Your Top Start-Up Questions Answered You've got questions. We've got answers. What could be more divine?

Entrepreneur.com is a virtual gold mine of information, butsometimes it's nice to have all your top questions and answersin one spot. That's why we decided to create a kind of FAQsection just for homebased startups, culled from questions posed toour former Startup Expert, Keith Lowe. Read on to glean tons ofuseful tidbits from these, your top start-up questions.

e-Business

Q: I have decidedto start a business on the Internet selling computer hardware,software, books and accessories. Do I need to obtain the productsfor sale on my Web site from the manufacturers? Is this allowed, ordo I have to go about it another way in order to sell productsonline?

One of the reasons why I am asking is to make sure this isallowed or whether I will require licenses in order to sell myproducts. I would also like to know if I am too young to dothis.

A: There are a fewways to go about this. One is to buy some products, store them inyour basement and ship them to customers as you sell them. Thepositive side to this is that you can usually make more money ifyou do this by taking more risk. The negative side is thepossibility of getting stuck with stuff you can't sell.That's why you sometimes see department stores having sales for75 percent off-they are trying to get rid of stuff that they boughtand now can't sell.

Another way to go about this is to use a fulfillment company. Ifyou go to www.google.com and search on "fulfillmentcompany," you'll find out more than you want to know abouthow they work. Many will handle everything-they'll give you alist of products and the wholesale prices, you take the orders, andthey do the rest.

I'm not quite sure what you mean when you ask, "Is thisallowed?" If you mean can you buy products, keep them in yourbasement and then resell them, the answer is yes, provided thereare no city zoning restrictions that would prevent you from keepinginventory on the premises. Check with your city's zoningdepartment on any restrictions, for inventory or otherwise. Andcheck with your city on any needed licenses or permits.

When in doubt, a good attorney or accountant will be able toanswer these types of questions, and it's always a good idea toconsult them when starting a business. I think you are on the righttrack, and I would encourage you to keep trying and keep pushinguntil you get this thing going!

Q: I am justitching to get into the business world, but I have limitedfinancial resources. Can you give me any suggestions on low-costbusinesses to start that mostly involve the Internet?

A: Well, there areso many opportunities, I don't know where to start. First youneed to find something that interests you-it is pretty easy to findtons of services to offer (from Web site promotion to retail tobeing a technical writer to you name it).

There are many ways to go about this, and many can be donewithout a lot of risk or investment. One way is to start on eBay.There are lots of people making great money just selling things oneBay (but you need to pick something you have expertise with).I've got a friend who sells several hundred thousanddollars' worth of used golf clubs per year on eBay, works hisown hours and has a blast.

If you wanted to get started with something like that, trybuying and selling a couple of inexpensive things (but be careful!)just to see how things work. One word of caution: To do well oneBay, you must sell something you know a lot about-my friend isvery successful, but mostly because he's an expert in golfclubs.

I've got another friend who quit his job in Atlanta, movedto a small town in Georgia and became a ghost writer-he will writearticles and books for people and get them published. He lives in asmall town with a low cost of living and works in a local coffeeshop. What a life!

The key here is to find something that interests you, hopefullysomething that you can be passionate about!

Getting Started

Buying aBusiness

Q: I currently workfor a small company that has been profitable for about 30 years.The two owners are thinking about getting out, and I'm veryinterested in buying them out and taking this business to a wholenew level. How do I determine a fair price? A friend of minerecommended figuring out what their profits are (after paying outsalaries), then multiplying this figure by five years, andthat's what the purchase price will be. Is this accurate?

A: What your friendsaid is one rule of thumb, and you can sometimes use it, but theproblem is that there are hundreds of rules of thumb! Sometimes youmight use a multiple of cash flow; sometimes you might use amultiple of yearly cash flow. You've got to take many, manydifferent factors into account, including the industry and thestate of the economy.

There are a couple of things you can do. First do someresearch-check out www.bizbuysell.com and www.usbx.com. If you go through a few of these,you'll see some rules of thumb that stick out. Another route isto hire a valuation firm (that's what my company does)-youraccountant or estate planning attorney probably can recommendone-and have them advise you on what that business is worth. Youcan spend a few hundred bucks and probably save a lot of money byhaving them help you avoid a mistake.

Help! Where Do IStart?

Q: I want to startan IV therapy center. I know what to do in the center, but Idon't know where to start with the business part. What do Ineed to do?

A: Getting startedis difficult, and there so many unknowns. The way I often try tosolve a problem like this is to just start a list of things to do,and add to it as I think of more issues. Just write down everythingyou can think of, in no particular order (you can organize later).In your case, your list might look something like this:

• Do I buy or lease an existing building?
• If so, will I have to renovate?
• If so, how much would that cost?
• Can I get a loan? (Talk to a bank.)
• Will I need to build something?
• How much would that cost? (Talk to a builder.)
• How much space do I need?
• How much would my monthly operating costs be (heat, water, gas,mortgage/rent, etc.)?
• How much business would I have to sell to pay these costs?
• After my costs are paid, is there enough left over to make itworth all my time?

