Starting your own business can be a nerve racking process as so many different things must be considered before your business can get off the ground. You need money, space, employees and hundreds of other things to make the business you want happen. With all these “to-dos” cluttering your head, it is best to step back and take one thing at a time.
First things first, your business needs a name! This may seem a silly and frivolous task, but there is a lot to be considered when choosing a name for your business. The name of your business has great impact on how customers view you and your product. Choosing a business name is important not only because of its impact on customers but also because it will be with your business for life. So take some time to think about what goes into picking a name.
Stand Out
Pick a name that is unique to you and your business. Try to stay away from generic names like Betsy’s Flower Shop or Bob’s Car Repair, but instead find something a little more interesting. This is not to say you can’t use your name in the business name, but also look to other options. A business name with a story is always of interest to customers and will get them to spread your name around.
Spell It Out
When creating a name, stay with words that can easily be spelled by customers. Some business owners try unique word spellings to make their business stand out, but this can be trouble when customers look your business up in the phone book or try to refer you to others. Stay with traditional word spelling and try to avoid unfamiliar words.
Keep it Simple
Make your business name short one customers can remember it easily. This will also help when marketing your name as you won’t need as much word space. If you like, you can make your business name an acronym for a longer title, but just be sure to list your business by this acronym in the phone book.
Make Some Sense
Occasionally, business owners will choose business names that are nonsense words. Although this does make you stand out, it creates a problems for the customer. Words create visuals for people and if the title of your business is a nonsense word, it will be difficult for customers to envision what your business is about. Use words that convey your line of business and the feeling you want customers to get when they come to you.
Give a Clue
Try to include in your business name some information about what your business does. Calling your light fixture business Rise and Shine is appropriate, but the same name would not do well for tow truck business. Your business name should match your business in order to remind customers what services you provide.
Don’t Box Yourself In
Avoid picking names that don’t allow your business to move around or add to its product line. This means staying away from adding geographic locations or product types to your business name. With these additions, customers will be confused if you expand your business to different locations or add on to your product line.
Jump Start Your Brainstorming
If you are having trouble thinking of business names, try giving your brain a jolt by looking through a thesaurus for alternate words. A dictionary may also help by giving you words that define your line of business. You can even try looking to competitor business names to give some ideas. However, be careful not to create a name that is too similar to a competitor’s as this will lead to confusion for customers.
Try It Out
Come up with a few different name choices and try them out on friends, co-workers, and potential customers. Ask questions about the names to see if they give off the impression you desire. Be sure to come away with a few different names in case another business has already snagged your first choice. The next step is to register your name and get your business going!
November 30, 2009
How to Pick a Name for Your Business
Training for Success With Your Internet Business, Article 4, Deductions for Use of Home
If you are working from home, you may or may not have an area of your home that you refer to as your office. It may be that you make your phone calls from the bedroom and complete your paperwork at the kitchen table and see customers or clients in the family room.
On the other hand you may have a separate room in your home which is furnished with a computer, printer, desk, comfortable office chair, phone, filing cabinets etc. from where you conduct all aspects of your business.
While from the point of view of maintaining an efficient office the latter option is probably preferable, many of us don’t have the luxury of an extra room that can be set aside for a home office and we end up working under circumstances much closer to those mentioned in paragraph one.
Regardless of how your “office” is set up at home, you may be able to deduct a portion of the operating expenses of your home and treat them as office expenses.
To qualify for these deductions you must use your home or portions thereof regularly and exclusively as your principal place of business for your home based business. Regular and exclusive use means that you can’t just point to a desk in the corner and call it your office. It must be broken in by regular use. This does not mean you have to use it every day, but it must happen frequently enough to show that you are actively engaged in your home based business.
If you think that the regular use of your office might be questioned, keep a log book (see Record Keeping article issued earlier in this series ) recording your home based business activities and business visitors for each day the office is used. You are not required to commandeer an entire room or a separate structure to meet the exclusive test. A portion of a room is acceptable.
Whatever space you do set aside, however, must be used exclusively for your home-based business. You can set aside more than one area of your home for business. For example, one room may be used as an office and another for meeting or entertaining clients. Your principal place of business is where: (1) you conduct the most important activities for that home based business and (2) you spend the most time.
If you meet with clients or deliver goods or services to customers, your principal place of business could be where those meetings or deliveries take place. However, if your home based business has no fixed location, you may deduct expenses for a home office if you use your home to conduct substantial management activities and complete necessary paperwork.
You can have more than one principal place of business if you have separate business activities. For instance, you may be employed and work in your employer’s place of business all day, then return home to run your own home based business on evenings and weekends. Or you may own a business that operates in rented office space and also conduct a second home based business from your home. Your home office expenses will be deductible, because your home is the principal place of operating your home based business. It does not matter if your businesses are closely related or share the same clients, as long as different tasks are involved. Do not bring work home from your employer or another business that does not qualify for the home office deduction, or you could lose the deduction for your home based business activities. You will fail the exclusive use test.
