Ready For Your New Venture. 5 Questions To Answer.

Adam Radly and Bob Bates Recommend:

Adam Radly Bob Bates have estbalished many new businesses. This is an interesting article from Entrepreneur Magazine about the questions you need to answer before you get going.

For all its glamour, being an entrepreneur requires hours of unglamorous work. Launching numerous ventures can be great, but can also bring along stress and burnout. Even if you’ve been successful before, circumstances in your life change, and you may be considering a new venture.

It’s critical to make sure you’re genuinely ready before even thinking about making a pivot as an entrepreneur. I’ve compiled the five critical questions that too many entrepreneurs forget to ask themselves before beginning their next venture. Failure to ask any of these could lead to pain if you aren’t mentally and financially prepared. Here’s what you need to do some soul searching on before jumping off.

See the rest of the article here.

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When to Source Funding for Your Startup Business

When to Source Funding for Your Startup Business

The natural inclination to fund a business is to invest your finances on it. However, to get real, substantial capital for a business and to move it forward, you have to start searching for investors and funding. You can’t shoulder everything anyway.

On the other hand, if the reason why you’re searching for funding is because you’re very excited to start a business based on an idea you just had, you might end up disappointed. Seeking for funding has to be done when you and your business is ready. In other words, it has to be done in the right time.

Jayson Demers, founder and CEO of AudienceBloom, a company that helps startups with their online marketing initiatives, suggests checking off these requirements before you search for funding.

  1. A Payoff
    You should have a specific payoff for your investors – an exchange for the funds that they will provide you with. Payoffs can vary. For individual investors, it may mean a projected amount of money that your business has earned after a certain period of time. For a crowdfunding initiative, it may mean having rewards or offering sample products for different investment levels.
  2. A Goal
    You need to know the amount of funding you exactly need before you start asking for funds. Investors will most likely ask why you need that certain amount as well, so be prepared in answering such question. Explaining where the money will go will let your investors know that you have a solid plan and that the money is going to something worthwhile.

    Here are two examples:

    • “I need cash for my startup business.”
    • “I need $5,000 for marketing, $15,000 for product manufacturing and sales, $20,000 for equipment, and $10,000 to setup an office.”
  3. A Brand
    Your brand will not be discussed during the fundraising phase of your business’s development. However, it will be mentioned most prominently during the marketing phase. Investors are interested in all phases of your business development. Showing them that you have a strong brand proves the character and viability of your business. It’s a display of identity that can creatively and concisely drive your pitch successfully.
  4. Existing Funds
    Investors find startup businesses credible if founders invest their own money in their business. It also shows your commitment to the success of your business. Initial funding can be sourced from your own bank account, and even from friends and family’s financial help.
  5. Skills and Talent
    You should have the skills and talent to run your business and manage your employees (or interns). Make sure that you can personally handle the first stages of business growth and development.

    You’re in good shape if you have proven credentials or more importantly, years of experience in the industry. Otherwise, you’ll need to secure outside resources or undergo training to gain some business and management skills.

  6. Potential Customers
    The only way to determine your customer base is to conduct market research. Once you’ve identified your target market, gather a few testimonials and present it to your investors. They will be much more interested to work with you if you already have a demand from customers.
  7. Long-term Plans
    You need to chart out your projected long-term growth. Create business plans that will cover the course of your business first year, and then three years, up to the next five years. Many investors want to fund a business with a long-term solution to the challenges that it will face in the future. Don’t create the mistake of focusing exclusively on how to build a business from the start. Think about how your business will move forward.
  8. Financial Structure
    A financial structure is an important part of your business plan. It’s one of the most detailed parts that investors scrutinize over. Investors want to know that you understand your business’ finances and that you have a clear business model for it.

    A financial structure should include growth rates, profit margins, sales and revenue, acquisitions, and projected costs. It should show how your business will create profit.

  9. Market Research
    You need to have a numerical grounding to prove the potential worth of your business. The best way to do this is to conduct market research, which contains verifiable data that can show the viability of your business or idea. It verifies that your theory can be applicable.

    You can perform some research yourself. You can also hire someone or a company to conduct research for your business.

  10. A Business Plan
    Finally, the most important requirement is a business plan. It’ll be the foundation of your idea. It should include all the details of your business and how it should make profits.

    It’s a challenge to complete all the requirements in this list. The good thing is, you can miss one or two. Just make sure that you can provide nearly every item before you ask an investor for funds.

7 Ways on How to Convince Investors to Fund Your Startup

7 Ways on How to Convince Investors to Fund Your Startup

Startup companies have to bring a fresh perspective to get their business noticed – not only by customers, but by investors most specially. However, potential investors are not convinced by mere ideas alone. It takes more than that for investors to write you a check.

According to Entrepreneur Magazine, a long-time leader in entrepreneurship and business management news and stories, you should master your investor pitch if you want to capture the attention of people and companies who can move your business forward by providing you with funding.

