Tax deductions, pricing, scoping out your competition and more answers to some of your common questions
Keith Lowe is taking a break from his Ask the Expert column on Entrepreneur.com, but here's a collection of some common questions he's received and his responses.
Q: I am getting ready to buy a small greenhouse and put it in my backyard. Should I set up the company before I purchase the greenhouse and start using the business as a tax deduction even before I actually start selling my orchids?
A: You definitely want to talk to an accountant to make sure you get this straight, as laws vary by state. My understanding is that you can deduct the expenses (just keep careful records of them) whether you are a corporation or not.
Q: My question is about pricing: How do we accurately price each of our handmade garments to make sure we can make a profit but still be competitive? If, for example, a garment costs us $10 to have made, what is the fair markup we should then ask from retailers?
A: Pricing is always a tough question. I've heard of basic rules of thumb saying that if your cost is $10, you should sell it for $20, but I can't even remember where that came from, so I don't know how accurate it is. I would try to find a retail consultant and let that person help-here is one I found with a quick search: www.retaildoc.com/main.htm. Really, if you were to ask your stores what the typical markup is and what they are willing to pay, you could get some good information that way.
Q: I am planning to start a mail-order business and I'm still deciding on what products to sell. My problem is that I really don't know what the market wants. I already did a survey, but it doesn't seem very complete. I have one major competitor in my area, and I want to know what items he is selling and to whom. In short, I want to know information from my competition. How do I find out? I can't just call him and ask for the information, right?
A: You can call him, but he probably won't tell you. Your best bet is to find a similar business in another town (where you won't be competing with them) and ask them--just be honest with them and tell them what you are planning to do, and most will be happy to help you.
Q: My partner and I are in the beginning stages of putting together a business plan for a limo service. I am not finding information on this industry to be easily accessible. What is the best way to do the necessary research to formulate a business plan to submit to a lender?
A: You are going to have a hard time getting a loan for this. While there are exceptions, most bankers don't loan start-up money. They want to loan money based on assets. If you have significant personal resources, they might loan you money against that, but they really shy away from loaning start-up money. My advice would be to talk to some of the people who are already in the limo business. (You might need to go out of town, so you won't be competing with the people you are asking for advice.) Here are some links that might also help:
Q: I am starting a homebased recruiting company and have concerns about using my home address on my marketing materials. I have given thought to using a P.O. Box, but worry that because this is a new company, clients may doubt the legitimacy of my business. What are your thoughts?
A: If you don't want to use your home address (which is fine), go to one of those private mailboxes (Mail Boxes Etc. is an example) and rent a "suite"-really a P.O. Box, but your address is XXX Ave., Suite YYY, and they'll accept FedEx and UPS packages for you. It is very cheap and will give you the address you are looking for.
Want to see more Q&As from Keith Lowe? See Your Top Start-Up Questions Answered.