If your business is selling products, you may deduct expenses allocated to areas of your home regularly used for storing your inventory and product samples. Your home must be the only location for the business of selling your products. The exclusive use test does not apply to storage areas, but the space must be a specific, identifiable area. Suppose, for example, that you use a cupboard in your hall to store your inventory. Even if you use the space to store linens as well, it will be deductible as part of your home office.
Deductible office expenses include a portion of the following expenses:
Rent,
real estate taxes,
mortgage interest,
utilities,
home insurance.
If clients or customers regularly visit your home, the costs of lawn care, landscaping, and driveway repairs may also be included.
Repairs to other parts of the house and family living expenses (such as food) are not deductible.
However, a pro rata share of repairs that benefit the entire home, such as roof repairs or painting the outside of the house, may be claimed. The same is true for the business portion of the cost of installing and maintaining a home security system.
You may also include a deduction for depreciation on your home, but as this could well lead to a recapture tax upon the later sale of your home, you should obtain advice from your tax advisor before considering this.
The percentage of your home used for business is computed by dividing the square footage used for business by the total square footage of your home. Your home office deduction is figured by multiplying the total of your allowable household expenses by the percentage of the home being used for the home business. e. g. Total Square Footage of house is 1500 sq ft. Total Area used for business is 150 sq ft. making the percentage of the home being used for your home based business 10%. Thus 10% of total allowable household expenses can be used for home business deduction.
In most countries, the home business deduction cannot be used if your home based business already has a loss for the year. Neither can it be used to create a loss for the year. Usually however, any part of the deduction not used can be carried forward to future years. Verify with your Tax Advisor as these rules do differ widely between countries and also frequently change when tax authorities update legislation. If claiming the home business deduction you will need to record the following information:
Total Sq Footage of Home,
Sq Footage of Home Office Area(s),
Utility Costs,
Insurance,
Repairs & Maintenance,
Mortgage Interest,
Property Taxes,
Rent,
Although this sounds complex it is one of the most advantageous tax deductions available to home business owners and should not be overlooked. Should your home based business operate at a loss, you will probably be able to offset the loss against any other income that you have earned, thus reducing the amount of Income Taxes that you will be required to pay.
So now you should be able to see the very real advantage of operating a home based business.
Note: Taxation legislation differs between countries and each country may change their rules at any time. The information provided in these newsletters is accurate at time of publication. You should however seek specific information from your Tax Advisor or Taxation Department as it relates to your own situation each year that you are required to provide Income and Expense Statements.
Other topics in this series are as follows:
Number 1, Record Keeping,
Number 2, General Expenses,
Number 3, Purchase of Goods for Resale,
Number 5, Home Entertainment Costs,
Number 6, Motor Vehicle Expenses,
Number 7, Depreciation Costs,
Number 8, Business Meals,
Number 9, Salary Payments to Children,
Number 10, Travel Expenses,
Number 11, Demonstrators Samples & Promotional Tools,
Number 12, Gifts,
Number 13, Here Comes the Tax Man,
Number 14, Capital Items,
John Ritchie, A. I. B. , A. I. C. B, F. I. C. B, email:brlynt@gmail. com
Copyright to this article belongs to John Ritchie. http://johnritchie. blogini. com. (Having Fun Making Money) Blog Site.
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Business Credit Lines-long Island, New York: Using Business Credit Cards Effectively
This is not the same as using your personal credit to obtain a credit card with your business name on it. Obtaining a business credit card relies on your business credit information, not on your personal credit information.
When you are beginning your business, you will probably need to use your personal credit. After you have fulfilled certain basics, your business should rely on itself for credit.
These basics include incorporating your business as a legal business entity. This does not include DBAs (individuals Doing Business As company x). Consult a local business attorney about incorporations are available in your state.
Another basic for building business credit is establishing a business phone that matches your business address in the national 411 directory. Even business cell phone service can be set up for this. Residential addresses are okay, too. Just make sure you are listed as a business in 411 and that your information is correct. Always give lenders this same information.
The last basic step involves building credit with your vendors. If you are in the service industry, you can develop accounts with your office supply, Internet, and phone service providers. Otherwise, get a credit account with your suppliers.
Now you are ready to apply for a business credit card. Use all business information on the business credit card application. Use business sales numbers, list other business assets and liabilities. List business creditors (your vendors) and use business references. Simply put, make your business stand on its own when obtaining business credit cards.
Once you have a business credit card or two, use them for business expenses only. Carry some balance on them month-to-month, but plan on paying almost all of it off monthly. Do not use your business credit card to purchase items for which you could otherwise obtain business financing. Your long-term goal should be to establish solid overall credit for your business.
