president of the National Association of Home-Based Businesses in Owings Mills, Maryland. “In addition to low overhead, [self-employed people who work from home] also enjoy the benefits of no time spent commuting, greater flexibility and they can set their own hours,” says Lewis. Recent U.S. Census Bureau data indicate that 58% of black-owned businesses with no employees operate from home.
“I don’t have the overhead of a store, so I can cut prices 30% to 40%,” says craftswoman Cain.
Another option: executive centers with shared or co-op office spaces where you can meet clients and have access to services. Generally, fees range from $125 to $250 per month, although conference rooms can run from $10 to $25 per hour. But if you must operate a retail business from a storefront location, thoroughly investigate the neighborhood, parking, proximity of competitors and accessibility before renting or making a purchase, says Bernard B. Kamoroff, author of Small Time Operator (Bell Springs Publishing, $16.95).
Determine your capital needs. How much money you will need to launch your venture depends on the type of business you are starting.
Identifying how much you need to earn in order to thrive and checking out your competitors’ prices can help you determine what to charge and how many clients are necessary each month to reach your income goals. Identify your start-up expenses and how long you’ll need to supplement your income before your business can support you.
Tompkins saved up $25,000 to start his business, in part because he had figured out what his business purchases, bills and personal expenses would be once he left his job. “I had to figure out how to fill the gaps until I got paid. I laid out a financial plan and decided that I needed month-to-month retainers to manage,” says Tompkins.
Keep in mind that a business can take anywhere from three months to over a year to turn a profit. Have a plan for how you will cover your living and operating expenses during that period.
Taylor also recommends checking your credit report. If your credit is a mess, consult a credit counselor to discuss strategies for paying off excess debt prior to leaving your salaried position.
Identify financing sources. Common self-financed sources of funds include credit cards, 401(k) plans, savings and stock. Most
business loans (debt-financing) are personal loans in that you, as the owner of the business, personally guarantee the loan, and you must repay the loan whether your business succeeds or not, out of your personal, nonbusiness assets. This differs from equity financing, where you acquire a partner or an investor who only gets paid back if the business succeeds.
Most loans to new businesses come from relatives, friends and acquaintances. Private loans should be in writing and should include the names and addresses of the lender, borrower, the amount, date of the loan, interest rate and payback terms. All parties should sign and date their copies.
To successfully secure a bank loan, you must convince the bank that your business has a good potential for success,