Small business. Where you can get a fortune or go bust. What say you?

[boomgoesthedynamite]

I will concur that it is much easier being an employee vice a business owner. As an employee, you get to leave each day and leave your job at work; that is not the case when it is your place. I will also agree that this does not hold true for someone that just "owns" a job. The rewards are also much better if you can make it work if you own the place. The key is to have a team that provides all of the labor at some point so you can truly own a "business". It is not for everyone, and that is fine; every business needs good people that want to work for "the man". I have had a business operating for over 5 years now, and I am almost completely transitioned out. It is a good feeling when it gets to that point.

Employee:
Pros -

• Minimal worries - do your job and you should be safe
• typically get paid for what you work (i.e. no 80 hour work weeks unless you get paid for them)
• Keeping the lights on and making payroll are someone else's problem
• Can up and leave when you feel like it
• No costs to start working for someone
• No risk
• You get paid after working.

Cons -

• Not many things are in your control. If you are awesome but "the man" is an incompetent douche, you are screwed.
• Little reward (tied to no risk); "the man" gets all the money and you are the one bustin' your ass.
• You will likely only get what you are worth to the business, not necessarily your true worth.

Business owner:
Pros -

• Force multiplier - you receive some overhead dollars from every person that works for you. You can do much more with 10 people working for you than you can do on your own.
• In theory, more flexibility. You want to show up late everyday because you want to neckbeard for 22lr, no problem.
• Potential for that holy grail of passive income: you are chilling and the bank account is growing.
• You control your own destiny (to a degree). If you are awesome and your product/service is in demand, you can be wealthy.
• You are "the man"

Cons -

• Remember those incompetent douches? You will hire a few.
• Think of the worst person you have ever worked with and how worthless they were. "The man"was actually paying them while they sucked that much. This will be you.
• You know how people love Fridays because of payday? These days can really suck when you are writing the checks.
• Stress
• Stress (not a double post)
• People think you are "the man"
• People think you have to hire someone who pushes around your wheelbarrow full of cash/are rolling in money
• People don't understand what it is truly like to own a business - they think of the pros only.
• Choking incompetent douches that work for you is frowned upon.
• Speaking of douches, not only do you end up hiring some, but some of the douches that work for other people become your customers. It is frowned upon to choke them too.
• Digital terrorists/"Yelpers" that can truly damage your reputation even when they are douches.
• All of the risk. Employees don't have sign a personal guarantee for a lease, or a loan.

It is not for everyone, but if you can hack it, it is a great thing (assuming it works). I think if you talk to anyone in business they will say that, followed by "it's for sale if you want it."

 

[London]

I mean no disrespect, but I propose that you're not listening to the right people. You might consider taking the advice of people who have been successful in business, not just those who simply traded employment for self-employment, or others who've failed all together.

I'm just presenting the majority opinion from what I've gathered. I'm sure if I asked Bill Gates or Donald trump what they think about being self-employed...

I can' really say anything from experience about self-employment aside from the few wedding gigs I freelance bartended at. They were great jobs and I loved the work (getting paid to eat other people's food, drink other people's beer and margaritas, and getting eyed by every single lady because I always have the nicest suit or tux).

I'm going to slowly try my hand at making money from home making pistol holsters (eventually). We'll see just which side of the coin I end up on.

 

[F350-6]

To the OP, if you start your own business, it must be something you believe 100% in and something you are willing to pour your heart, soul, and all your spare time into. Starting a business just because you think you will become rich because of having your own business is a good recipe for failure.

I am not a small business owner; it is just something I have been doing a LOT of research into lately. Here's the gist of what I learned from guys who have been there:

Constant 12-hour days, years without a vacation, unavoidable IRS issues, regulations from dozens of three-letter agencies, the fact most small businesses fold in under two years... There's a saying amongst business owners: "You don't own the business. The business owns you." Working for yourself sounds nice, but a lot of people who do it actually wish they could go back to their old jobs. there's also another saying: "What's the best way to make a million dollars in small business? Start with two million."

Being a millionaire isn't all it's cracked up to be. That's a LOT of money to have to earn the hard way.

You've done some pretty good research I think. Although IRS issues aren't a guaranteed problem, knock on wood. The part about owning the business or the business owning you isn't quite accurate either, but it's not too far off. The simple version is, the boss is the one who writes the check. To all the employees, that's the owner. To the owner, the one who writes the check is the customer, so having a bunch of demanding customers is like having a bunch of demanding bosses instead of just one.

I mean no disrespect, but I propose that you're not listening to the right people. You might consider taking the advice of people who have been successful in business, not just those who simply traded employment for self-employment, or others who've failed all together.

As a member of various local clubs and community civic organizations where I live, I run into and meet a lot of business people. In light of the recent economy, I've talked with many about the very thing being discussed here. One common thread among them: Every successful person that I've ever met and talked with about the subject has said that going into business was the best thing they ever did. Why would I want the advice or counsel of those who are failing?

