Your own business… sounds impressive, doesn't it? It conjures up visions of office buildings and row after row of designers producing Web sites while you sit back and rake in the cash.
Okay. Get your head out of the clouds. The office building is a desk in your spare bedroom. The rows of designers, nah… it’s just you. It’s time to quit fooling around. You have a business to run.
There is a lot more to starting a business than just saying, “I want to start a business.” There are legal requirements, forms, permits, licenses, and fees to pay.
But before you attack the paperwork, sit down and decide just what it is you want from your business.Take some time to think carefully about your new venture and how you will define “success.” Think about what kind of hours you can put in at home, how hard you are willing to work, and any other personal factors that might influence your business decisions…
• Are you looking to make a little money from your Web site design hobby?
• Do you want to generate income in your spare time?
• Would you like to work in the evenings to supplement the income from your present job?
• Do you want to build a business that will let you work at home full time?
• Are you planning on becoming a major force in the Web site design market?
After you have given your “vision” some sort of framework, talk it over with someone else or a few people. Don’t skip or rush this exercise. The clearer your goals are, the stronger your business foundation will be.
Great! At this point, you are ready to establish…Your Business Structure
A business is considered a legal entity. This means that it has real rights and real responsibilities as far as the law is concerned. It can…
• Open bank accounts
• Write checks
• Pay taxes
• Generate income
• Distribute profits
Where you live determines what types of business options are open to you. Each country has its own set of rules and regulations. These rules can even vary from one place to another within a given country.
That being said, when you start looking around, you will find that almost every place has a version of the three basic legal business structures…• Sole Proprietorships
• Partnerships
• Corporations
Each structure is different from the others and each has its own set of requirements, advantages, and disadvantages as you will soon see…1) Sole Proprietorships
A sole proprietorship is a business run by one person.
As a sole proprietor, you will provide products and services under your business name, but there is no legal distinction between you and the business. All of the profit from the business goes to you and is taxed as personal income. All business losses are your personal losses and they come out of your pocket. If you stop working, the business stops.
In short, you are the business.To start a sole proprietorship, go to your favorite Search Engine and type in “sole proprietorship” and the name of your state, municipality, etc. You will find links to your federal and local regulatory boards.
These government sites will tell you what you need to do and what paperwork you need to file. The rules may vary somewhat, but the following is what you should expect:
• A business license: Many states, counties, and cities license businesses. Some require licenses only for certain kinds of businesses.
• A Doing Business As (DBA) certificate: As a business, you will be working under an assumed name. To prevent fraud, most places require that you register assumed business identities.
• A zoning permit: To control what kind of businesses are allowed to operate in residential areas, the Department of Zoning in your area may require a special permit.
Sole proprietorship is the simplest form of business organization, and the most popular. Roughly 75 percent of all businesses are sole proprietorships. They are easy to set up/operate, and are the most inexpensive option available.
However, there are risks with this type of organization. If something happens and the business is sued, you will pay the bills out of your pocket. This is the biggest drawback of a sole proprietorship -- your personal assets are on the line. You can lose your kid's college tuition, your car, your cash assets, and even your house.
The chances of being sued for designing a bad Web site are pretty slim, and even if a client does initiate legal action, you would expect the costs to be limited to a refund of the fees paid. The risk is there just the same so it’s important to take that factor into consideration.
2) PartnershipsYour next option is a partnership. This can be considered a proprietorship of two or more people.
Many of the rules and requirements associated with the sole proprietorship also apply to the partnership (e.g., DBA, zoning permits, etc.) But there is an additional consideration for partnerships… “The Partnership Agreement.”
The Partnership Agreement is a legal document that outlines the relationship between all partners. For those involved, it defines job assignments, responsibilities, profit sharing, and expense sharing. The Agreement also addresses how business disputes are to be resolved, how to dissolve the partnership, and how to deal with the resignation or death of a partner.