And so on. One thing to keep in mind: Knowing how to dotechnical work is very different from running a business that doesthat technical work. (A great book on that subject is MichaelGerber's The E-Myth.)

The main thing that I would do is to go to some nearby towns(where you won't be competing for business), find a few similarplaces and talk to the owners. They will almost certainly be happyto tell you about their experiences and mistakes and give youadvice. Nothing you can do will be more valuable than this.

Finally, for the mechanics of starting a business, I'd sayto start with a good attorney. They'll guide you through themechanics of getting started, and anything you pay them will bemoney well-spent.

Inventions

Q: I came up withan idea for a product, but I have no idea how to make a prototype.My questions are:

1. Who can build me a prototype of my product?
2. How can I trust this person if my product isn't patentedyet?
3. How do I check to see that this product doesn't alreadyexist, and if it doesn't, how do I patent it?
4. How do I locate a manufacturer for the product?

A: You canabsolutely find your way through this, but be prepared to do abunch of research and leg work. It is hard to advise you on whereto go to get a prototype built without knowing more about theproduct. The first place I'd look would be to go to www.google.com andsearch on "XX prototype," with XX being your product.You'll find contract manufacturers who will be able to do itfor you.

There really isn't a good answer for whether you can trustthem not to steal your idea. In general though, I don't usuallyworry about this because I have found that by itself, an ideaisn't worth much. The real value is in the talent, brains anddetermination to make it successful. The vast majority of peopleyou deal with wouldn't steal your idea, and of those who might,most of them don't have the time to use it-they probably havetheir own company and plenty of ideas of their own. It is atremendous amount of work to bring a product to market, and fewpeople would try it with the risk of you suing them hanging overtheir heads.

That being said, my understanding is that this is a bit more ofa risk when dealing with very large companies, which sometimes seestealing ideas as just another way to do business. The best thing,in my opinion, is just to trust your gut and go for it.

The patent process is pretty straightforward-there is a lot ofinformation on the U.S. Patent and Trademark Office Web site. If you moveforward with this, you will probably want to work with a patentagent or patent attorney who can guide you through the process andhelp you with searching for similar products. Also, go back toGoogle for that.

Once you get through all that and are ready to manufacture yourproduct, you'll find many, many companies ready to do that foryou-just search on "contract manufacturers" on Google,and you'll be amazed at how many there are.

Selecting RetailSpace

Q: I operate aninterior decorating business out of my home. The business issuccessful by many standards. My husband and I have discussedbranching out and opening a home specialty store in one of thelocal shopping centers. We've searched for information onstarting a small retail store, but most of the information forstarting a business that we find deals with manufacturing,franchises or other homebased businesses. Where can I findinformation on how to select retail space and how much space isneeded, where to get store fixtures and products, and how tofinance the early stages of a retail store?

A: I talked to afriend of mine who had a great deal to say on this. I thought hiswisdom might help. Here's what he had to say:

First, talk to some small retailers. Ask them how it's goingand how they started. Some may be unwilling to talk to a potentialcompetitor; find someone else. Don't try to hide whatyou're doing; many people will be delighted to offerinformation. Small-business owners tend to be a clubby sort,particularly in a strip sort of area, where more stores means moretraffic and everyone can win. Obviously, this won't work wellif there's already a store of your type in the strip you'relooking at.

The next fairly simple thing to investigate, math-wise, is thecost of retail space. Anywhere there's a blank retail window,there's a phone number of the person who wants to fill thespace. Call them and ask about the cost of the space, what thatincludes, the minimum lease times, and the typical utility costs orwhether they're included. While you're at it, ask abouttypical traffic for the unit.

Check with surrounding business owners, too. Ask how thelandlord is about problems, whether they're happy where theyare, whether they get good traffic. Ask them about who providestheir insurance in the retail sector, and you'll get some agentnames. Ask the lessor what kind of shop was in the space before youand maybe even before that.

Next, find the market that sells what you'd sell, and gothere. There are homebuilders' shows, retail clothing, jewelry,furniture, everything. And until you go and actually talk to somewholesale vendors-the people you'll be buying from to equip andfill your store-you simply won't know what you can andcan't get and how much it will cost you. Some places won'tsell you just what you need; there are often minimum amounts tobuy, particularly for more popular brands.

On the other hand, wholesale vendors may offer you great ideasfor starting your store. Don't be bashful about the fact thatyou're opening a new store. You've been in business for awhile, you're experienced in your field, and now you'readding a retail outlet and looking for experienced vendors to helpyou make it a success. I guarantee they'll talk to you.It's all in how you present yourself. If you seem serious atall, they'll take time and help you. If they don't, findanother vendor-the next booth over is probably perfect. (That'sthe great thing about shows.)

Keep in mind that the time spent managing the store will notonly include the time that your doors are open, but also the timebuying, receiving, stocking and returning inventory. It willinclude trips to the bank (hopefully lots of those!), monthlyinventory checks, tax preparation, licenses and so on. That'snot a reason not to do it; it's just time that you have tospend. But you should be paid for that time, and that should enterinto the "cost" of the store. You should be aware of itupfront, and then make your decision.