Establishing solid credit for your business is relatively easy to do if you start by following the three steps above. Then get business credit cards to further build your business’s credit. With good business credit as your foundation, you are now ready to get a business line of credit that does not depend on your personal credit.
While a business credit card is a great tool for using credit for business purposes, as with any tool, use your business credit card wisely and it will serve your business well.
Pat Gage, The Opportunity Creator, and a leading expert in the field of business credit has helped a number of clients target his specialty – starting, expanding, and growing their businesses through his trademarked 10 Steps to Money System. The Opportunity Creator is not only a sought after business credit coach, but also a national speaker. For more information on any topic discussed, visit Gage’s site at http://www. 10stepstomoney. com
Should I Buy a Franchise Business?
While there are quite a lot of people looking to change jobs or even start their own businesses, many people often overlook the possibility of a franchise business. Whether they think it will cost too much or possibly not allow them the creativity and freedom they are looking for in their business, franchises can often be a mystery to most new entrepreneurs. If you have ever wondered about the pros and cons of franchise opportunities versus traditional business opportunities, take a look at a few of the reasons in favour of and against buying a franchise business.
If you have ever started a small business before, you undoubtedly know how hard it can be to get a business off the ground. In fact, the vast majority of new small businesses rarely make it past the 5 year mark, let alone go on to become successful corporations. This is one of the main advantages of a franchise. With a small business franchise, you will get all of the benefits that come with every small business (being your own boss, setting your own schedule and business philosophy, even being able to work from home) but you will also get some of the benefits of a large, successful corporation (centralized support, large scale advertising, continual product development and advancement, etc. ).
Franchises like Jani-King and The Cleaning Company have built hugely successful franchise businesses in the home cleaning industry. Both of these companies have made their franchisees very successful by offering a complete package to setup the franchisee with everything they need to get going, even if the franchisee has no prior experience in the business world or in the service industry. This intensive training coupled with the time-proven systems developed by Jani-King and The Cleaning Company make your franchise very likely to succeed.
Very few entrepreneurs start a business solely with money out of their own pockets and, for the first time business owner, investors and loans are almost a given. What many people don’t know about franchises is that since they have proven to be more likely to succeed than the average small business, most banks are more willing to give out small business loans to franchisees that to entrepreneurs with traditional small business start-ups, so if you have been having trouble getting approved for a small business loan, you may find the bank singing a different tune if you choose to start a franchise.
Imagine you decide to start a landscaping company that will focus mainly on giving your customers a beautifully manicured lawn and garden. If you are a first time entrepreneur, you may have trouble getting investors to sign on and help you purchase all of the necessary equipment, but if you chose a franchise like GreenThumb Limited (a well-known and successful lawn and garden franchise) you will undoubtedly find it easier to get a loan or a few investors.
Furthermore, banks and investors often require a detailed business plan describing your business model down to the very last detail. If you have never written a business plan before, you may find this a daunting task and when you know that your business depends on how you articulate the business plan, it only adds to the pressure. With a franchise business, the business plan will most often already be written for you. The franchisor will put together a detailed business plan for you and your investors explaining the overarching themes as well as the minute details for your particular franchise. The franchisor will not do all of the work for you, but having a strong name and a well-proven business plan behind you will definitely work in your favour when it comes time to seek investors and loans.
Finally, consider that with a franchise business, your success rate will be higher than any small business that you could start on your own. Almost every major franchise started out as a small business, then expanded more and more each year and finally chose to take their strong business plans and recognizable names to the realm of franchising. Succeeding as a business start-up is a great feat in and of itself, so the prospect of taking a business model that has been proven to work and being able to own your own franchise will nearly guarantee that your business will find success.
Do not assume that the franchisor will do all of the work for you. Every business will be a lot of work, but with a franchise you will get plenty of training up front and ongoing support from the franchisor. Their support staffs will help you out with any questions you have related to the franchise, how to properly manage people and anything to do with the business in general. Whether you choose one of the many home business opportunities such as Cardgroup Greetings or The PC Support Group which allow you to work at home or something with a physical location providing much needed services like The Little Gym, you will most likely find that the businesses that succeed most often, and make the most sense fiscally, are franchises.
How to Make Money Online Beginning With a Business Plan
Normal 0 Online business opportunities are just opportunity until they have a plan for success. Start creating a business plan on how to make money online, and you’ll start planning your success.
Online business opportunities are just that – opportunities. Learning how to make money online starts with your plans on how to turn an opportunity into a success. Researching and evaluating how to make money online is your first step. Once you have chosen an online business that affords you the opportunity to make money from home while maintaining your desired lifestyle, you should start making a business plan. Even if you’re not going to be pursuing bank loans or investment funds for your online business, a business plan will serve as a benchmark for you as your online business progresses. The act of making a business plan, whether it is formally typed or simply sketched in a notebook with pictures and notes, will provide you with the insight and knowledge you’ll need to turn your online business opportunity into an online business success.
