own business. Business “A” has done no pre-opening analysis of his competition and has no business plan to elevate and differentiate his business.
- Create a marketing plan– this is a companion to knowing your competition. A marketing plan is a written summary of how your business will differ from other businesses, and how these differences will be communicated to potential clients or customers.
- “Soft opening”– many businesses will do a “soft opening” where all staff and management are present to serve a limited number of clients or customers. Soft openings provide actual working conditions and provide clarity about staff, service, or functional problems. With soft openings, new businesses can address and correct operational problems before the business functions at 100%. When fully functional, clients or customers benefit from refined systems and services that are a result of soft opening analyses.
jghghhg
If the list above indicates anything, it’s that starting a business is not a simple or easy task. But, the list (although not all-inclusive) means that starting a business can be divided into a series of orderly steps that minimize the stress and uncertainty associated with beginning a new and unfamiliar enterprise. Even with two years of experience in my chosen field, the process of starting, funding, staffing, and operating a new dental practice was a daunting task. To be successful, a new business requires dedication, commitment, and many focused hours of hard work. In many cases (like my own situation), the owner must initially manage and provide services for the business. The small business owner must initially wear the hat of the owner, manager, and service provider. In many cases once the business is established and successful, the owner has the option to transfer some of the business’s responsibilities to managers and staff members.
gjhhjhghjhg
Will Business “A“ Survive?
Statistically Business “A” has a 20% chance of surviving. Unfortunately, because many of the bullet points above have not been successfully navigated, I would place the long-term chance of success even lower for Business “A“. This is one of those situations where I hope I’m proven wrong!
hghjjhghjgh
jghhghhg
Final Thoughts
jghhghhg
- Many people want to start a new business without realizing the ramifications of what that involves.
- Generally, new businesses have a survival rate of 20%.
- Every new business begins as an idea or concept.
- Proceeding from an idea to an actual business requires many steps that must be completed to afford the greatest chance for survival.
- Virtual businesses require no physical location and require fewer steps to proceed from idea to business.
- No business will be successful without dedication, commitment, and hard work.
hhghhghg
jgjhgghghg
If you’d like to be a part of a free online retirement community, join us on Facebook:
COMMENTS