Starting my own business?

Factual Questions
1

I’m only 27 and I’ve been working at a ok paying job for awhile now, but I hate it. I’ve always wanted to start my own business, mainly and arcade/console and lan center/video game store. You know something I love to do, be my own boss and all of that.

The problem is I’ve only ever finished 1 year of collage, and I don’t know anything about how an actual business works, besides providing a service/product for more then it cost to make it.

From what I picked up I would need capital, most likely from a bank and a business plan for that. That’s pretty much the extent of my knowledge. Like how does an LLC differ from a corporation, ect.

I’m wanting to research this and find out what steps I need to do to see if this is something I could try to do. But first I’m not sure how well the type of business I’d like to start would do. Would an LLC type of arrangement protect my personal finances from the debtors if the business would fail?

Basically what I’m hoping you dopers can help me with is the first step I need to do. Speak with a lawyer? a bank? draw up a business plan, if so how do I find out what that entails?

So where do I start?

2

I own my business so I will try to give you some ideas for starting before others come along.

You need to work for someone in the business you wish to start. That way you learn and make mistakes on someone else’s dime. You need to learn how to run the business from the ground up, and what makes the business profitable.

While your doing this, save your money. No bank or institution is going to lend money to you to start a business, except to the extent that you have assets to cover the loans. If you don’t have money, they won’t lend you money - if you do have money then they will lend it - based on you assets, not on your business idea.

Don’t worry about personal liability when starting out. You don’t have anything anyways, so there is really nothing to lose. You will be 100% liable for any debts you incur. For example if you have the protection of a corporation, a bank or supplier would require personal guarantees before providing credit.

3

I disagree. I have started and closed eleven full-fledged business over the last twenty years of my life and have both learned much and bettered myself financially from each and every one of them. I incorporated my latest venture and turned profit in eight months.

My point of disagreement is that if you have a good idea then there are oodles of loansharks out there that do business as credit card companies who will finance anyone who will answer their business phone and show a hint of responsibility (credit rating and all the right answers to fill in the blanks). I have six cards with over $100,000 in open credit and carry a balance of less than ten percent of that.

I bought my first house with credit cards and have started most of my businesses with them. High interest rate? Yeah, so? Cost of doing business. work it in.

You mileage may vary and I wish to stress again that you must have a good idea… and probably a real good work ethic to come out on top. I am a success story and am not so naive to think that there are not a multitude of failures for every one of me. I just knew enough not to listen to the naysayers.

I have lots of stories on the matter. I will relate them all if thread warrants.

4

The type of business I’m thinking of really has no comparison that I’ve found in my area. That’s why I think there is a market. Granted I’m still researching if there is a demand for it.

I’m basically looking to open an Video game arcade that is also a PC LAN center that includes and X-Box 360 and PS3 network in it. Plus, and this is the part I’m not to sure about, selling gaming merchandise like games themselves, guides, systems basically what you would find in a gamestop. But that’s something I’d like to add at a later time if the LAN/Gaming center works out. Big “but’s” I know.

The only thing close to this, is the only arcade in my city. Your advice is sound but if I quit my current job to work there I’d be taking a substantial pay cut. I would not be able to afford any my personal expenses, like car payments and rent etc. So I’m not sure how I can apply your advice.

Also if I had the assets why would I even need to go to the bank for a loan? If I could afford to do it myself why get a loan just to pay interest to the bank? I don’t follow the logic there. But again I’m really clueless about all of this.

5

First- when you own your own business you are not “your own boss”. Get that right out of your head. Every customer (with money) is your boss, and you have to kiss far more customer ass than boss ass. Trust me. Been there done that.

To answer your question, your local Chamber of Commerce likely has a pack of materials on this very subject.

6

Get this book http://www.amazon.com/E-Myth-Small-Businesses-About/dp/B000DZTP5S/sr=1-7/qid=1172494759/ref=sr_1_7/002-2148804-3880036?ie=UTF8&s=books

The author has since spun that one good idea into a veritable empire of advice & I’m-such-a-guru worship. The rest of what he wrote/sells is derivitive bunk & should be ignored, but the original book was damn solid.

Understand that running a business is mostly about business & only tangentially about your particular product / service. In general, if you like providing the service or are super knowledgable about the product space, that’s exactly NOT the reason to go into business trying to sell that service / product.

Having done startups a time or two myself, I agree with the experience of others above. It takes about 3x the money and about 10x the effort you think it does.

I also strongly agree that you ought to have job experience in as similar an environment as you can find. For your particular idea there are no direct ananlogs in your local area. But you can certainly find something similar, whether that’s working at a gamestop, or a camera store, or … Anything where you have to live the problems of running a retail establishment that provides both product & service.