Once you have selected your business opportunity and defined your business goals, you should be able to define your online business. Professional business advisors suggest that you learn how to define your online business in one sentence so that you can quickly summarize it when needed. To define your business you need go beyond defining your business as merely an online business. You want to be able to promote your online business as descriptively as you can, and as short as you can. This will not only be helpful in developing the website for your online business, but you’ll have a solid answer whenever someone asks you what your business is. Having a fast informative response to the question will help your family at home understand the nature of your online business. It will help immensely when networking with others concerning mutually beneficial online business opportunities involving social networking, affiliate programs, blogging, pay-per-click advertising, forum conversations, and a multitude of other potential business and marketing opportunities. Define the fundamentals of your business, and include how your online business is unique.
After defining your business, a significant portion of your business will concern how to market your business online. Online businesses that are targeted to a particular market are more likely to achieve sales success than business that don’t. Part of your business plan is to determine your target market. You have to create a profile (real or imaginary) of the customer who is most likely to visit your website. Income, jobs, geography, social activities, hobbies, education, and behavior are all traits to take into consideration. Behavior targeting is becoming widely used in internet marketing opportunities, and learning how to make a customer profile is the first step to getting a solid view of your customer’s behaviors.
Marketing includes competitive analysis. You will want to analyze websites that are similar to yours. Business analysts refer to the “SWOT” method – which means identify the strengths, weaknesses, opportunities and threats between your business – and your competitors. With enough competitive analysis, you’ll be able to find how to beat your competitors. Once your learn how to do business better than your online competitors – your online business will be skyrocketing to success.
After defining your online business goal, your target markets, and doing your competitive analysis, you will want to examine some financial statistics. Even if you hate math, you are going to have to face the dollar signs. You will want a list of your expenses, such as domain names, hosting fees, auction fees or advertising fees, and a list of your revenue – such as advertising commissions, affiliate program commissions and sales revenue. Your revenue minus your expenses is your profit. Once you start making a list, you might discover you have expenses you haven’t thought of, or you might discover there are areas where you can learn how to make more money and increase your revenue. Becoming familiar with how to manage your financials will help you make well-informed decisions regarding your online business strategies.
How to make money online begins with making a business plan to turn an online business opportunity into a work from home online business success. Creating a business plan will put you ahead of your work from home competitors who haven’t given their business much thought. You’ll also be able to manage your money for strategic business development. Make a business plan for your online business – and you’ll be making a plan for online business success.
Finding Financing for Your Startup Business
Starting your own business is exciting, but also often a little intimidating. Perhaps the most intimidating part is trying to acquire the financing you will need to successfully start your business. Most new businesses come with substantial startup costs, far more than what business owners can come up with out-of-pocket. Therefore, getting financed is one of the crucial steps to starting your own business.
Unfortunately, not every aspiring business owner is able to find financing. Lenders and investors tend to want to see first that the business — and its owner — has a good likelihood of success before they back it financially. Remember, a lender’s primary concern is making sure they’ll be able to get their money back again — as well as the interest accrued. If you can convince a lender of that, your chances of getting a startup business loan are pretty good.
Here are some tips for how to start your own business the right way — with sufficient funding.
Know the Industry
Experience in your business’s industry is extremely important. Lenders and investors will want to know your background in the industry, because if you know the industry well you have a much greater chance for success. If you don’t yet have experience in the industry, you should consider taking classes or working for a business similar to the one you want to start. You can also form a partnership with someone with the proper experience, form a Board of Directors to advise your company, or hire someone with the required experience as one of your top managers.
Clean Up Your Credit
Many startup business owners mistakenly assume that since they are financing a business, their personal credit does not come into play. Quite the opposite is true. Since your business is a startup, it has no track record, of either income or paying bills on time. As the sole proprietor, it will be up to you to qualify for — and guarantee — the loans your business is given.
In order to put your best food forward, it is important to start this process far in advance. Cleaning up your credit can take several weeks or months. You will need to first pull your credit report from each of the three credit reporting agencies, as major differences can exist between what each one reports — particularly if there are mistakes. Carefully go over each credit report, and contest mistakes with both the credit reporting agency and, if necessary, the creditor. Most credit bureaus offer online forms for disputes, which make cleaning up your credit report easier than ever.
Finally, if there are accurate but potentially negative items on your credit report, you may be able to negotiate with your creditors to remove the items — particularly if your track record with them is otherwise good. Taking these steps ensures that you will make the best possible impression when applying for a startup business loan.