Scot Issen, CEO of the Future Founders Foundation, a Chicago nonprofit that empowers youth through entrepreneurship, suggests the following methods of convincing investors to put their money into your startup business. These methods have recurring themes that industry experts have used, time and again, to best articulate their value proposition to investors.

Expect a Challenging Feedback
Entrepreneurs deliver the most successful pitches when they anticipate questions that investors have for them. Investors will raise questions and potential issues to:

  • see how you handle difficult business situations
  • test your business knowledge

Gaps or unanswered questions will exist even though you have thought out your pitch well enough. However, if you anticipate the questions, you’ll be prepared to answer them. It’s even better if you have faced business problems and have overcome them. You’ll be able to answer well. It also shows that you are committed to your business idea, even during a difficult time.

Another tip is to do research about your business potential competitors. Differentiate your business from theirs. Investors will possibly ask you about your team, the level of success that you and your team have accomplished together, and how long you have worked together.

Show Your Commitment in Your Business

One of the best ways to show your commitment to your business is by telling investors that you have financially invested in it. They want to see that you’re not just giving a lot of your time for your business, but your cash as well. It’s normal for nearly every startup founder like you to keep a day job while you are working part time on your business. It makes sense financially and personally. More importantly, it shows investors that you are dedicated to the success of your business.

Provide Complete Investment Details

Arrive on the presentation day prepared. Make sure that you have with you all the required documents that investors have requested from you – including information about how will your business use the funds that investors will grant to you. They will conduct an assessment to determine whether your business expenses will be good for your startup or not. Will it lead to exponential sales growth? They will also use the information you’ll provide to evaluate whether it’s the time to invest in your business now, or hold it for later. If you can clarify the urgency and use of the investment, you will be more successful with your request for funding.

Know Your Financial Structure and Return-on-Investment

Effectively communicating your business financial structure is more important, than being able to create one. What would you do with a document when you can’t explain its contents to investors?

Investors want to know that you understand your business finances and that you have a clear business model for it. More importantly, they need to know how else your business will create profit and get more funds, when you’ll start creating money, and how much will their investment earn in the long run.

explain Your Potential Target Market

Investors need to know who will buy your product and how are you planning to reach them. This shows that you have done sufficient research to back up your business and its need for funding. You should be identifying realistic ways on how you will conduct marketing to potential customers. Remember, marketing is one of the most important aspects of starting a business and getting funds for it.

Prove the Credibility and Validity of Your Business

Profits are one of the best sources of funding and capital. Sales projections are important, too. However, it is only an indicator of what can happen or a prediction of how much you can earn. Sales on the other hand, show whether there is an increased demand for your product or service or there’s none.

Sales validate your business and prove that it is credible with customers. It shows that customers are willing to buy what you are selling. At the same time, if you have a notable client, even only one, who is willing to pay for a pilot product, other customers will follow suit. This helps investors to recognize that there is a market demand for your business product or service.

Build Investor Relations

This is one of the key aspects of sourcing funds that most startups forget. In order to successfully request funds for your business, you have to build a relationship with your potential investors first. One of the advantages of establishing relationships with investors early-on is it minimizes desperate acts to get funding. If you know your investors well, you can negotiate better terms.

Do your homework to get to know potential investors. They have different preferences in terms of risk threshold, industry, and business stage. They also may have passions or experience in specific areas in which they only want to invest in.

Get investors to believe in your company’s mission and vision first. Over time, you can show them your progress. Remember, the best investor relationships grow organically. Investors anyway, are your partners. They should open their networks to you and not just offer their money.

Finally

It all begins with your pitch. Creating a compelling one is the means for a successful partnership with an investor who can move your business forward. The investment cycle can take time, so make the time and effort to nourish your relationships with your investors.

How to Start a Business with This 30-Point Checklist

How to Start a Business with This 30-Point Checklist

It’s exciting to start a business. However, you have to face the challenges that come with it. The best way to do this is to set your priorities straight right from the beginning. Here’s a 30-point checklist that can help you start your business. It is divided into two priorities – high and low.

High Priority – Now
These are your first priorities when starting a business. You have to do this before and during the first days or months of your business.

  1. Run a feasibility study.
    This may sound complicated when it’s not, actually. You just have to create a set of questions that would determine the capability and practicality of the business that you want to start. Only you can answer them anyway.

    For example, what’s the best product or service to offer to customers? What are the needs of my future customers? How will my business be able to help my future customers fulfill their needs? Aim for brutal honesty when answering your questions. Will your customers buy it? Would you even buy it? How many products should I sell to cover my operational expenses? Will I even make a profit?

  2. Know how to finance your business.
    One of the main reasons why most individuals delay starting up a business is the lack of financing. You can’t start with anything without the right financing. As early as possible, you have to figure out how you will get the money to finance your startup. Otherwise, you’ll end up using your living expenses, which will not be enough in the long run. How else will you get the money to feed yourself and your family? Before you start your business, investigate your options.
  3. Name your business.
    Nothing makes a business more viable than a business name. However, you have to consider a name that’ll work long-term. You may determine the feasibility of your startup and know how to finance it, but without a name that’ll stick to your customer’s heads, your business can fail quickly.

