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Make big sense of small business


Small Business For Dummies has been a leading resource for starting and running a small business. Calling upon their six decades-plus of combined experience running small businesses, Eric Tyson and Jim Schell once again provide readers with their time-tested advice and the latest information on starting and growing a small business.


This new edition covers all aspects of small business from the initial business plan to the everyday realities of financing, marketing, employing technology and management-and what it takes to achieve and maintain success in an ever-changing entrepreneurial landscape.





Write a strategic business plan

Start, establish, or rejuvenate a small business

Hire and retain the best employees

Get a small business loan



If you're a beginning entrepreneur looking to start and run your own small business, this book gives you all the tools of the trade you'll need to make it a success.

Small Business For Dummies, 5th Edition

Introduction 1





About This Book 2





Foolish Assumptions 3





Icons Used in This Book 4





Beyond the Book 5





Where to Go from Here 5





Part 1: Getting Started with Small Business 7





Chapter 1: Is Small Business for You? 9





Defining Small Business 10





Small (and large) business basics 10





Financial basics: The same whether you're big or small 11





Small business: Role model for big business 12





Different people and businesses, similar issues 13





Our definition of a small-business owner 14





Do You Have the Right Stuff? 15





Getting started with the instructions 16





Answering the questions 16





Scoring the test 18





Analyzing your results 18





Identifying the Pros and Cons of Owning a Small Business 20





The reasons to own 20





The reasons not to own 21





Exploring Alternatives to Starting a Business 23





Chapter 2: Laying Your Personal Financial Foundation 27





Getting Your Financial Ducks in a Row 27





Cutting the umbilical cord 28





Improving your business survival odds 28





Maintaining harmony on the home front 29





Creating Your Money To-Do List 30





Assess your financial position and goals 30





Shrink your spending 34





Build up your cash reserves 35





Stabilize income with part time work 35





Assessing and Replacing Benefits 36





Retirement savings plans and pensions 36





Health insurance 37





Disability insurance 37





Life insurance 38





Dental, vision, and other insurance 39





Social Security taxes 39





Time off 40





Managing Your Personal Finances Post-Launch 40





Chapter 3: Finding Your Niche 43





Why You Don't Need a New Idea to Be Successful 43





Choosing Your Business 45





Consider your category 45





Take advantage of accidental opportunities 48





Inventory your skills, interests, and job history 48





Narrow your choices 50





Go in search of fast growth 51





Take advantage of government resources 53





Inventing Something New 54





Say yes to useful invention resources 55





Run away from invention promotion firms 55





Recognizing Your Number One Asset - You 57





Chapter 4: First Things First: Crafting Your Business Plan 59





Your Mission: Impossible If You Fail to Define It 59





Writing your mission statement 60





Keeping your mission in people's minds 61





Your Business Plan: Don't Start Up without It 63





Using your business plan as a road map 63





Finding financing with your business plan 64





Writing Your Business Plan 65





Part 1: Business description 66





Part 2: Management 67





Part 3: Marketing plan 68





Part 4: Operations 72





Part 5: Risks 74





Part 6: Financial management plan 74





Keeping Your Plan Current 78





Chapter 5: Making Financing, Ownership, and Organizational Decisions 81





Determining Your Start-Up Cash Needs 81





Using Your Own Money: Bootstrapping 84





Profiling bootstrappers 85





Tapping into bootstrapping sources 86





Outsourcing Your Capital Needs 88





Banking on banks 89





Getting money from nonbanks 90





Exploring Ownership Options 96





You as the sole owner 96





Sharing ownership with partners or minority shareholders 98





Deciding between sole and shared ownership 99





Going public: Cashing in 100





Deciding Whether to Incorporate 102





Weighing unincorporated options 102





Considering incorporated business entities 106





Part 2: Buying an Existing Business 111





Chapter 6: Exploring Buying a Business 113





Understanding Why to Buy a Business 113





To reduce start-up hassles and headaches 115





To lessen your risk 115





To increase profits by adding value 115





To establish cash flow 116





To capitalize on someone else's good idea 117





To open locked doors 117





To inherit an established customer base 117





Knowing When You Shouldn't Buy 118





You dislike inherited baggage 118





You're going to skimp on inspections 118





You lack capital 120





You think you'll miss out on the satisfaction of creating a business 120





Recognizing Prepurchase Prerequisites 120





Business experience and training 121





Down-payment money 122





Chapter 7: Finding the Right Business to Buy 123





Defining Your Business-Buying Appetite 123





Generating Leads 125





Perusing publications 126





Networking with advisors 126