Basically, it defines who does what and who gets what. Never enter into a partnership without a Partnership Agreement. Your Web site design business is not a social activity and money can make friends, relatives or colleagues behave very strangely. This is a business. Treat it that way.
There are some real advantages to starting a partnership…• You will have more people to share the work
• There may be more funds available to get things started
• More people means more experience to draw from
Like sole proprietorship, the partners are the business. Your personal assets are at risk in the event of a lawsuit.
And in many places, there is an additional risk -- each partner can be held financially responsible for 100 percent of business debt. You can wind up personally responsible for expenses incurred by your partner. If your partner charges $100,000 to the business and leaves the country with the money, you will be responsible for repaying it.
This is not a good thing. So the lessons to learn here are…• Only go into business with people you trust
• Visit a lawyer and set up a detailed Partnership Agreement before you do anything else.
3) Corporations
As was just outlined, with a sole proprietorship or a partnership, you are the business. There is no legal distinction. What you do, your business does. Any profit is your profit. And if there are legal problems, they are your personal problems.
Corporations are different.A corporation is a legal entity all by itself. Instead of just working with you, your clients will deal with “The Corporation” -- a corporation that can enter into contracts, pay taxes, and be sued.
But if your business is sued, your personal assets (car, house, etc.) will be protected because you are just an employee of the corporation. This is a good thing.
Yes, your clients will still talk to you on the phone and you will still write the checks and pay the bills. But there is a key difference to note. You are no longer acting as an individual. You are now a company representative, not an individual doing business. And it’s this distinction that protects your personal assets.
Setting up a corporation is usually a little more involved and a little more expensive than setting up a sole proprietorship or a partnership. You may feel it’s worth the money for the legal protection and peace of mind it brings.
The big question is… which is the best choice for your Webmaster business? And the answer is… it depends.It depends on what your long term business goals are, how much work you expect to get, who your target market is, where you live, and so on.
Most home-based businesses start out as sole proprietorships, but my recommendation is that you incorporate as your first step. It’s a little more work, and it costs a little more, but it’s worth the effort to protect your personal assets.
If you aren’t sure which way to go, pick up the phone and call your local Small Business Association or Chamber of Commerce. Speak to the people who do this stuff for a living. They can’t make your decision for you, but they will take the time to review the details of your situation and give you the advice you need to select the option that is right for you.
OK, the next step…Your Business Plan
A business plan is a written document that defines…
• The purpose of your business
• The products and services you will offer
• Who your clients will be
• The legal construction of your business
For most new entrepreneurs (like you!), writing a business plan is the hardest part of starting a business. That’s because you don’t know what to expect and it can be very difficult to plan things you have never done.
And because it can be such a pain, some people just don’t bother to do it. Big mistake! According to the people who study these things, lack of planning is the #1 reason why many small businesses fail.
Before you start a business, you need to know what you are going to do and how you are going to do it. If you don't, your new business will run into trouble as soon as you begin allocating your limited resources. You will wind up spending your time and money on those things that seem to need immediate attention but have no real bearing on your long-range business goals. And then, when the really important things come around, your business will suffer because you will not have laid the groundwork to address them and your available funds will have been depleted.
The bottom line is… you must do the prep work.
So fire up the word processor or go get a pencil. We will walk through the basics together. It will then be up to you to complete the full business plan afterwards…1) Let’s start with the name of your business. I don’t know the name you’ve chosen, so I’ll make one up for this exercise…
Business Name: Apple Web Site Design, Inc.
2) Write a very brief statement that tells what kind of business you are in. Obviously, you are designing Web sites. Will you be doing anything else?…
Type of Business:
Web site design and consulting services for private organizations and small businesses.
3) Create a “Statement of Purpose” for your business. Some people call this section a “Mission Statement.” Think of it as an explanation of what your business is, what it does, and any features or assets that make your business special or unique (i.e., stand out from the crowd).