    You can use tools such corporate name search and Google search. You can also check government listings for names that are already used. Aim for a unique, trendy name.

  4. Develop a business plan.
    Now it’s time to create your business plan. It should be made in two levels – startup and current. Your startup business plan will include most of what’s mentioned in this article, while your current business plan will include financial projections that can help you operate your business better.
  5. Create business cards.
    Now that you have a business plan, name, and financing, you will soon start creating a network. Having your own business card adds credibility to your business whenever you’re presenting yourself to potential clients, suppliers, and others.
  6. Ask your family to help.
    Starting a business has many challenges. Having the support of your family and close friends is one of the best ways to get motivated. If you’re lucky, they might contribute some of their talent to help move your business forward.
  7. Ask your co-founders to help, too.
    You can’t do everything by yourself. If you have other individuals that helped you start a business, and they want to be part of it as a co-founder, they have to chip in with the workload. To make it easier to delegate responsibilities, put everything in paper. You can add this in your business plan.
  8. Consider your incorporation status.
    While you’re figuring out your financing, you can also figure out the legal structure of your startup. This helps protect your personal assets. The best way to do this is by considering the incorporation status of your business. Discuss this with your accountant or lawyer and the other options involved (sole proprietorship, LLC, or corporation).
  9. Get an EIN.
    An EIN is an Employer Identification Number. Like an incorporation status, it helps protect your personal identification (social security number). If you will open a business bank account or incorporate your business, you can give your EIN instead of your social security number. Having an EIN can also protect your personal information from identity theft and phishing (online identity theft).
  10. Get a business license and permit.
    The Small Business Administration can help you get a license for your business. You can go to their website for more help.
  11. Open a business bank account.
    It’s best to separate your personal and business finances. At the same time, you should have separate business bank accounts for your expenses and profits.
  12. Set up an accounting system.
    After opening a business bank account, you should be setting up an accounting program that will take care of your bookkeeping. Your business can fail without a proper accounting program.
  13. Get an office or retail space.
    Depending on the business you started, you should by now rent an office or retail space. However, this is only applicable if you’re starting a retail or brick-and-mortar business. You have to consider accessibility and foot traffic.

    On the other hand, don’t rent office space if you’re not starting a retail business. Avoid spending lease payments when you’re just starting.

  14. Start a website.
    Start a website to represent your business. Together with a business card, it makes your business even more credible, not to mention easily accessible whether it’s a retail business or not. Providing company information notches up your reliability a bit higher if you have a website.
  15. Get a domain name.
    Your website should be registered with a domain name that is the same as the name of your business. Don’t settle for anything less. Getting a generic domain name will make your business look like it’s not real or that you’re not planning on staying long. Choose a domain name that comes with a free email address. Your business card will look even better with a domain name and email address under your business name.
  16. Create social media profiles.
    To market your business, the best way to start is by having profiles in major social networking websites such as Twitter, Facebook, and LinkedIn (the last one is the best way to widen your business network online). Create profiles that have the same name as your business as well.
  17. Generate revenue.
    As soon as you have all these set up, start generating revenue. Sell as soon as possible. Don’t wait any longer. Don’t forget to have your lawyer create contract forms for your customers if necessary.
  18. Low Priority – Later
    After making sure that you’ve done everything from the first part of this checklist, you can now move on to this part.

  19. Improve your product, and sales and marketing approach.
    While generating your first revenue, you’ll come to learn more about the marketplace you’re in. Use this to your advantage by improving your product, and sales and marketing approach with the information that you gather.
  20. Register for patents and trademarks.
    Depending on the nature of your business, consult your attorney about the need for patents and trademarks.
  21. Create a network of service providers, manufacturers, and suppliers.
    For retail businesses, find a good source of inventory such as suppliers and manufacturers. For everything else, find a good service provider that can help make tasks easier for your business and service delivery for your customers.
  22. Get a business insurance.
    You should be getting insurance coverage for the products you’re selling, and your employees if necessary. Health insurance, worker’s compensation, and liability are only a few of what you should be discussing with your insurance agent.
  23. Hire sales people.
    You may be your own sales team at first. However, to expand your business, you should hire a person, or if possible, a team that will focus on sales only.
  24. Expand your network.
    Aside from your family and friends, you can now expand your network to a wider audience. Keep in mind that you’re not expanding your network just to make sales, but to increase brand awareness for your products or services.
  25. Improve your pitch.
    While you’re doing all of the items in this checklist, you should work on your business pitch. It’ll be your weapon to expand your network, get more investors, persuade more customers, and even hire new people. You should convince them to “invest” in your business.
  26. Protect sensitive data.
    Secure your IT assets. This is important for all types of business and not just for tech companies. Your business data and customer information, especially credit card details, should be protected at all cost.
  27. Maximize device usage.
    Take advantage of the current communication technologies that we have today. As an entrepreneur, you should be easily reached by business partners and customers. Get the best smart phone or tablet. Use the right apps to help make your tasks easier, too.
  28. Get free advice.
    The Small Business Administration website can help you with your startup business. They give free advice, which you can also get by visiting one of their local offices. There are also many small business resources websites that you can access for free business advice.
  29. Hire a mentor.
    If free advice is not enough for you, you can hire a business mentor that can help you with every step of the way. Make sure to consult with a mentor that is already successful in the industry that you’re both in.
  30. Hire an employee.
    As mentioned earlier, you can’t do everything by yourself. Admit it if you need help with the workload. If you already have a sales team, that’s great. However, they should focus on sales to grow your business. Hire an employee that can do other tasks from administrative to IT. You can hire freelancers or interns, too.
  31. Avoid business partnerships.
    Business partnerships are not good for startups. You should be focusing on getting customers and making sales at the moment.