Have Some Sort of Collateral
Just as you will need good personal credit in order to acquire financing for your business, you will also need to be able to provide some sort of collateral. If you are looking for a loan to help you start your own business, chances are you do not have any business property yet — although if you do, that would be the logical first choice. Without business property as collateral, however, you will need to use your personal property to guarantee the loan. Examples of property that could serve as collateral are your home or commercial real estate (minus what is still owed on the mortgage), a work truck or other heavy equipment, and office furnit
Write a Business Plan
While you are going through the lengthy process of cleaning up your credit is the perfect time to thoroughly research your business venture. Starting your own turnkey business is more than just getting a business loan and hanging up your shingle. You will need to know where the market stands right now, where it is projected to go, and how your business will fit in. You will also need to know who your target customers are, and how you will reach them. There are many different factors that play into how successful your business is, and you want to be sure to fully understand all of this before you get started.
Once you have done this research, you will put it together into a business plan. This is important because the business plan is how lenders and investors decide whether your startup business is worth funding. A well-researched, well-written business plan demonstrates that you know your market and therefore have a pretty good chance of starting a successful business.
Starting Your Own Business with the Proper Funding
One of the most important parts of launching a business is getting enough funding to start off on the right foot. Most startup businesses rack up considerable costs, and trying to cut corners on some of these can be disastrous to your business’s chances for success. Most small businesses fail within the first two years, usually as a result of insufficient funding and poor decision making along the way. Taking the time to find the proper funding for your business is imperative for not only supporting a successful launch, but also for making your business more likely to succeed.
Franchising Vs. Licensing A Business (Franchise Vs. License) And Business Opportunity Expansion Options
What’s the difference between franchising vs. licensing a business? The starting point in the franchising vs. licensing a business analysis is to consider the legal aspects, then the business aspects. In considering the legal aspects, begin with the following premise that applies to both options. If you put someone into business (or allow them to use your business name/mark) this transaction will normally be a regulated activity, subject to substantial penalties for noncompliance. This guiding legal principle, coupled with the business aspects of selling a franchise vs. a license (discussed below) will answer most franchise vs. license questions. Advice from a competent franchise attorney is indispensable. BACKGROUND OF FRANCHISE & BUSINESS OPPORTUNITY LAWS Why does regulation exist? The government, due to documented past abuses where tens of thousands of individuals lost all of their net worth by investing in nonexistent or worthless business endeavors, has devised two principal consumer protection mechanisms: (1) franchise disclosure-registration laws; and (2) business opportunity laws. The thrust of these laws is to require sellers to give potential buyers enough pre-sale information so informed investment decisions can be made before money changes hands, long-term contracts are signed and sizeable financial commitments are undertaken. Under federal regulations, a Franchise Disclosure Document (FDD) covering twenty-three individual chapters and a hundred or more pages in length must be prepared and given to every potential buyer at least 14 calendar days before any contract is signed or money paid. It doesn’t matter what terms are used by the parties in contracts or other documents to describe their relationship. For example, the contract may call the relationship a license, a distributorship, a joint venture, independent contractors, etc. , or the parties may form a limited partnership or a corporation. This is entirely irrelevant in the eyes of governmental regulators, in particular the Enforcement Division of the Federal Trade Commission (FTC). Their focus is not on semantics, but on whether a small number of defining elements are present or not. Today the industry is subject to a complex web of regulations that differ from the Federal level to the state level and differ widely from state to state. Firms or individuals that say calling it a “license” dispenses with legal regulations are delusional and wrong for at least three reasons: (1) Common Sense – if it was really that easy, everyone would would be doing it that way. The 3,000-plus companies that are franchising are not stupid. Many of them can afford the best legal talent available. It’s not a coincidence they’re all franchising and not licensing; (2) Even if the relationship is not regulated under franchise law, business opportunity laws (discussed below) will apply, and complying with these will be a lot more expensive than going the franchise route; and (3) Any analysis must include federal as well as applicable state laws. This all reminds me of some financial planners who still advise clients filing U. S. income tax returns is not required under their interpretation of the U. S. Constitution. It just doesn’t work that way. Actually it only works until the IRS catches up. The “licensing avoids franchise regulation” spin (which, not surprisingly, is not accepted in the legal community) also only works until the company gets caught. The logic (not) goes something like this: licensing arises under contract law, not franchise law and therefore franchise law doesn’t apply. Sound’s just like the “you don’t have to file a tax return because tax laws don’t apply” argument. Here’s a real life example. A “licensing attorney” prepared a dealer license agreement and ignored the FTC Franchise Rule disclosure requirements. The dealers became disgruntled and hired a litigation attorney who sued the company, not surprisingly, for selling illegal, disguised franchises. It cost the