Start-UpResources

Q: I'm anabsolute novice about starting a business. Could you please give mesome ideas or a Web site where I could gather step-by-stepinformation on starting a business?

A: Wow, that'sa tall order! There are lots of books on this subject (just try asearch on Amazon.com), such as Start Your Own Business by RievaLesonsky and the staff of Entrepreneur, and lots of Web sites, butI don't know of one that I'd really recommend, other thanEntrepreneur.com! Seriously, if you are looking for"getting off the ground" advice, that's the place tolook. You'll find articles on licenses, incorporating, workingfrom home, you name it.

If I can just give you some basic advice (and a lot of thisdepends on the kind of business you are going to start)-watch youroverhead like crazy-it is easy to get caught up in the excitementof starting a new business and, especially if you came from a bigcompany, think that you need all kinds of expensive equipment,office furniture, etc.-and usually you don't.

Legal Issues

Licenses &Permits

Q: I'm thinkingof starting an e-commerce site that sells products to collegestudents, such as dorm room decorations and lights. What licensesand permits do I need to do this? Should I incorporate if myproducts are coming from a wholesaler and I simply distribute thegoods?

A: My advice is todefinitely form a corporation. And don't do it on the Internetor out of the back of a magazine-get a real attorney to help you.This will cost you less than $1,000 for the whole thing, but if youdon't have the money to do this, try to do it as soon as youcan.

One major reason to incorporate is to separate you personallyfrom the corporation for liability reasons. You may have heard areference to the "corporate veil." In general, youcan't be held personally liable for anything that happens inthe corporation, and your personal assets (house, car, etc.)can't be attacked by creditors or a lawsuit on thecorporation.

In order to have that protection, you must act like acorporation. That means you need to do things like have boardmeetings, take notes and publish minutes in your corporate books.Be sure to have a separate corporate checking account and, if youneed them, corporate credit cards. Don't use corporate moneyfor personal things, and vice versa (unless you file an expensereport). Many people think that they don't need to go to allthis trouble if it is just a one- or two-person company, but inorder to be treated like a company, you must act like one. Yourattorney will be able to give you a lot more details.

To determine what permits and licenses you need, contact yourcity or county. They can tell you exactly what you need.

Registering YourCompany

Q: How do Iregister my company-not the Web page, but the company?

A: Company namesare registered by state. When I've started a company, I'vealways had my attorney do a name search-I think there is a statedatabase that most lawyers have access to. I'm sure you can dothis yourself, but it has always been part of the start-upprocess-my attorney has drafted articles of incorporation, bylawsand the name.

Skipping the attorney and incorporating yourself is somethingthat I absolutely do not recommend. The odds are that somewhere,sometime, someone will wind up suing you. If they do, you want tobe protected personally, and a good set of corporate documents isthe best way to do that.

Subchapter SCorporation

Q: I am startingthe first of three Day Spas in the Tri-Cities, Tennessee/Virginiaarea. My question is regarding subchapter S corporations. I will bestarting the business with one other partner. After much research,we decided on the S corp structure for the tax and limitedliability aspects.

The name of our corporation will be different from the name ofour spa. How does this work tax-wise? Under the corporation, therewill be at least three to six different businesses within the nextfive years.

A: This used toconfuse me considerably. Eventually, I figured it out-you can havean official name for your company "XYZ Corp." and thenhave as many "doing business as" (dba) names as you want.For example, I used to run a contract engineering company(WireSpeed), and with my brother-in-law, I started a golf vacationbusiness (Tucker Golf). As you can see, those companies are verydifferent, with different employees and different clients. Insteadof incorporating a new business for Tucker Golf, we just ran itunder WireSpeed as a dba. Officially it was "WireSpeed dbaTucker Golf," but to the public it was "Tucker GolfCo." We kept a separate set of books, had a separate checkingaccount, separate corporate credit cards, etc. No one knew or caredthat they were really the same company.

Then one day we decided that it was big enough to stand on itsown, so we incorporated Tucker Golf Corp. We did this because wewanted to start out small and cheap and not spend the money onpaperwork for the new company until we knew it would besuccessful.

You can do the same thing even if you don't ever plan onmaking them separate corporations. You will need to register yourdba name with either your local or state government. There arealways tax, accounting and cross-liability considerations with sucha strategy, so contact your accountant and attorney for advice.

Trademarks

Q: I am a graphicdesigner in the process of starting my own company. I am the soleproprietor and principal designer. I would like to use the businessname "Divine Design." I've checked with the officialgovernment trademark registration office via the Web, and there isno business officially registered as that. However, there is a Website, divinedesign.org, that has a TM next to its "DivineDesign" logo. Does this forbid me from using that name for myown business?

A: You have hit onone of the hardest things about starting a business thesedays-getting a decent name! With so many people out thereregistering domain names, it is tough to get a good oneanymore.