You can also add more to this list that you think should be considered when starting up a business. However, making sure that you prioritize the ones on this checklist can help you jumpstart your business.

The State Of Entrepreneurship

The State Of Entrepreneurship

The rise in the rate of self-employment in the United States was largely ignored since the 2000 recession until its rapid growth in recent years. Today, it remains an important source of jobs for many Americans, making entrepreneurs out of many self-employed workers. Entrepreneurship on the other hand, plays a major role in job creation, which is an important issue to policymakers.

Much is known about how many workers in the US are self-employed, around 10% of the country’s 146 million labor force. However, little is known about the factors that surround it. This article attempts to answer some of the questions about the statistics of self-employment in the United States through the result of a survey conducted by the Bureau of Labor Statistics (BLS). It will provide details about the socioeconomic and demographic characteristics that created the self-employment numbers as a whole. It will also include data on incorporated and unincorporated self-employed, and the number of employees working for self-employed workers.

About the Survey

The Bureau of Labor Statistics, under the Department of Labor, conducts a monthly survey, called the Current Population Survey (CPS). Also referred to as the household survey, it provides employment and unemployment data for the country’s civilian, non institutional population ages 16 and older. It taps 60,000 households to gather the information it uses to represent the employment rate in the US.

Getting the Information

The CPS has been regularly collecting data on self-employment since the late 1940s. Back then, it only categorized self-employed workers according to the industry, which was only either agricultural or non-agricultural, that they belong to.

In 1967, the BLS survey started to include the unincorporated self-employed. It wasn’t only until 1995 that the survey added the incorporated self-employed category. Nearly two decades later in 2014, the number of paid employees that self-employed workers hired was included.

When the unincorporated self-employed workers were classified in the 1967 CPS, the only possible way to separate the number of incorporated self-employed workers was to consider them as wage and salary workers. They were anyway, legally employees of their own businesses.

To determine whether a self-employed worker is incorporated or unincorporated, the CPS asks the question

“Last week, were you employed by government, by a private company, a nonprofit organization, or were you self-employed?”

Individuals who say they were employed by government, a private company, or a nonprofit organization are classified as wage and salary workers. Otherwise, they are self-employed.

Self-employed respondents are then asked,

“Is this business incorporated?”

Individuals who respond with a yes are classified as incorporated self-employed, wage and salary workers. If the answer is no, respondents are classified as unincorporated self-employed.

To determine how many paid employees an unincorporated self-employed worker has, the following question is asked (since 1995 only):
“Do you usually have any paid employees?”
If the answer is yes, a follow-through question is asked

“Excluding all owners, how many paid employees does your business usually have?”

Then in 2014, incorporated self-employed workers were asked the same questions to determine the number of their paid employees.

Who are The Self-Employed Workers?
Based on the CPS, self-employed workers are

  • those who work for themselves – this means that they are not an employee, in one way or another, of the government, a private company, or a nonprofit organization.
  • those aged 16 or over.
  • Classified either as unincorporated or incorporated

Incorporated and Unincorporated Self-Employed
According to the BLS, incorporated workers, have established a legal corporation and typically employ others, such as small-business owners or entrepreneurs. Unincorporated workers on the other hand, have not established a corporation and often operate alone, such as freelancers.

Key Survey Findings

According to the US Bureau Labor Statistics, the self-employment rate in 2015 was 10% of the total US employment. That’s roughly 15 million people out of 150 million American workers. Based on the Current Population Survey, here are the key findings that make up the self-employment numbers in the US.
By Incorporation Status

Figure 1. Percentage distribution of self-employment by incorporation status, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Based on a compiled report of the CPS, there are more unincorporated self-employed workers in the US compared to incorporated self-employed workers (See graph above). Out of 15 million self-employed workers, only 9.5 million are unincorporated. This represents 63.4% of the self-employed American workers. This also means that 6 out of 10 self-employed workers are unincorporated.

On the other hand, 36.6% or 5.5 million out of 15 million self-employed workers are incorporated. Incorporation is a business strategy that allows entrepreneurs to receive benefits that traditional, corporate employees and businesses have such as tax considerations and limited liability. It also enables them to sell stocks and bonds in order to raise capital for further business development.

In reality however, the number of unincorporated self-employed workers has declined. This trend has been observed by the BLS since 1994 (See graph below). Generally, the decline in self-employment status according to incorporation status has decreased for the past two decades.