company $750,000 to go to trial in federal court to answer the question “Is this contract a franchise?” It’s always a very expensive question to answer. Trying an end run around the franchise disclosure laws by calling it a “license” may be a cheaper way to go initially. But it’s not a question of if you will be caught, the only question is when. Be prepared to spend mind-boggling amounts down the road when the disguised franchise is challenged for what it really is. In a 2008 case, Otto Dental Supply, Inc. v. Kerr Corp. , 2008 WL 410630 (E. D. Ark. 2/13/08) another disguised franchise vs. a license was at issue. The licensor claimed it sold just a license, not a franchise and the franchise laws didn’t apply. It made a motion for summary judgment to have the case thrown out of court. The federal Eastern District Court ruled against the licensor and ordered the case onward. It said whether or not the license was really a franchise was up to a jury to decide. Juries apply common sense to the simple defining elements of a franchise. They are not swayed by semantic arguments like “licensing arises under contract law, not franchise law and therefore franchise law doesn’t apply. ” Another expensive franchise vs. license learning lesson. This is not to say licensing a business isn’t a viable option in foreign (out of U. S. ) transactions where U. S. laws don’t apply – but these are a very small minority. Most transactions and contracts cover U. S. activities and residents, so the franchise vs. license question is an easy one to answer. Even inside the U. S. there are some cases where calling the relationship a “license” makes sense. Years ago, a company selling education franchises to university professionals called their contract a license. To comply with applicable laws, a full franchise disclosure document was prepared and registered. For strictly marketing reasons, the “franchise agreement” was called a license agreement within the franchise disclosure document. The list of required defining elements is quite short, and although certain franchise exemptions and exclusions are available, the franchise statutory framework was designed to pigeonhole these relationships into either a franchise or business opportunity box. Normal license agreements contain certain “control” provisions (right to audit, require reports, mandate suppliers, etc. ) and the presence of ANY control or assistance provision (operations manual, training, site or other assistance) is enough to satisfy these elements of the Rule. In fact, the title of the FTC Rule says it all: “Disclosure Requirements & Prohibitions Concerning Franchising and Business Opportunity Ventures. ” So, the focus must be on which box is better to use, not on how to avoid using either box. THE FRANCHISE BOX – REGULATION BY THE FEDS Let’s consider the franchise box. Under FTC regulations that became effective in 1979 a thick document (now called a Franchise Disclosure Document) must be prepared and given to prospective buyers for a minimum of 14 calendar days before any money is paid or contracts are signed. This document now contains 23 items or chapters of information, as well as current financial statements and a copy of the actual contracts used. As mentioned, this document is designed to give prospective buyers enough pre-sale information about the company, its financial condition, the proposed contract, investment requirements, trademark rights, exclusive territories, etc. ,so informed decisions can be made before long-term contracts are signed. For companies that attempt to disregard federal law, the FTC Act authorizes the Commission to recover civil penalties of up to $10,000 for each violation of its Rule, plus injunctive relief, consumer redress (obtaining complete refunds, canceling contracts), etc. Because each sale can involve multiple violations of various regulatory provisions, these fines can be substantial and far outweigh the cost of doing it right the first time. Selling a disguised franchise (an illegal franchise) as a “license” can be the most expensive mistake a company ever makes. One need only consult the franchise registration filings of various states to see the significant number of companies that fall into this trap. They started out selling “licenses,” operating under misguided advice, in a vain attempt to save money. Then, they either get sued for selling an unregistered or illegal franchise. Or they finally get competent legal advice that what they’ve really sold are disguised franchises, even though they were called a “license. ” The governmental agencies require them to offer full rescission rights (cancel the license, refund all money that’s changed hands) to all persons they’ve sold “licenses” to. Defenses like “we didn’t sell a franchise, we only sold a license” or “it’s a license and a license arises under contract law, not franchise law” just don’t work and never have. In the end, they pay a lot more to have it done the way it should have from the very beginning. And for those disguised franchise owners who usually exercise their “let’s get out of this license contract” rights given to them by the regulatory agencies, the sellers end up putting them into the business for free plus having to refund all the money they paid. Not a pretty picture. STATE REGULATION OF FRANCHISING Because regulation of franchising is at the federal and state level, the effect of state regulation must also be considered. The FTC Rule sets minimum standards and applies in all states, unless a particular state sets higher standards, and then that state’s law applies. In 1971, eight years before the FTC Rule went into effect, the State of California was the first to enact a franchise disclosure-registration law where a franchise registration process is required before franchises can be offered (i. e. advertised) or sold. The California Franchise Investment Law was in response to a wave of consumer franchise complaints. Other states soon followed California’s lead, leading to a situation where franchise companies had to follow different rules in each franchise registration state. To alleviate these difficulties and achieve a uniform format, a group of Securities Commissioners from various states adopted a Uniform Franchise Regulation, effective in 1977, known as the Uniform Franchise Offering Circular (UFOC) format. All states requiring franchise registration