As for the trademark, the only way to be sure is to check with adecent corporate attorney. My advice, though, is to come up with aname that is unique to you. Having a cool name like Divineisn't as important as having one that means you! Come up withsomething that you can attach a good domain name to-in the graphicsbusiness, that's probably where most people will find youanyway. Even if you can legally use the name Divine Designs, youdon't want people to be confused or to go to the other Web sitelooking for you.

Management

ChangingDirections

Q: My husband and Irun a fence business from our home, and we offer financing, but itis done through an outside company. We are interested in openingour own finance company, but we don't know where to start. Wewould mainly be offering financing for fence jobs and maybepersonal loans-it depends on the information I can dig up.

A: Are youinterested in doing this because your experience has given you agood feel for which customers are a good risk and which are not?Unless the answer is an absolute yes, I'd think carefully aboutthis. I'm not saying that you don't want to do this, but besure you fully understand the risk. Outside agencies such as theone you are currently using have spent a lot of time and moneydeveloping the risk profiles that let them profitably decide whomto lend to and whom to refuse.

One argument against this is to ask "What kind of businessam I really in?" Is it the fence business or the financebusiness? They are very different, with different risks anddifferent skill sets involved. To me, you have the perfectsetup-you can offer financing, but you don't have to manage itor take the risk. I'd be certain that I understood how muchextra money I might make before I took on the extra headache.

On the other hand, if your goal is to eventually get out of thefence business and be in the finance business, then this is a goodway to ease into it. I'd recommend talking to a banker or twoand letting them explain as much of the process as possible. Thendo some research on the Web, and also look for some financialconsultants who can guide you.

I've had my share of problems trying to do too many thingsat once, and I've learned that focus is crucial to success. Myadvice is to pick one of the two businesses and concentrate allyour efforts on making it as profitable as possible.

Q: I am consideringapproaching several individuals to be on my Advisory Board for mystart up company. However I don't know what to offercandidates. I am raising money for the company by offering LLCunits.

A: I've seedifferent people do this different ways, and my advice is to offeryour advisors some small number of LLC units for every advisorymeeting they attend, plus some amount to agree to be and advisor inthe first place. I think you want these people on your team, youwant them to have incentive for the company to succeed, and youwant to be generous with them. The number could vary but here'smy opinion on a rough amount-if you have 1,000,000 membership unitsoutstanding, I'd consider giving them a few hundred to start,and then after a few months if they are being of value, I'd upthat to a few thousand each. For advisors who are addingsignificant value to the company, even more.

Titles

Q: I am starting aconsulting company and am working on the logistics of getting thecompany up and running. I have a simple question regarding jobdescriptions. What are the major roles and responsibilities for thepresident of a company vs. the CEO?

A: I've come tosee it this way: the president is an inward-facing position, andthe CEO is an outward-facing position. The president (oftencombined with the COO title) is responsible for running thecompany-managing the consultants, interfacing with the customerswhen appropriate, managing the sales and marketing staff, makingsure the bills get paid and money is being spent wisely, motivatingthe employees and so on. The CEO is more responsible for dealingwith the press, vendors (especially your banker, attorney andaccountant) and strategic partners. The CEO spends most of his/hertime on the overall strategy of the company-and setting,understanding and communicating (with employees, vendors andcustomers) that strategy. A CEO's schedule is filled withnetworking, going to lunches and dinners, attending meetings, andlooking for opportunities to tell the company's story. In onesentence, I'd say the CEO is responsible for articulating thevision/strategy, and the president is responsible for executingthat vision/strategy.

Note that until a company is a certain size and can support moreoverhead, one person usually serves as CEO, president and COO (andof course CFO, CTO, IT support, bookkeeper, janitor, etc.).

When I first started out, we had a three-person company, and Ispent a lot of time on job descriptions, employee policies,manuals, etc. Much of that was wasted time, because our real needwas getting new business and making sure we delivered quality onthe business we had. We really didn't need much of that untilwe had 15 to 20 people. This is not to say that procedures,policies and job descriptions aren't important, because theyabsolutely are. As you grow, if you've got good procedures inplace, you don't have to reorganize the company every time youget a little bigger. But don't spend too much time on thisearly on-focus on getting new customers and delivering yourservice, and you'll have plenty of time to develop other thingsas you go.

Money & Finance

Investors Vs.Bootstrapping

Q: I am seekingfunding in one of the most unforgiving economic climates in modernhistory. My company specializes in making CD business cards.Initially, I drew up a business plan with a budget for $150,000.However, this is way too small for venture capital, while being ahefty price tag for an individual investor. By the way, friends,family, credit and SBA loans have all been explored.

So I drastically altered my budget, creating a $28K model. Now,after wining and dining one angel investor for months only to havehim back out in the end, my question is this: Where can I find andapproach people who would be interested in an investment of thissize?

A: Yours is aclassic problem, and it is difficult to solve. Most peopledon't want to invest in unproven businesses or people-they wantto think that something is about to take off, and then get onboard. That doesn't seem fair to an entrepreneur who is tryingto get off the ground, but unfortunately that's the way itworks.