Figure 2. Self-employment rates by incorporation status, 1994-2015.
Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

In 1994, the self-employment rate was at 12.1%. By 2015 however, it became only 10.1%. During this time, the unincorporated self-employed workers declined from 8.7% to 6.4%, whereas the incorporated self-employed increased from 3.2% to 3.7%. (See chart data below)

YearTotal self-employedUnincorporatedIncorporated
199412.1%8.7%3.5%
199511.88.43.4
199611.58.33.2
199711.58.13.4
199811.17.83.3
199910.87.63.2
200010.77.53.3
200110.67.43.3
200210.67.33.4
200311.17.53.6
200411.27.53.7
200511.17.43.7
200611.17.33.8
200711.17.13.9
200810.96.94.0
200910.97.03.9
201010.77.03.7
201110.46.83.7
201210.46.73.7
201310.26.53.7
201410.16.43.7
201510.16.43.7
Table 1: Chart data for Self-employment rates by incorporation status, 1994-2015.
Source: Self-employment in the United States. March 2016.
https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

There are three reasons as to why there are less unincorporated self-employed workers today than 20 years ago. A large share of self-employed workers is under the category of agriculture. However, according to the report by Steven Hipple and Laura Hammond, authors of the Self-employment in the United States (A Spotlight on Statistics), the decline in the number of unincorporated self-employed workers can be attributed to the decreased employment in the agricultural sector. In relation to this, while 97% of farms in the US are family-owned, majority of these farms are increasingly becoming operated by large companies. This meanwhile, is according to the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS).

On the other hand, Hipple and Hammond’s report cite the general increase in entrepreneurs incorporating their businesses as the third reason why unincorporated self-employment is on the decline.

Per State
There are 21 states in the US that have high self-employment rates. Some are even higher than the national rate (10.1%). The remaining 29 states, including Alaska and Hawaii, have rates lower than the US rate. (See graph below)

Figure 3: Self-employment rates by state, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Of the 21 states that have high self-employment rates, Montana has the highest rate with 16.1%, while Nebraska has the same rate as the national one. On the other hand, of the 29 states with low self-employment rates, Hawaii is on top with 10%, while Alabama with 7.5% is at the bottom. (See chart data below)

StateTotalUnincorporatedIncorporated
Montana16.1%9.0%7.1%
Maine15.411.24.2
Vermont14.410.04.3
South Dakota14.29.64.7
Oregon13.48.54.9
Colorado13.36.96.4
Iowa13.08.54.5
Wyoming12.47.64.9
Oklahoma12.48.53.8
Minnesota12.37.84.5
California11.78.63.2
North Dakota11.68.82.8
Kansas11.57.83.7
Idaho11.48.23.2
Connecticut11.46.74.6
Missouri11.06.94.1
Florida11.05.85.2
New Hampshire10.77.63.1
Washington10.56.14.5
Arizona10.37.13.2
Nebraska10.16.83.3
Texas10.07.12.9
Hawaii10.07.22.8
New York9.86.23.7
New Mexico9.76.23.5
Georgia9.75.44.3
Utah9.64.55.1
North Carolina9.66.23.4
Louisiana9.55.63.9
Alaska9.57.02.5
Wisconsin9.35.53.8
South Carolina9.16.13.0
Arkansas9.16.03.0
New Jersey9.04.44.6
Illnois9.04.94.1
Ohio8.96.02.9
Indiana8.85.43.5
West Virginia8.76.32.4
Michigan8.75.53.2
Rhode Island8.65.63.0
Mississippi8.65.82.8
Massachusetts8.65.72.9
Maryland8.64.54.1
Virginia8.54.34.1
Kentucky8.55.92.5
Pennsylvania8.35.13.2
Nevada8.14.73.4
Tennessee8.06.11.9
Delaware7.24.22.9
District of Columbia7.13.83.3
Alabama7.55.02.5
US National Rate10.16.43.7
Table 2: Chart data for Self-employment rates by state, 2015. Source: Self-employment in the United States. March 2016.
https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

By Age
According to Hipple and Hammond’s report, there are more older people, aged 65 and over, who are self-employed compared to their younger counterparts. (See graph below)

The BLS report cites two reasons why there are more self-employed workers aged 65 and older. This age demographic has the greater capacity to accumulate wealth. At the same time, they have gained enough managerial skills, which is crucial in starting a business. Younger self-employed workers on the other hand, still have to acquire these resources either through business loans (wealth) or personal efforts (skills).

Figure 4: Self-employment rates by age, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Based on a table shown in the report (see below), self-employment rate for unincorporated businesses is at the 15.5%, which is the highest, for workers aged 65 and over. The lowest rate meanwhile, is for workers aged 16 to 24, which is at 1.9%.

Incorporated self-employment rates on the other hand, were lower for all age groups. (See table below). Despite this, the rates increased with age – from 0.3% for workers aged 16 to 24, to 8.6% for workers aged 65 and older.