Here’s an example, but don’t just copy this presentation. You need to think about your own business reality and customize this section to reflect your particular situation…
Statement of Business Purpose: Apple Web Site Design, Inc. is a home-based design company that provides quality Web site design, consultation, and Internet services to small business owners at competitive prices. The company will focus on providing Web site design services to professionals and to companies that provide business-tobusiness (B2B) and business-to-consumer (B2C) services and products.
As an Internet-based business, our primary storefront and primary advertising tool is our Web site (www.applewebsitedesign.com). This site makes us available to our prospective clientele twenty-four hours a day, seven days a week.
The business draws on the experience and education of the owners, who have on-the-job experience in business management and web site design. This comprehensive background provides the skills necessary to support business operations, technical aspects of a computer-based business, and the design and development of products for our clients.
4) List the services that your business will provide.Look at the sample list below. Cross out those that don’t apply to you and add others if you wish. If there are services that you won’t offer now, but expect to offer in the future, list them as well and indicate when you intend to start providing them…
Products and Services:• Web site design services
• Consultation services
• Web site reviews
• Search engine optimization
• Copywriting
• Web site maintenance services
• Graphics services
• Logo development
• Photo editing
• Database development
• Subcontracting
5) Develop a list of potential clients who might be willing to pay for a Web site. You may wish to serve a variety of markets or you may want to target a particular group only.
Clientele Served:Our clientele will consist of business-to-business companies, business-toconsumer companies, nonprofits, and professionals (doctors, lawyers, etc.) who are looking to promote their services and products on the Internet, and other Web site designers that need subcontractors for specific tasks.
6) Define your business goals clearly. This is often one of the most difficult sections of the plan to determine.Don’t consider your goals as wishes on a list (“I’d like to sell 500 Web sites this year”). Write down a set of well-defined realistic objectives. All your activities for the next few months will focus on meeting them. For example, if you plan to sell six Web sites within the next twelve months, you need to give some thought as to how you are going to accomplish that feat.
Take some time to consider your services and potential market. Set business/sales goals that you think are challenging, yet achievable. Stay away from goals that are way beyond your reach or that are too easy to attain…
Business Goals:Our goal is to become profitable by the end of the second year of operation. We will do this by selling a minimum of six Web sites in the first year and twelve in the second. We will achieve these goals through aggressive marketing and promotion to specific segments of our target market -- that is professionals (doctors, lawyers, etc.)
7) List your coordinates. These include…a) Civic address (which is also your home address!)…
Location of Main Office: Apple Website Design, Inc. 123 Winesap Road
Seattle, Washington 98101
Apple Website Design, Inc. 413A Granny Smith Ave. Seattle, Washington 98101
c) URL…http://www.AppleWebsiteDesign.com
10) Describe the legal construction of your business. It can be a sole proprietorship, partnership, or a corporation. It may also have special features depending on local requirements and regulations…
Legal Construction:11) Define who is running your business and their position in the company. The format of this section may change depending on the legal construction…
Principal Officers:
Your Name -- President
VP’s Name -- Vice President Treasurer’s Name -- Treasurer
Your business plan is a living document. It will change and evolve as your business develops. With time, you will gain a better understanding of how everything fits together, and your original plan may require some revisions. Try to keep it in tune with your daily reality.
(Start Your Own Home-Based Website Design Business provides a more indepth discussion on this essential business element.)
Now for a quick summary of your actions so far… You have gained a basic understanding of the three kinds of business structures and, hopefully, you have decided which is best for you. (If you are still not quite sure, call your local small business support organization and discuss different scenarios with them.)
You also have a workable outline for your business plan -- a plan that you spent time reflecting upon and discussing objectively with a friend or two.So now it’s a matter of following your plan!
Don’t just file it away. Check your progress against your plan and, in turn, check your plan against your progress. If you deviate, get back on track. If your goals change or you get new information, revise your plan accordingly.
It’s critical that you maintain a clear vision of your goals and that you have a welldefined path to get there.
With that roadmap in place, we will turn our attention to three essential marketing “secrets” that will change the way you look at Web sites…