If there is any way to bootstrap it-to take a job and work onthis at night until you got revenue going-that would be my firstrecommendation. Getting investors is a major step, and after youhave them, your life will be harder, not easier. Before that, youare only responsible to yourself-after that, you have to keep theirbest interests at heart, and there is responsibility and liabilitythat goes with that.

If you believe that getting investors is the only way to go,then look around for a local incubator (preferably a nonprofit) bysearching at www.nbia.org. You'll find people there who canhelp you network with investors.

Setting Prices

Q: I am in theprocess of starting a landscape design company. I have managementdegrees, horticulture degrees, affiliations, etc., but I seem to beclueless on where to set my baseline costs. I need some type ofschematic for costing. Should I tell the potential client that itwill cost a flat rate to visit-creditable to the design should theychoose to undertake my services? What if they do not like my designand I have spent the initial time (five to 10 hours plus travel,photos, measuring, etc.)? Reimbursing them would be out of thequestion!

Currently, I visit a client, explain my fees and request $100(nonrefundable)-this covers the usual one- to two-hour interviewand measuring plus travel and photos. It is barely enough. Halfwaythrough, I show them where my design has taken their yard, and atthat point they may change it (somewhat) without penalty. Once wehave all agreed on a direction the yard will take, I bring thedesign back to the drawing board for the homestretch. Uponfinalization, I request the balance. The problem is, I am leavingmyself open to a lot of gray area regarding personal interpretationof the design, and consequently nonpayment. I have not run intothis yet, but it's only a matter of time.

A: It seems to methat you really have a handle on this business and are asking allthe right questions. After reading this, I'm struck by thesimilarities between your business and mine (contract softwaredevelopment). The sales process is very similar.

My thoughts are that you should develop a nice one-page"fact sheet" or something that explains how you work. Init, I'd lay out the things that you will deliver and whatyou'll charge for them. This will give people a clearunderstanding that this is how you make your living and that theyshouldn't expect free stuff.

At my company, we developed a two-phase development process. Wewould have a meeting with the client and learn about the project,and then tell them that phase one was the design phase. For that,we charged $X per hour, and at the end of that they would have acomplete design for the project. Then we could do theimplementation phase for $X per hour or they could take our designto someone else.

Now, your business seems to be different in that you only havethe design phase, but I think you can handle it in the same way. Iwould meet with potential clients and tell them that there is nocharge for an initial meeting. I'd talk about what they aredoing, give them some ideas (a taste of your talent) and learn whatthey're looking for. Then I'd go back and work up a designproposal, saying that you charge $X per hour and that you estimatethat this project will take between X and Y hours. Then bill themfor every single hour you spend on it.

Depending on how large a job it is, you can give thempreliminary reports to show them the direction you're taking-ifthey don't like it, they can either change it or stop it.Either way, you get paid. If they don't like your design, well,that's the way it goes.

The chance that any client of yours is taking is that they willneed to spend a little money to see how good you are. I think thatanyone who isn't willing to do that is probably going to bemore pain than they are worth, and you probably don't want themas a customer anyway.

Partnerships

Contracts

Q: I am consideringstarting a hair salon with two other people. We have an opportunityto buy an existing salon at a very reasonable price. One partner isvery experienced with running salons and is also a licensedbeautician. She will be hired only to run the business, but shewill not have ownership of the business. The other partner and Iwill split the upfront financial requirements and handle the books,bills, etc. We are planning to incorporate the business and splitownership. However, I want to know how the business contract shouldbe organized so that my financial interest will be protected. Howis this explained in the contract?

A: It sounds likethis is a reasonably simple deal, but there is only one place to goto be sure that your interests are protected. You definitely needto talk to an attorney and get them to draw up a contract for you.There are tons of gotchas in something like this, and unlessyou've done it a lot, you won't think of all of them.

That said, I do have one piece of advice: While it is importantto have an attorney to draw up a contract, I don't believe abusiness relationship should be based on the letter of thecontract. By that I mean that you must draw up the contract so thatit is fair to everyone and so that everyone gets what they want outof the deal. Also, make the contract such that everyone can have away out, if they want it, that doesn't hurt the other partners.I say this because if you ever have problems in the relationshipwith either partner (and the odds are that you will), you'llneed a way to gracefully separate. Long term, if everyone isn'thappy and doesn't think they got a good deal, then it won'twork. And even though you may have a legal right to force someoneto do something, if they aren't willing, you will have a veryhard time running a successful business. So get an attorney to drawup a contract that is fair to all parties and spells out what isexpected of everyone.

Do You Need aPartner?

Q: I will begraduating from Penn State University next December, and I amseriously interested in starting my own business. I served fouryears in the military, and during that time I was successful inwriting a business plan that was approved by a bank for financing.I turned that offer down because I was not ready to live in thatpart of the country. My question is this: I have a plan for abusiness, but I could really use the help of having a partner. Whatshould I look for in that person?

A: That's atough question. I think finding a partner is like finding a mentor.(See my article "Finding a Mentor" formore on mentors.) However, since you will depend much more on apartner than you would on a mentor, you should choosecarefully!