Knocking on doors 126





Enlisting business brokers 127





Considering a Franchise 130





Franchise advantages 130





Franchise disadvantages 131





Evaluating Multilevel Marketing (MLM) Firms 132





Being wary of pyramid schemes 132





Finding the better MLMs 133





Checking Out Work-from-Home Opportunities 134





Chapter 8: Evaluating a Business to Buy 137





Kicking the Tires: Doing Your Due Diligence 138





Examining owners' and key employees' backgrounds 138





Finding out why the owner is selling 141





Surveying the company culture 142





Inspecting the financial statements 145





Uncovering lease contract terms 151





Evaluating Special Franchise Issues 151





Thoroughly review regulatory filings 151





Evaluate the franchiser's motives 152





Interview plenty of franchisees 152





Understand what you're buying and examine comparables 153





Check with federal and state regulators 153





Investigate the company's credit history 154





Analyze and negotiate the franchise contract 154





Chapter 9: Negotiating Terms and Sealing the Deal 155





Valuing the Business 156





Exploring valuing methods: Multiple of earnings and book value 156





Getting a professional appraisal 158





Tracking businesses you've explored that have sold 158





Tapping the knowledge of advisors who work with similar companies 159





Consulting research firms and publications 159





Turning to trade publications 159





Enlisting the services of a business broker 160





Developing Purchase Offer Contingencies 160





Allocating the Purchase Price 162





Doing Due Diligence 162





Think about income statement issues 163





Consider legal and tax concerns 164





Moving Into Your Business 164





Part 3: Running a Successful Small Business 167





Chapter 10: The Owner's Responsibilities in the Start-Up and Beyond 169





Dotting Your i's and Crossing Your t's: Start-Up Details 170





Buying insurance 170





Paying federal, state, and local taxes 172





Negotiating leases 172





Maintaining employee records 173





Getting licenses and permits 174





Signing the checks 174





Outsourcing: Focus on What You Do Best 174





Surveying the most commonly outsourced tasks 175





Figuring out what to outsource 176





Simplifying Your Accounting 177





Introducing some common systems 178





Choosing the system that's right for you 184





Controlling Your Expenses 185





Looking at fixed and variable expenses 186





Understanding zero-based budgeting 187





Managing Vendor Relationships 188





Dealing with Bankers, Lawyers, and Other Outsiders 190





Bankers 190





Lawyers 192





Tax advisors 194





Consultants 195





Governments 196





Chapter 11: Marketing: Products, Pricing, Distribution, Promotion, and Sales 197





Marketing in a Nutshell 198





Tackling Product and Service Development 199





Pricing: Cost and Value 201





Developing your pricing strategy 201





Picking the right price 204





Distribution: Channeling to Customers 205





Direct distribution of products 205





Indirect distribution of products 209





Deciding on distribution 210





Promotion: Spreading the Word 210





Networking (It's not what you know . . .) 211





Recognizing the power of referrals 212





Online marketing 213





Media advertising 219





Publicity 225





Sales: Where the Rubber Hits the Road 227





Pitting in-house versus outsourcing 227





Becoming a sales-driven company 229





Chapter 12: Tapping Technology 233





Making the Decision: Cloud-Based versus Internal Server 234





Improving Your Business's Efficiency 235





Managing your time 235





Providing supplemental web services 236





Lowering your administration costs 237





Scanning and managing inventory 238





Managing finances 238





Expanding Your Research Possibilities Online 239





Brainstorming business ideas 239





Finding and obtaining financing 240





Buying a business or franchise 241





Chapter 13: Keeping Your Customers Loyal 243





Retaining Your Customer Base 244





Getting it right the first time 244





Continuing to offer more value 245





Remembering that company policy is meant to be bent 245





Learning from customer defections 246





Recognizing and practicing customer service 248





Dealing with Dissatisfied Customers 252





Listen, listen, listen 252





Develop a solution 253





Chapter 14: Managing Profitability and Cash 255





Cash Flow: The Fuel That Drives Your Business 256





Making Sense of Financial Statements 259





The profit and loss statement 259





The balance sheet 262





Turning the Numbers into Action 265





Understanding Key Ratios and Percentages 266





Return on sales (ROS) 267





Return on equity (ROE) 267





Gross margin 268





Current ratio 268





Debt-to-equity ratio 268





Inventory turn 269





Number of days in receivables 269





EBITDA 270





Managing Your Inventory 270





Collecting Your Accounts Receivable 272





Finding paying customers 272





Managing your accounts receivable 273





The Three Ways to Improve Profits 274





Decreasing (or controlling) expenses 275





Increasing margins 278





Increasing sales 280





Chapter 15: Learning from the Experiences of Others 281





Utilize Mentors 282





Finding your mentor 282





Building the mentor-mentee relationship 283





Network with Peers 284