I also agree with DrDeth. Between customers & your own need to make it succeed, the worst boss you will ever have will be your business. “I demand you work 23 days straight days for no pay.” “I demand that whenever anyone else calls in sick, you have to cover for them, regardless of whether you just finished a 10 hour shift.” Oh, and you can’t quit.

That’s something to think about, if you’ve (consciously or unconsciously) fallen for the TV commercial: “Start your own business, make $100K the first year & lay by your big pool while your minions slave at the shop…”

There certainly are a few folks who invent successful get-a -strong-income-quick ideas that do work; many suddenly popular website ideas fall into this category. And some of them need surprisingly little effort to keep alive once they get going. But what you’re planning is emphatically not that. It’s retail.

Good luck. Keep asking & studying. You’re probably a couple years away from being ready to start something like you want. But the harder & faster you work the project now, the sooner you suceed.

7

If you’re concerned about practical steps, I recommend that you start by asking around for a Certified Public Accountant (CPA), particularly one who has experience with small businesses. My CPA helped me start my business for free with the understanding that I’d look to him for assistance with taxes.

I recommend that you find a partner and form an LLC, but if you’re doing this alone, you may as well stick to a proprietorship. Your state gov’t info is here, and this site also looks helpful. The best person to answer questions, though, is your CPA.

I’ve loved being an entrepreneur, and even if you fail, it’s still an incredible learning experience. Good luck!

8

Great ideas are the easy part, implementing those ideas is the hard part. You might visit this site to get some idea of what’s involved in starting a new business.
http://www.score.org/

9

Take thee to the nearest library and check out all the books you can find on
Starting and running your own business,
Starting and operating an LLC or corporation,
How to get by on three hours sleep, etc.
Really, any book that’s related to small business, being your own boss, finance, LLC and anything else you can think of including any material tangentially related to the business you actuall want to open is a good read at this point.
Get a few weeks of reading under your belt before you talk to an attorney, the bank, a possible business partner, or anyone else for that matter.
The worst thing about starting something like this is not even knowing what questions to ask because you don’t have enough information to know what questions to ask. It’s a catch 22 that way. Do some serious reading. Then you’ll be armed with some information, and then you’ll know what questions to ask and who to ask.

10

Once you’ve done a little research, it would be wise to make an appointment with your local Small Business Development Center (SBDC). Each state has them, and they usually have locations at various universities and community college around the state. They’re a government agency that can help you with locating resources and doing the research and business plan as well as managing legal risks.

Be forewarned - some of the capital will likely have to come from you. You will have to keep your job for awhile and work on this in your spare time. This means either putting up your own cash or getting loans based on your own credit at first. Good credit is important.

11

Well, being a canuck and all, I can’t help you with the details, but I do have a friend who currenty runs a business very similar to what your planning. Not the consoles so much (though he is expanding in that direction) as LAN based PC gaming. It’s a rough business to hear him tell it. Computers that will run games tend to be expensive, and have a short asset life. If you’re not a professional-level technician (which he and the other owner both are) expect to pay a lot of money to keep them running and playing nicely with eachother. You have to secure the machines well, since you will have people walk through your doors intending to see what they can get into. And that’s not even going into how much you need to invest in the games, since you will need to get multiple licenses per game. Pick the wrong game, and you’re out a lot of money.

And even though there are no businesses that serve this need in your area, you have plenty of competition. It’s called the internet. Most of your customers can get a very similar experience on their couch with their own computer/console connected to the internet without spending any more money than they are already. To get them off that couch and into your store can be quite a challenge. It involves lots of advertising, having the right ambience, good chairs, (my friend’s biggest regret whas the chairs he got, he eventually had to replace them all in a few years) sponsoring tournaments, and a bunch of other stuff I’m sure I’m forgetting. The way he tells it, he had to diversify quite a bit to show a profit, and jokes that he usually makes more from the technician work they do on the side than the actual games.

I have also run my own business in the past, and I would like to echo what some of the people above me have said. DrDeth nailed it spot on that you will NOT be your own boss. You will be a slave to your business. You will work gruelling hours for little or no pay. If you think you can’t afford to work at an arcade, I don’t think you can afford to be your own boss unless you’ve got someone with money backing you. You will need to save enough money to live on for a while while your business grows, since you will probably have cash flow issues for a while.

That all said, I still have no regrets about starting my business, even though it failed. I learned more in 9 months than I ever learned in school. But it cost me around ten K in debt when all was said and done, and I didn’t need near the capital investment that you will require to start my business.