Have you considered why you really need a partner? Is it moralsupport? Is it that you have a big hole in your knowledge or skillbase and need someone to complement your skills? I've started abusiness with someone I didn't know, and it didn't work outvery well. The last few that I've started have been with peopleI've known and trusted for a long time. You can never becompletely sure if you've selected the right person, but thebetter you know them, the more likely you'll make a goodchoice.

If you decide you really need a partner, then get as manypersonal references as possible, and check them carefully.

Who's theFounder?

Q: My partner and Iare having a hard time determining the correct usage of the term"founder." Initially my partner, Jill, and I had aprevious business relationship. Because of this, when Jillsuggested selling gourmet foods through home parties, she calledme. My response was, "I'd invest in that," and Idid.

For two years, the company operated out of a building on myproperty, and Jill put in countless hours getting the business offand running. For four and a half years, I had little involvementother than some encouragement now and then. At that point, thebusiness grew to the point that it needed someone like me to playthe role of COO. Until recently, Jill and I titled ourselvespresident (Jill) and vice president (me). Because neither titlerefers to foundership, we are struggling with correct usage of theword founder. Is she the founder and I co-founder? Are we bothfounders? Are we both co-founders?

A: I would consider youboth co-founders-you both started the company (you with money, herwith time). My advice is not to worry too much about that. If youare searching for a way to refer to yourselves, I think co-founderssounds fine. You might also consider"principal"-that's more of a financial industry term,but it sounds pretty good and seems to fit here. I wrote an articleon titles that you might find helpful, "The Relevance of EmployeeTitles."

Sales & Marketing

Advertising

Q: I am located ina small town in south Georgia. I've been in business for a fewmonths now. I only have six Web hosting customers, and I'mtrying desperately to get more. I am planning on putting ads in thenewspaper in a local town that is a lot larger and will reach manymore people. What do you think? Any advertising advise?

A: I'd becareful about spending a lot money on newspaper advertising.I've not found that to be very effective, and it can be quiteexpensive. Instead, get your own site in tip-top shape, then spendmost of your time promoting it in the search engines and trying todrive as much traffic to it as possible. I've had a good amountof success in several different businesses by putting most, if notall, of my marketing efforts into driving traffic to my site viathe search engines. Learn more about traffic at Web SiteSecrets and Web Site Garage.

You should also network like crazy. The bottom line is to meetas many people as possible, tell them what you do and ask them ifthey have any business for you.

GettingCustomers

Q: I own a computernetwork integration firm. To be honest, the business only exists onpaper at the moment, along with a bank account and a credit card.Only a few people seem to know I exist at all, and that's wheremy question comes in. How do I get customers? My problem lies inthe fact that I am in a small urban community, with small urbancommunities surrounding it.

A: Boy is thisfamiliar. I was talking about this question with a friend of mine(with whom I've started several businesses), and he and I wereremembering how hard this was for us. Here are some of histhoughts:

• Find a local coffee shop/Internet café, and hold a coupleof "seminar" sessions. A local guy I know of is doingjust that, and that's how I found out the shop exists.
• Have some business cards printed up, then frequent places whereyour target audience (maybe overworked IT folks?) frequent and"drop" them all over the place.
• Put up fliers or cards at local grocery stores. Offer to helpthe local library manage its computer services, and see if, inreturn, they'll let you post a "Computer services providedby XX" in the library or leave some cards around.
• Go to the local bookstore, and find books that are for what youdo, but on a beginner level. Open each one, and slip your card inthe table of contents with a tiny "Let me help!" on thefront.
• Contact your local chamber of commerce to get a list ofbusinesses in your area that might be interested in your services.Write a letter to each one (not a mass mailing; you've got timeto do each one separately) explaining who you are and whatyou're available to do. Tell them satisfaction is guaranteed(nobody in IT seems to do that) to get your foot in the door. Evenif a few of them rip you off for a few hours, you'll getcustomers, contacts and experience.
• Offer to help local churches that are big enough to have an ITstaff, again either for free or for very little, in return forword-of-mouth referrals.
• Radio stations, newspapers, TV stations-anyone who has anaudience for their opinion-find a way to get them to like you andtalk about you (which is free, and very effective,advertising).
• Ask local computer stores (preferably independent ones, anddefinitely ones that you buy from) if you can leave cards or fliersnear the front desk. Find ones that do not already have a competingservices group, and ask if they ever get requests for business ofthe sort that you do. Offer them a 10 percent cut of the entire jobfor any referrals that you end up getting. Again, you might not dothis forever, but it's a great way to get some exposure.
• Target small, nontechnical offices, and see if you can find theperson who's been saddled with "keeping the networkup" responsibility. This person is probably nontechnical andprobably hates it, but is afraid to call in a "big-timeconsultant" because of the money. Offer to do a freeassessment or a free first service call (up to an hour, forinstance). If they like what you do and you fix their problem,they'll call you back at your regular rates (be sure to havethese fixed and handy, preferably in a flier or on the back of yourcard, when you go on these "free" introductorycalls).
• Get a magnetic sign that you can slap on the door of your carwhile you drive around town. Spend a few lunchtimes driving tolocal computer or office supply megastores.
• See if there are any small-business associations that meetmonthly in your town. If there are, slap on a tie, grab somebusiness cards and go see what's happening.
• Drop your business cards in every "free lunch foryou" restaurant bowl you can find. This increases your chancesof getting noticed, and after all that work, it's nice to get afree lunch.