Form a Board of Advisors 285





Reaping the benefits of a board 285





Forming your advisory board 286





Find a Partner 287





Join a Trade Association 289





Find a Business Incubator 291





Locate a Small Business Development Center 291





Give SCORE a Try 292





Tap into Small-Business Information 292





Part 4: Keeping Your Business in Business 295





Chapter 16: Finding and Keeping Superstar Employees 297





Assembling a Top Team 298





Hiring hints 299





Mastering the interview process 303





Training: An Investment, Not an Expense 305





Motivating: Pay and Performance Issues 306





Designing a compensation plan 308





Get SMART: Goal-setting that works 310





Writing performance expectations 313





Reviewing an employee's performance 314





Parting Company: Firing an Employee 317





Designing Flexible Organization Charts 319





Valuing Employee Manuals 321





Turning the Tables: Characterizing Successful Employers 323





Flexibility: The bending of rules 323





Accountability: Where the buck doesn't get passed 324





Follow-up: The more you do it, the less you need it 325





Chapter 17: Providing Employee Benefits 327





Seeing the Real Value in Retirement Plans 327





Getting the most value from your plan 329





Convincing employees that retirement plans matter 332





Deciding Whether to Share Equity 333





Stock and stock options 334





Employee Stock Ownership Plans (ESOPs) 335





Buy-sell agreements 336





Including Insurance and Other Benefits 336





Health insurance 336





Disability insurance 340





Life insurance 343





Dependent care plans 343





Vacation 344





Flexible hours 344





Flexible benefit plans 345





Chapter 18: Handling Regulatory and Legal Issues 347





Navigating Small-Business Laws 347





Suffering through Start-Up Regulations 349





Complying through licensing, registrations, and permits 349





Protecting ideas: Nondisclosures, patents, trademarks, and copyrights 356





A business prenup: Contracts with customers and suppliers 359





Laboring over Employee Costs and Laws 360





Chapter 19: Mastering Small-Business Taxes 361





Getting Smarter about Taxes 363





Reading income tax guides 363





Using tax-preparation software 364





Hiring help 364





Keeping Good Financial Records Leads to Tax Benefits 367





Knowing (And Managing) Your Tax Bracket 368





Staying on Top of Employment Taxes 369





Be aware of your benefit options 369





Stay current on taxes 369





Report your work with independent contractors 370





Hire your kids! 371





Spending Your Money Tax-Wisely 372





Take equipment write-offs sensibly 372





Don't waste extra money on a business car 373





Minimize entertainment and most meal expenditures 373





Grasping the Tax Implications of Your Entity Selection 373





Chapter 20: Cultivating a Growing Business 375





Recognizing Growth Stages 376





The start-up years 376





The growth years 377





The transition stage 377





Resolving Human Resources Issues 379





Identifying important HR concerns 379





Dealing with HR issues in three stages 380





Addressing Time-Management Issues 381





Choosing Your Management Tools 383





Management by objective 385





Participatory management 385





Employee ownership 385





Quality circles 386





Total Quality Management 386





Reengineering 386





Open-book management 388





Troubleshooting Your Business Challenges 388





Filling out a troubleshooting checklist 388





Taking the five-minute appearance test 389





Redefining Your Role in an Evolving Business 391





Making the transition to manager 392





Implementing strategic changes 393





Part 5: The Part of Tens 397





Chapter 21: Ten Mistakes You Don't Want to Make 399





Failing to Use Financial Statements to Manage Your Business 399





Failing to Prepare an Annual Budget 400





Failing to Utilize Your CPA 401





Failing to Understand How Marketing Applies to Your Business 402





Hiring Too Quickly 403





Taking Too Long to Terminate Nonperforming Employees 403





Assuming That Your Employees Are Motivated by the Same Things You Are 404





Considering Training to Be an Expense and Not an Investment 405





Failing to Take Advantage of Available Resources 406





Failing to Maintain an Up-to-Date Organization Chart 406





Chapter 22: Ten Tips for Small-Business Success 409





Focus on the Execution 409





Assemble a Team of Superstars in Game-Breaker Positions 410





Work Hard, Get Lucky 411





Realize the Difference between Profits and Cash 412





Hire for Attitude, Teach Skills Later 413





Create an Exit Strategy 414





Grow or Die - There's No In-Between 415





Prepare for the Transition to Manager 415





Develop an Insatiable Appetite to Learn 416





Do What You Love 417





Chapter 23: Ten Ways the 2017 Tax Reform Bill Benefits Small Business 419





Corporate Income Tax Rate Reduction 420





. . . and (Some) Simplification 420





Individual Income Tax Rates Reduced 420





20% Deduction for Pass-Through Entities 421





Better Equipment Expensing Rules 422





Increased Maximum Depreciation Deduction for Automobiles 422





Limited Interest Deductions 423





Reduced Meal and Entertainment Deductions 423





Elimination of Health Insurance Mandate 423





Revised Rules for Using Net Operating Losses 424





Index 425