AgeUnincorporatedIncorporated
16 years and older6.4%3.7%
16 to 24 years1.90.3
25 to 34 years4.11.6
35 to 44 years6.43.7
45 to 54 years7.14.7
55 to 64 years8.85.9
65 years and older15.58.6
Table 3: Chart data for Self-employment rates by state, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

By Gender

Figure 5: Self-employment rates by gender, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Men have a higher self-employment rate at 12.3% compared to women at 7.5% only. (See chart above).

Men also have a higher unincorporated self-employed rate, at 7.4%, compared to women at 5.2%. Women also have a lower incorporated self-employed rate, at 2.3%, compared to men at 4.9%

By Race and Ethnicity

Hipple and Hammond’s report reveals that self-employment by race and ethnicity is dominated by Caucasians. This also means that Hispanics, Asians, and Blacks are less likely to start their own businesses. (See chart below). Caucasians make up 10.9% of self-employed workers in the US. Asians followed with 9.6%. On the other hand, 8.3% of Latinos or Hispanics are self-employed, while Blacks have a 5.2% self-employment rate. However, the order changes if the incorporation status is considered.

Figure 6: Self-employment rates by race and ethnicity, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Caucasians continued to be on top of the unincorporated self-employment rate with 6.9%. It is followed by Hispanics or Latinos with 6.4%, Asians with 5.6%, and African Americans with 3.6%.

As for the incorporated self-employment rate, Caucasians and Asians shared the top spot with 4% each. It is followed by Hispanics or Latinos with 1.9%, and African Americans with 1.6%.

Race or ethnicityUnincorporatedIncorporated
Caucasians6.9%4.0%
Blacks or African Americans3.61.6
Asians5.64.0
Hispanics or Latinos6.41.9
Table 4: Chart data for Self-employment rates by race and ethnicity, 2015. Source: Self-employment in the United States. March 2016.
https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

By Origin

However, by considering the origins of self-employed workers in the US, and not their race or ethnicity, it is revealed that foreigners are more likely to operate their own business. (See chart below). Foreign-born self-employed workers make up 11.2% of the total numbers of self-employed workers in the US, while US-born self-employed workers are only 9.8%.

Figure 7: Self-employment rates of the foreign born and native born, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

As for the incorporation status, there are more unincorporated self-employed workers for both demographics – foreign-born with 7.6% and U.S. native-born with 6.1%, than incorporated self-employed workers. Incorporated self-employment rate was a bit higher with US-born self-employed workers (3.7%) compared to foreign-born workers (3.6%).

Other Findings

The Self-employment in the United States (A Spotlight on Statistics) by Steven Hipple and Laura Hammond, also included other findings in their compiled report.

Educational Attainment

According to the report, self-employed workers have a variety of educational attainments – from those with less than a high school diploma to a doctoral degree. However, workers with a professional degree have the highest self-employment rate at 21.3%. Workers with a master’s degree on the other hand, have the lowest self-employment rate at 9.3% only. (See chart below)

Figure 8: Self-employment rates of by educational attainment, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Incorporated self-employment rates on the other hand, were highest for those with a professional degree at 12.2% and lowest for those less than a high school diploma at only 2.1%. Unincorporated self-employment rates meanwhile, were highest for those with less than a high school diploma at 10% and lowest for those with a master’s degree at 5.2%. (See table below)

Education levelUnincorporatedIncorporated
Total, 25 years and older7.0%4.2%
Less than a high school diploma10.02.1
High school diploma, no college7.63.6
Some college or associate degree6.93.7
Bachelor's degree6.25.0
Master's degree5.24.1
Professional degree9.112.2
Doctoral degree8.28.4
Table 5: Chart data for Self-employment rates educational attainment, 2015. Source: Self-employment in the United States. March 2016.
https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

For War Veterans
According to Hipple and Hammond’s report, it is more likely for veterans (12%) to be self-employed than those who did not serve (10%) in any of the wars that the US participated in. (See graph below). Of these veterans, the ones who served in WWII, Korean War, and Vietnam War have the highest rate at 24%, while Gulf War II veterans have the lowest self-employment rate at 4.5% only.

Figure 9: Self-employment rates by veteran status and period of service, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

Period of serviceUnincorporatedIncorporated
Veterans7.1%4.9%
Gulf War-era II2.42.1
Gulf War-era I4.24.0
WW II, Korean War, and Vietnam era15.38.7
Veterans of other service periods7.95.3
Nonveterans6.43.6
Table 6: Data chart for Self-employment rates by veteran status and period of service, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

As for the incorporation status for self-employed veterans, there is more unincorporated workers (7.1%) than incorporated workers (4.9%). (See table above)

By Occupation
The self-employment statistics report also revealed that self-employed workers are working in a wide variety of occupations in different industries and sectors. (See graph below)

Figure 10: Self-employment rates by occupation, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

However, the rate of unincorporated workers remains high with a total of 63.2%. Of this said rate, construction and extraction workers have the highest unincorporated rate at 14.8%, while office and administrative support workers have the lowest rate at 1.4%.