followed the UFOC format, a thick document also containing 23 chapters of information. None of these states accepted what was then known as the FTC’s Basic Disclosure Document. To ease the obvious predicament created by UFOC vs. FTC format, the FTC allowed companies to use the UFOC format as an alternate to its Basic Disclosure Document. In 2007, the FTC adopted its own version of the UFOC format, known as the Franchise Disclosure Document or FDD. The FDD format is the required format in all states beginning July 1, 2008. FRANCHISE BOX SUMMARY Bottom line on the franchise box: By preparing a single franchise disclosure document (at a cost of about $30,000), a company satisfies the federal requirement and is positioned to offer and sell franchises throughout the United States. Although certain state-specific information and disclosures may be required in the minority of states having a franchise registration-review process, this can normally be accomplished in a couple of extra hours per state. THE BUSINESS OPPORTUNITY BOX Now, let’s consider the business opportunity box. At the state level, there are approximately 24 states that regulate and register business opportunities. Unlike the franchise box, there is no such thing as a uniform business opportunity disclosure format. Business opportunity rules and registration requirements differ in each business opportunity state. Many of these states also have a “cooling off” period, usually a couple days after the sale where buyers can change their mind for any reason and receive a full refund. For a company that’s going the business opportunity route two different documents may need to be prepared and provided: the FTC’s Basic Disclosure Document (if the business opportunity fits the FTC’s definition of a business opportunity) and a state’s more abbreviated business opportunity disclosure document. Also, different timelines may need to be observed: the FTC’s 14 calendar days before, and a business opportunity state’s cooling off period after. Bottom line on the business opportunity box – if you’re an attorney with a business opportunity or “licensing” client, get ready for hundreds of billable hours, you’ve just landed a big one. But, if you’re the business paying the legal bills, it’s going to be a lot less money to go the franchise route. Prepare a single, Franchise Disclosure Document, register in a state or two as expansion efforts begin, and you’re essentially done. There are also other factors to consider in the franchise vs. business opportunity analysis, including liability issues (definitely a greater risk in the franchise arena) but these are beyond the scope of this article, which is not intended to offer legal advice. Companies should consult with competent, informed legal counsel about the specifics of their particular situation before making any decision. THE BUSINESS ASPECTS OF FRANCHISING VS. LICENSING A BUSINESS The business aspects of the franchise vs. license and business opportunity options are relatively straightforward. It all boils down to image from a marketing standpoint. From a credibility standpoint, does your company want to stand toe to toe with the likes of McDonalds, Radio Shack, H & R Block and other franchised household names? These are the mental images formed in the mind when an average consumer hears the word franchise, along with familiar, highly advertised slogans like “being in business for yourself, but not by yourself,” “complete training,” “support where and when you need it,” etc. This, coupled with the complete package of training, start up and ongoing support services offered by franchise companies, makes a franchise a more attractive commodity in the eyes of the prospective buyer and an easier sale. The same applies to firms that first sold “licenses” then switched to selling “franchises. ” These companies report they attracted considerable interest and far more inquiries when offering “franchises” compared to when they offered “licenses. ” So, even from a business standpoint, the franchising vs. licensing a business question is easy to answer. In addition, and as discussed above, a “license” is almost always a franchise in disguise, a ticking bomb creating significant legal issues if the FTC Rule (and corresponding state franchise registration laws) are not followed. THE BUSINESS ASPECTS OF FRANCHISING VS. BUSINESS OPPORTUNITIES Business opportunity ventures, when compared to franchises, suffer from definite image problems that translate into difficult marketing issues. If you ever need proof of this, just attend any business opportunity show or expo. You’ll see a host of fly-by-night opportunities such as worm breeding in backyards, exotic plants raised in glass bowls, condom vending machines (not a bad idea these days) and the like all promoted by fast-talking, high pressure salespersons. Does your company really want to be associated with these companies and the reputation they project? Poor image, coupled with the fact that business opportunity ventures typically provide little training and no ongoing support, make them a much more difficult sale to prospective buyers. In a business opportunity, the buyer is just thrown a ball, and it’s entirely up to them how to run with it. CONCLUDING REMARKS From both a legal and business perspective, the franchise vs. license choice is an easy one to make. Doing it right the first time will save money and significant legal headaches down the road. The individuals prevalent on the internet who claim (via very unprofessional-looking websites) that merely calling the relationship a “license,” are only selling a future lawsuit. They are not looking through the lens of an expert with almost three decades of experience who has seen first-hand the havoc these “disguised” franchises cause. Instead, they are attempting to make easy money – at your expense. From the most basic, common sense perspective, if it looks like a Duck, talks like a Duck and walks like a Duck – . . . it’s a Duck. © 1990-2009, Kevin B. Murphy, B. S. , M. B. A. , J. D. – all rights reserved.
Is Starting a Small Business the Right Way for You?
You find most people set off to work for someone else every day although more and more are finding new careers by starting a small business.
Many with entrepreneurial skills and vision find tremendous satisfaction and success by owning and operating their own small home business.