12

I’ve run one of these LAN-Party places without OWNING it, so here’s some info I’ve gleaned:

  1. Be good in tech support. Included is networking. If you’re not, find a partner who is. Network techs are expensive, and this is the basis of your business.
  2. Offer one or two private console gaming rooms, including couches and such. Until we put two in, it was basically a bunch of clicks and such, and we didn’t get into the real meat and potatoes market.
  3. Invest in switching technology over the individual PCs. PCs get abused/broken all the time. When the router or switch goes down, it affects everyone. Individual PCs will only affect one person.
  4. That being said, you can’t cheap out on the PCs in the beginning. Gamers will know the difference. To keep your cash flow moderately steady, offer internet access for rent in-store.
  5. Accessories were a very large part of the usual business. We also ran a small tech support desk for our regular customers. We also had storage for the items too, so you always had your keyboard/mouse/headphones/controller at the place and didn’t have to worry about bringing it.
  6. Speaking of other revenue streams, try selling “memberships” which would get the cardholder a permanent login, discounts on hourly gaming rates, discounts on accessories, and exclusive mailing lists. The secret for this is to set the business up in an area that has a population wealthy enough to spend, but cheap enough to hire out the service aspect.

There’s others, but I’m not your consultant. Try going to a local SBA office (usually in a community college) or looking up SCORE for counsultants with regular business experience.

13

This is a surprise to many people that banks generally will not lend money for a good idea. Banks don’t like to risk their money. Banks loan money based on secured assets. That asset could be your own good credit rating. Banks will loan money to an established profitable company, but it first needs to have a good track record.

The only kind of money I have ever seen lent to new businesses is by some sort of government programs that were esablished to do just that, and don’t really care that they will lose money. There is also private equity available, but that is generally not going to flow to a retail operation, or one that has not been at least proven on a small scale.

Offering my humble two cents worth, your current idea sounds more fun than profitable. Retail is brutal. One big problem that has not been discussed is leasing a premises and the guarantees that they will require before they lease.

I don’t want to sound negative. Running a business lets you put your ideas on the line for fun and profit. I would again urge you to find a profitable model of your business that is already in operation. The further it is away from you, the more likely the owners will not view you as competition, and tell you about their business. See how much capital they needed to start.

14

Having one year of college will not hinder your ability to start a small business, it will probably help it. I have a business degree and remember a professor saying in a final class if we were going to be successful entrepenuers we would already be out there making things happen instead of sitting in a classroom learning how others did it. I did not think this spoke well of the professors abilities, but he probably had a point (other than on the top of his head).

15

Before you form a corporation, look for bank loans, even write up a business plan, you need to do some serious market research, and determine:

  1. If there are any potential customers out there for your business. Just because you think it’s a great idea, doesn’t mean that anyone else thinks so. You may feel that the fact that no one is already operating such a business proves that the market is wide open for you. It could actually mean that there is no market there to serve.

  2. If so, how many of them are there within your market area? And how much are they going to be willing to spend with your business? You need to know as much as possible about your customers so you can tailor your services and marketing to meet their needs. If you don’t know who your customers are, what they want, and how much they’re willing to pay, you are bound to fail.

  3. How can you reach (i.e. market to) your potential customers, and how much will that marketing cost?

The answers to these questions will determine such key factors as how much you charge for your service, how much equipment (and therefore capital) you will need, how much staff you will need, and many other important issues.

I think the biggest mistake that many people make in starting a business is being too much in love with their idea, assuming that because they love whatever it is they’re planning, everyone else will, too. Then in researching the market, they always make the most positive assumptions, blinding themselves to the possibility of failure.

You must be constantly looking not for reasons to go ahead with the business, but for warning signs that it won’t work. You must be painfully honest about the realities of your market, avoid cherrypicking data, and make realistic projections, not best-case scenarios. And you must be willing to give up on the idea before you even start if the numbers can’t be made to work without unreasonably optimistic projections.

I’d guess that most small businesses fail because the founders fooled themselves into believing they would work while ignoring signs that they wouldn’t.

There is one sense in which not having any similar businesses in your area is a good thing. If you can find similar businesses in other cities, you can visit them and try to learn as much as you can from them. Since you are not a direct competitor, they may be willing to be helpful and open with details of how they have run their business. A local competitor would obviously never do this.

Good luck.

16

I had considered starting a business like this at an area mall where rents were cheap, but I didn’t like the revenue limit: $7/hour seems to be what others are charging around the country, and if I was EXTREMELY lucky I might have 10 paying customers each hour for 10 hours a day - for a theoretical MAXIMUM revenue of $700 per day. And during weekdays, the 10x10 figure is unrealistic. Given that I can make about 2/3 of that doing hourly billable work where it is 100% profit, I shelved the plan.

One thing that seems to do well in one mall is slot-car racing. One guy has about 1500 feet of space in a mall, and does a BOOMING business during the evenings and weekends. During the weekday daytime he reconditions the cars and other maintenance tasks.

I had a first meeting today with a new client company. Since the company’s formation some years ago they do only one thing: they haul a very specific type of product (non-hazardous) from several manufacturers to several hundred clients. They don’t sell, they don’t buy, they don’t maintain inventory; they just haul these long, thin boxes around the country and get paid by the manufacturer, and are quite profitable. To figure out a niche like that is my dream.