OccupationUnincorporatedIncorporated
Management, business, and financial operations9.7%8.9%
Professional and related4.82.8
Service7.51.6
Sales and related7.85.8
Office and administrative support1.41.4
Farming, fishing, and forestry3.61.7
Construction and extraction14.84.4
Installation, maintenance, and repair6.22.7
Production2.91.1
Transportation and material moving4.52.1
Table 7: Data chart for Self-employment rates by veteran status and period of service, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

On the other hand, incorporated workers have a total rate of 32.5%. From this rate, production workers have the lowest incorporated rate at 1.1% only, while management and business workers have the highest incorporated rate at 8.9%.

Paid Employees
Finally, the statistics report examined the number of paid employees that self-employed workers have.

Figure 11: Self-employment rates by number of paid employees, annual averages, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

According to the report, there are 14.3% of unincorporated self-employed workers who have their own paid employees, while data is not available for incorporated workers. In addition, 70% of unincorporated workers have 1-4 paid employees.

On the other hand, the report also examined the rate of paid employees according to gender, race, and ethnicity. (See table below)

CharacteristicUnincorporatedIncorporated
Total14.3%42.1%
Men17.545.5
Women9.233.9
White14.242.5
Black or African American9.027.2
Asian23.951.3
Hispanic or Latino12.638.0
Table 8: Data chart for Self-employment rates with paid employees by gender, race, and ethnicity, 2015. Source: Self-employment in the United States. March 2016. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm

According to the report, unincorporated workers hired more men (17.5%) than women (9.2%). It also showed that incorporated workers hired more men (45.5%) than women (33.9%). On the other hand, both unincorporated and incorporated workers hired more Asians (51.3%) than any other employees of race or ethnicity.

Conclusion

The Harvard Business Review reported in 2014 that the number of self-employed, independent workers in the US will increase to 70 million by 2020. This is according to a survey designed by Emergent Research and sponsored by MBO Partners, a leading management services provider for independent professionals in the US. This is significant because the number will soon represent 50% of the American workforce – an explosive growth that will instigate law and policy makers to create better regulations for small businesses and self-employed workers. This also means that the push to create more flexible work schedule and environment will become better for both start-up entrepreneurs and self-employed workers.

References:

  1. Self-employment in the United States. March 2016. Steven Hipple and Laurel Hammond.
  2. https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/home.htm
  3. https://www.sba.gov/blogs/resources-veterans-start-your-veteran-owned-small-business
  4. https://data.oecd.org/emp/self-employment-rate.htm
  5. ttps://hbr.org/2014/02/where-are-all-the-self-employed-workers
  6. http://www.pewsocialtrends.org/2015/10/22/three-in-ten-u-s-jobs-are-held-by-the-self-employed-and-the-workers-they-hire/
  7. http://www.talenteconomy.io/2017/08/03/self-employed-workforce-comes-benefits-caveats/
  8. https://www.bls.gov/careeroutlook/2014/article/self-employment-what-to-know-to-be-your-own-boss.htm
  9. http://www.huffingtonpost.com/erica-gellerman/5-benefits-of-self-employ_1_b_8115936.html
  10. https://www.forbes.com/sites/eriksherman/2017/01/14/self-employed-ranks-are-far-smaller-and-less-well-off-than-many-want-to-pretend/#4877ec59563a
  11. https://www.dol.gov/general/topic/disability/selfemployment
  12. http://www.pewresearch.org/fact-tank/2016/09/01/8-facts-about-american-workers
  13. https://www.usda.gov/media/press-releases/2015/03/17/family-farms-are-focus-new-agriculture-census-data

A 30 Point Checklist for Your Startup

A 30 Point Checklist for Your Startup

So you want to start a business – congratulations! Once you get over the initial excitement, it’s time to break down the process of launching your startup into manageable chunks.
You might get overwhelmed with the sheer number of items on your to-do list. But not to worry; I’ve broken down this startup checklist into the primary tasks you need to do now, and those that you can defer until later.

What You Need to Do Now

Determine viability

Be brutally honest. Your startup needs to be something you can make a profit doing or delivering. Ask yourself: would you buy it? Run the numbers: will customers pay enough so that you can cover costs and make a profit? Here is a list of 29 more questions to ask, attributed to noted investor Paul Graham.

Create a business plan

It’s easy to convince yourself that you don’t need a business plan, but creating a business plan with financial projections forces you to think through details. Keep your plan a living breathing thing that you revisit and adapt regularly.

Figure out the money

Most startups take a lot more time to get off the ground than you expect. Know where your living expenses for the first year will come from (savings, a job, spouse’s income, etc.). If you need financing for the business start investigating as soon as possible.

Get family behind you

Spend time to make sure your spouse and other close family ‘buy into’ your startup. You’ll have enough challenges without resistance from family.

Choose a business name

You want a name that will stick in your target audience’s heads. And it shouldn’t already be taken by another company. Do Google searches and use a corporate name search tool to see if the name you have in mind is unique. Check at the state and Federal level.