Running a small business even from home involves a wide range of activities, including developing a business plan, overseeing sales and marketing, dealing with personnel, and innumerable administrative responsibilities.
If you think you’re up to the challenge, owning your own business can be tremendously rewarding, both personally and professionally. Getting a new venture up and running takes particular business skills and personality traits.
If you are considering starting your own busi¬ness, the following questions may help you decide if you’re up to the challenge.
Do You Have the Mindset?
Do you have organizing ability?
Are you prepared to wait several months or more before you make a profit?
Do you like to think ahead and plan for your future, then work to make it happen?
Are you psychologically ready to take some risk?
Do you have personal drive and leadership qualities?
Do you have special expertise in the business you want to start?
The right mindset is only the beginning. You’ll need important busi¬ness skills as well. Do you know how to find your particular niche in the market and how to identify your customers?
Do you know how to sell enough of what you have, at a price that will return an adequate profit for you?
Although there are no guarantees, if you answered yes to most of these questions, you may have what it takes to be successful in start¬ing your own business. Just remember, every new business faces difficulties
Getting Started
Running a small business takes sharp business sense and tenacity. Knowing how to take advantage of market conditions and develop strategies to get through the tough times will help turn your great idea into a suc¬cessful business.
First, you’ll need to develop a business plan, the road map you’ll use to establish and guide your business. Consider every aspect of the busi¬ness, give some thought to the idea and ask every question you can think of, and be sure you come up with satisfactory answers.
What type of business do you want to start? Will it be retail, service or manufacturing?
What service or products will your business provide and what need will it fill?
Who are your potential customers going to be for your products or service and why will they purchase it from you?
What about the competition? Is the community large enough to support another similar business? Check out the local chamber of commerce and the yellow pages for details.
Where will you locate your business? Is there a similar business nearby? Get information on the community’s plans for business growth, such as shopping malls and business park expansion.
Will you be able to find enough qualified people to employ? How will you sell to potential customers or clients? Where will you get the financial resources to start your business?
Get a clear and positive image in you mind of the most likely picture of what your business’s future will be by using all available data and then write a business plan.
It’s essential to have written a business plan. As painful as it might be to write, the busi¬ness plan will serve two critical purposes. Firstly to clarify your thoughts and secondly your business plan is your primary tool for securing financing
Starting your own business can be an exciting and rewarding that often brings financial success, along with a sense of accomplishment and contentment. Starting a business takes planning, determination, hard work and, maybe, just a little luck.
Go for it. And. . . good luck!
Track Your Business Expenses With Business Credit Cards
Are you a business owner or do you have plans of venturing into business? If yes, then this article is for you. It doesn’t matter whether your business is old or new, or what type of business you’re into- if you’re in the business industry, you should take advantage of the benefits of business credit cards. Why is a business credit card a must for every business owner? Track Your Business Expenses Efficiently Primarily, business credit cards help a business manage its finances more efficiently. For instance, tracking business expenses can prove to be a challenge. Keeping inventory of the costs and making sure that not a single cent is missed involves a lot of work. However, this task is made much simpler with the help of business credit cards. How Do Business Credit Cards Help You To Manage Your Business? All purchases that are charged to your business credit cards are automatically included in your account history. Most business credit card companies provide an online account access option to its holders so you can check on the status of your business credit card account anytime. Monthly billing statements will also be sent regularly along with quarterly and yearly summaries of your account. Account summaries are indispensable tools when doing your accounting and bookkeeping tasks. These summaries are also wonderful references when filing your taxes. By checking into your account summary, you can easily identify the items or purchases that are qualified for tax exemptions. Another great feature of business credit cards is the option to distribute extension credit cards to your employees. This way, you can give out credit cards to your selected employees which they can use for official business expenses. Because all expenses charged to these extension credit cards will also be listed in your account statement, you can be sure that you can keep track of your employees’ spending habits and that the cards will be used accordingly. The use of business credit cards also enable a business establish a separate business credit history for the company. By using your business credit card, keeping within your given credit limit, and staying true to your payment obligations, you can build an excellent credit history for your company more easily. Of course, don’t forget that in order for your business credit to be recorded, you need to register with a business credit reporting agency like D&B and Experian. Furthermore, business credit cards help you separate your business funds from your personal money. This is a crucial factor especially as your business begins to grow and as expenses start to multiply and mount up. A separate business account helps you see exactly how much your budget is and thus, will enable you to make business decisions more effectively. Use Your Business Credit Card with Care Caution must also be taken when using business credit cards. For instance, some business owners carelessly use their business credit cards even for their personal purchases. Doing so can easily put you into credit card debt and can cause problems to your business. Therefore, make sure that you’ll use your business credit card strictly for business expenses only. Don’t use it when you’re at the mall or buying your groceries or when dining out with your family. Remember, your business credit card should be a tool to help you with your business and must never be used for personal whims.