Ready to Start Your Own Business?
Prudential's study, "The African American Financial Experience," revealed that African Americans—more so than the general population—viewed starting a small business as a path to financial freedom. In fact, of those surveyed, African Americans were nearly twice as likely to have a dream of starting a small business (35%) than those in the general population (19%).
The attraction of being your own boss can be compelling, but before you quit your day job and run off to chase a dream, it is wise to temper your enthusiasm by considering the basic requirements of starting a solid business venture:
- Business plan - Business plans clarify ideas. What are your company's objectives, purpose, product, and service offerings? What market does it serve, who will manage it, and what are its funding requirements? How stiff is the competition, and how will you evolve the business over time? A comprehensive business plan that addresses these questions is usually critical to securing funding for a start-up.
- Insurance - To attract and retain the right talent, your business will need to consider offering employees a benefits package that includes medical, dental, life, and disability insurance. Once your business is established, you'll need to think about adding business continuation insurance. Work with an expert to identify which insurance policy will provide the best value to the business while protecting your workforce.
- Funding - What blend of financing will get your business up and running? Experts say you generally need to be able to fund a business for at least a year. Would a withdrawal from your IRA, 401(k), Keogh, or SEP plan be sufficient? Consider that the withdrawal will generally be subject to income tax and possibly tax penalties. Consider personal savings; capital from friends, family, and investors; or taking out a bank loan or home equity loan.
Starting a business is a weighty proposition. Small business success requires careful planning and a willingness to endure minor and major setbacks. Be sure to reach out for professional financial guidance to help navigate the risks inherent in this all-consuming and complex endeavor.
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