Register a domain name

Get a matching domain to your business name. An AOL email address or a website with free hosting and a name like mysite.wordpress.com makes it seem like either (a) you are not running a real business or (b) you don’t plan to be around long.

Incorporate / figure out legal structure

Incorporating your startup can protect your personal assets. Talk over structure (corporation, LLC, sole proprietorship) with your attorney and accountant.

Apply for an EIN

An Employer Identification Number (EIN) helps you separate yourself from your business. You’ll need it if you plan to incorporate your business or open a business bank account. Plus, with it you can avoid giving out your social security number (an opening to identity theft). EIN numbers are free; apply online

Investigate and apply for business licenses

You may need one, if not several, business licenses for your startup, depending on your industry and where you are located. Most licenses are at the state or local level. Here in the United States,the SBA has a helpful business license and permits tool

Set up a website

Get your website up and running as soon as possible. Today, it’s necessary for credibility. Even if your product is not yet built, you can start with company information.

Register social media profiles

Getting set up on the major social media channels (Facebook, LinkedIn, and Twitter, to start) will make marketing on them later easier. Also, it’s important to reserve your brand as a profile name. Try Knowem.com to reserve the names.

Start your revenue stream

Start generating revenue as soon as possible. At the early stages of a startup there is never enough money – resist the temptation to wait until things are “perfect.” Oh, and get your lawyer to create any customer contract forms necessary.

Rent retail or office space

If you’ve got a brick-and-mortar business, you’ll need to sort this out early. If you plan to run a retail business, pay attention to foot traffic, accessibility, and other factors that will affect the number of people that will walk in your store. EXCEPTION: If you don’t have a brick and mortar or retail business, then hold off renting an office as long as possible to avoid saddling your startup with lease payments.

Order business cards

As a startup founder, you’ll be doing a lot of networking, so order plenty of business cards. They are inexpensive enough that you can reorder them later if things change. Without cards you lack credibility.

Open a business bank account

It’s all too easy to use your personal bank account to pay for business expenses, but it becomes a gnarl to untangle later.

Set up your accounting system

Once you have your bank account set up, choose an accounting program. Start as you intend to go. Few things will doom your business faster than books that are a mess.

Assign responsibilities to co-founders

If you have one or more founders, it’s imperative that you decide who will do what up front. Put it in writing. Co-founder disagreements can destroy your business.

What You Can Do A Bit Later

While you don’t want to put off these tasks too long, they don’t need to be checked off your list before you launch.

Upgrade your smartphone and choose apps

As an entrepreneur you are going to be on the go – a lot. I can’t emphasize enough how useful a good phone with good business apps can be, in running your startup. Get a credit card swipe device to accept payments, too.

Find free advice

Your local SBA office, SCORE, and other small business resources can provide you with free advice, access to business templates, and other tools.

Consult your insurance agent and secure coverage

Depending on the type of business you’re starting, you may need insurance of one kind or another, like liability, workers’ comp, or health insurance, especially if you hire full-time staff.

Hire your first employee

Depending on the type of business you have, you may need staff from day one (retail) or you may be able to outsource to freelancers, interns, and third-party vendors for a while (service and tech businesses). Just remember, trying to do everything yourself takes you away from growing the business.

Line up suppliers and service providers

Finding a good source of inventory is crucial, especially in certain types of businesses (retail, manufacturing). Beyond inventory, line up good reliable suppliers and service providers so you don’t have to sweat the details.

File for trademarks and patents

The best thing to do is consult an attorney early about the need for patents, especially. Get the advice early. Then you may be able to defer filing for a while, depending on the nature of your business.

Work your network

Reach out to former co-workers and colleagues, as well as friends and family. Don’t pressure them to buy your products or services. Instead, tap into them for introductions and help with other things on this startup checklist.

Don’t waste time on “partnerships”

Be careful about wasting time on “business partnership” discussions. Your business won’t be attractive to potential partners unless and until you start making headway. Focus your precious time to make sales and get customers.

Refine your pitch

You need a good elevator pitch for many reasons: potential investors, customers, prospective new hires, bankers. If you can’t persuasively and clearly pitch your business, how can you expect key stakeholders to buy in?

Refine your product, and marketing and sales approach

As you go along you will learn more about the marketplace. Use customer feedback to refine your product and service offerings, and your go-to-market approach.

Secure your IT

Whether you’re running a tech company or not, you likely have sensitive data on computers and devices that you want protected. Protect it from intrusions and disasters. Back it up! IT problems can derail a fledgling company.

Get a salesperson or sales team in place

In many startups the business owner starts out as the chief sales person. But to grow you need a dedicated sales function, so you can focus on activities other than day-to-day sales.

Get a mentor

It’s all to easy easy to work “in” your business rather than “on” it. As Michael Gerber tells us in The E-Myth,we need to be working “on” our businesses if we want them to grow and flourish. A mentor who has succeeded in your industry can provide you with priceless advice and serve as a sounding board.

Your checklist might be longer than this, but organizing what needs to be done before you launch and what you can take care of down the road makes it easier to prioritize your tasks.

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