Word-of-Mouth

Q: I'm lookingto start a carpet-cleaning business, and I'm wondering how todetermine the demand for this service and the level of competitionin my geographical area. Also, with the recent recession, do youthink I should worry that people will stop purchasing this type ofservice?

A: The majority ofyour competition would probably be listed in your local phone book.But you may or may not care about how many other people arecompeting with you. I say that because in my experience, this is abusiness where you can start small and grow rapidly with goodword-of-mouth if you provide good service. If you don't have toquit your job and do this full time, this could be a very gooddeal.

My opinion is that there is a lot of money to be made in thisbusiness by focusing on service, because so few people give goodservice. My personal experience with carpet cleaning is that mostof the people who offer it show up late, do an OK job, aren'tvery careful in your house, and overall have a poor appearanceand/or attitude. I think that if you can always keep appointments,do a good job, be careful and respectful of people's houses,look professional and be polite, you can clean up (no pun intended)in this business.

If you start this business, be sure to ask each client, afteryou've done a good job and they are happy, if they would giveyou the names of two other people who might want their carpetscleaned. If you can call someone and say "I just cleaned yourfriend Sarah's carpets, and she thought you might be interestedin getting yours cleaned-please call her and ask her if she washappy with my work," then you'll have more business thanyou can handle.

Taxes

Contractor orEmployee?

Q: Currently I amemployed as a developer for a small company. I have no benefitsother than three weeks of vacation. I would like to start my ownbusiness and work as a contractor for this company. What advantageswould there be to this arrangement, both for my current company andfor me?

A: Your accountantcan give you a lot more detail, but the bottom line is thatyou'll need other clients to be considered a contractor. If youbecome a contractor and only work for this one company, theIRS will classifyyou as an employee anyway. There is a list of rules that you canget (your accountant or the IRS will have them) that tells youwhether you are a contractor or an employee.

That aside, advantages for you would be more flexibility (ifthey tell you when or where to work, then the IRS will say you arean employee), the ability to find other projects (and perhapsbecome in demand enough to raise your rates), and the feeling ofbeing your own boss. The disadvantages are that you'd have topay your own Social Security and employment taxes-be sure that ifyou become a contractor, you get more than you get now, becauseyour expenses will increase. Plus, the company will have a lot lessof a commitment to you-it is much easier to "lay off" acontractor than an employee.

Deductions

Q: I am starting anHR Consulting and Training business. My question is very broad:What are deductible expenses for a small, homebased start-up?

A: You'lldefinitely want to talk to an accountant to get the officialversion, but here is some basic data:

Any miles that you drive for business purposes-to a meeting, tobuy company supplies and equipment, and so on-can be deducted. Theeasiest thing (and the most defendable to the IRS) is to get amileage book from any office supply store and, whenever you get inyour car, ask "Is this for business?" If so, record thebeginning and ending mileage on that trip. Some people combinepersonal trips with business trips, but I'm not sure how theIRS views that.

Other things you could probably deduct would be computerequipment in your home office, possibly furniture and othersupplies for that office, a digital camera or camcorder if you canshow that you use it in your business, magazine subscriptions, andmeals with clients. The rules on these things are always changing,so definitely check with an accountant.

Here are some good resources to help you:

• CCH Business Owners Toolkit's Home Office DeductionCalculator
• IRS
• Quicken software

WithholdingTaxes

Q: I have beenasked by a family in our city to supervise the homeschooling oftheir three children. They would pay me $450 per week. Obviously, Iwould owe taxes on this money. Would I be considered a smallbusiness and responsible for my own taxes and FICA, or are thepeople who hire me responsible for this?

A: You will need tosit down with them and decide one way or another. If I had toguess, I'd say that they have assumed you'll pay your owntaxes, and this is the typical way (as it is a fair amount of workfor them to make you an employee). If that's the case, thenmake sure you know how much taxes and FICA you'd owe, andsubtract that from the $450, and make sure it is worth it for thatamount. You may need to negotiate a higher amount after you takethat into consideration.

Any accountant can explain this in detail, and I'd recommendthat you contact one for detailed advice. This isn't somethingyou want to mess around with-you want to make sure everyone is onthe same page.

Teen Startups

Choosing aMajor

Q: I am collegestudent, and I want to start my own business eventually. What majorwould be best for a future entrepreneur?

A: I'm not surethere is any one that would be best. As an undergraduate, you canmajor in just about anything. I majored in electrical engineering,then worked for a big company as a software developer, then amanager, then became an entrepreneur with a software developmentstart-up, so my engineering background helped a lot. I know lots ofentrepreneurs who have business-related or marketing degrees. Somuch of this depends on the person.

If you are a very technical person, I'd consider getting anengineering or computer science degree as a base. If not, amarketing degree would serve you very well-many entrepreneurs arevery weak in marketing. A lot depends on your personality: If youare the kind of person who would do well in engineering, forexample, the attributes that allow you to focus on one thing for along time probably aren't great for schmoozing people (animportant sales skill), and vice versa-most salespeople would havea very hard time spending much time in front of a PC.

Financing

Q: I am trying tostart a business in the automotive sales and performance industry.I have done a lot of research on obtaining my Florida dealer'slicense and plan to buy and sell cars as one business while usingthat location to open an automotive performance shop. Here are thetwo problems I continue to run into: 1) I am 19 years old, and 2) Idon't have a lot of upfront capital or assets to pledge forequity. How can I get the start-up financing I need? I am lookingfor less than $50,000. My partner is 20 years old and has less debtand a better credit score than me.

A: I'm not anexpert on microloans, but that might be a good way to go if it isopen to you. Unfortunately, as you probably expect, there isn'tan easy answer to this. Because of your age, most people willassume that you are going to make a lot of mistakes before you getgood at your business. Probably the best bet for you and yourpartner is to start out small and bootstrap yourself. Get yourdealer's license (that doesn't cost much); buy a few carson credit; and, after you sell them, put the profits back intobuying more. Eventually you'll establish yourself, and creditwill start to be easier to get.

Another option is to try to find a store or car lot that someonewants to get out of. There was a lot in my town recently where theguy had several cars and maybe 10 more on consignment, and heneeded to move out of town so he was going to let the whole thing(including the office and equipment) go for something like $30,000.If you can find a good deal like that, that might give you yourstart.

One last tip: Go to our new online magazine for teens, TeenStartUps.com.You'll find a lot of helpful advice for people like you tryingto overcome the age barrier and get financing for theirstart-ups.

Sorry I couldn't be more helpful, but you should understandthe reality. Don't let this hold you back, though-keep pushingahead and you'll make it!

I'm Young...ReallyYoung

Q: I'm a12-year-old Bill Gates. I love making money. But I just need somesimple advice on starting a business. I know I can't gooverboard at my age-I hate those child labor laws. They hold meback from making money on something larger than a lemonade stand!But if you can advise me, and kind of guide me through the steps, Iwould surely appreciate it.

A: I like yourattitude. You are right that your age will hold you back a bit, butdon't let that get you down. I became an entrepreneurreasonably late in life (from your perspective anyway) at age 32. Ihave sometimes thought back and regretted not preparing myselfmore-I didn't even know I was going to be an entrepreneur untiljust before I quit my job and dove in.

If I were 12 years old again, here is what I'd do. I'dtake the long-term view and plan my entrepreneurial career. I'deducate the heck out of myself. I'd read magazines likeEntrepreneur and Web sites like Entrepreneur.com (which, by the wayincludes the teen-focused TeenStartUps.com). I'd listen to audiotapes from people like Zig Zigler, Brian Tracy and Michael Gerber.I'd take classes that helped build my knowledge base. I'dnot worry too much about my age and about its limitations. I'ddo a lot of research on the Internet and find out what other youngentrepreneurs are doing. I'd get part-time jobs in smallcompanies and offer to do anything to learn how to do varioustasks. If you do all these things, you'll be way ahead ofeveryone else when it is time to select a major in college.

I Want a BusinessNow

Q: I am a studentworking toward my business management degree. I am extremelyinterested in owning my own business. My ultimate goal is toown/operate my own resort. Obviously, I don't have the time ormoney for that right now, but I really want to start my ownbusiness immediately. I am extremely interested in public safety; Iknow the field really well. Do you think there is something I cando part time, selling the equipment or somehow making my ownbusiness out of it?

A: One of the hardlessons that I've learned in my life (at the expense of a lotof time, effort and money) is that experience is way more importantthan I had ever thought. When I got out of college, I worked as anengineer and a manager for 10 years, never thinking about becomingan entrepreneur. When I did become one, I really had to start fromscratch, and therefore I had to make a lot more mistakes than Iwould have if I'd been preparing for that all along.

So I'd ask you to think about a few things. First, get asmuch practical experience as possible on someone else's dime.Find a job, and when you are looking for that job, don't makesalary, vacation time or benefits your primary concern-look forsomething that will give you the training and experience you needto go out on your own.

If the desire to be on your own is too great to spend the timeto establish a skill base (or if you already have some businessskills or experience), then I'd recommend you start somethingpart time and see what success you can have while you finish yourdegree. That would be a great proving ground, and if the first orsecond thing you tried didn't work out, keep looking-you'llfind something that does.

Without knowing a lot more details, it's difficult to givespecific advice, but I think you are on the right track with thethought of testing your sales skills with a product before divingin to something more major.

Keith Lowe is a principal of Pretium CapitalGroup, a boutique investment bank in Huntsville, Alabama. Keithalso mentors new entrepreneurs; serves as chairman of the board forBiztech, anonprofit high-technology business incubator; and is a co-founderand officer for the Alabama Information TechnologyAssociation.