But best thing they ever did and a hard road to travel aren't necessarily two different answers. You don't earn a bunch of money or become rich just because you start your own business. You've got to work at it, and sacrifices have to be made in order to get there. Once you're there, it's easy to look back and say I'm glad I did that. While you're trying to get there, it's not always an easy journey.

 

[IXLR8]

I am shocked by the amount of small businesses in my area that have closed in the last year. Is the climate changing for small businesses? I have never owned a business but have considered it a few times. Some friends have done very well, but they do work all of the time. It would be difficult decision to open a store front when all of the stores seem to be moving online. Margins are getting thinner, and service is the great differentiator between similar stores. The Affordable Care Act (sic) is causing its own share of problems. If I had to provide my own healthcare as mandated, I am not sure that I could turn a profit.
The best strategy that I have heard is to open a business that makes a small steady stream of profit, but not enough to live on. Then continue opening them until the money is sufficient. With growth comes additional headaches, and far more involvement. Hiring the right people to manage your investment is a crucial decision. In the end, the proper management or mismanagement will determine your success.

 

[benenglish]

...IRS issues aren't a guaranteed problem...

+1

I consider this a benchmark. If someone is insufficiently detail-oriented as to keep out of tax trouble then imo, they aren't sufficiently on top of things to own their own business.

 

[diveRN]

..But best thing they ever did and a hard road to travel aren't necessarily two different answers. You don't earn a bunch of money or become rich just because you start your own business. You've got to work at it, and sacrifices have to be made in order to get there. Once you're there, it's easy to look back and say I'm glad I did that. While you're trying to get there, it's not always an easy journey.

Never said being in business was easy and nearly every successful person I know has struggled a LOT. There's truth to the cliche: Nothing worthwhile is ever easy. If it was, everyone would be doing it.

And I never said starting a business makes you rich, but compared to working a job, the odds of achieving wealth are a helluva lot better. My point in that reply was that if you're going to seek advice or counsel on starting a business, talk to successful people, not those who failed or are barely making it. That's like asking a college dropout what they thought about going to school.

 

[London]

...IRS issues aren't a guaranteed problem...

By "Issues" I mean the flat out fact they are going to tax you well beyond anything reasonable and there is probably no way you are going to stop them. You know, the "Normal" mountains of BS we've somehow all grown a tolerance to as opposed to the really messed up stuff they do every day.

 

[London]

My point in that reply was that if you're going to seek advice or counsel on starting a business, talk to successful people, not those who failed or are barely making it. That's like asking a college dropout what they thought about going to school.

Good point, but there's lots to be learned from the failures (or at least lack of stunning success) of others, too. I was briefly interested in opening a gun store. After learning that

1.) You will work like a slave, need at least $250k to start decent, and might still go under, AND;
2.) Profit margins on new guns are not enough to support anybody, AND;
3.) The real profit comes from used guns and accessories,

...I decided my dream was a nightmare in disguise. Just sticking to something simple like making holsters seem to be a much better idea for several reasons.

Oh, BTW- that $250k I mentioned? It's most likely going to have to come out of your pocket unless you can convince private investors to go in with you. Banks and Credit Unions typically put gun stores into a "Sufficient data not available" category when deciding they're not interested in lending you money.

Glad I did my homework on that one!

 

[diveRN]

By "Issues" I mean the flat out fact they are going to tax you well beyond anything reasonable and there is probably no way you are going to stop them. You know, the "Normal" mountains of BS we've somehow all grown a tolerance to as opposed to the really messed up stuff they do every day.

I don't know about businesses being taxed "well beyond anything reasonable." Consider all of the liberal whining about corporate "subsidies" in the form of tax breaks and other perks. I used to hear that crap every day from my leftist colleagues regarding the last hospital chain I worked for.

I haven't started a new business in more than 10 years so I can't speak about today's circumstances, but when I was getting my pool business off the ground, I was able to shield a lot of income against taxation through deductions that as an employee I wouldn't have been able to realize. Expensed items like my truck and the gas I put in it, my cell phone, all of my tools, a few of my guns (I carried for protection when I was working many commercial jobs), computers, etc, etc, etc were all things I could write off directly and the money I kept fell right to the bottom line and into my pocket. I understand that no business ever matures based solely on its deductible expenses, but up to a point, income-dollar for income-dollar you'll pay more in taxes as an employee than as a sole proprietor. When I moved that business under the umbrella of an LLC and started drawing a salary as an employee, I personally paid WAY more in federal taxes than I ever did when I was just drawing income from the business and filing a straight schedule C.

Additionally, with a SEP or Keogh, you can put away far more tax deferred income than you can with a 401k, 403b, or other traditional IRA. The max 401k/403b contribution for 2014 is $17,500 whereas for SEPS, it's $49K or 25% of your income. One of the reasons I went back and got a part time job was so that I could take advantage of my employer-matched contributions to my retirement. Even as a part time employee, I maxed out my 403b every year and the company contributed 1/2. As both an employee and business owner, I get to contribute to both plans.

There are a number of tax advantages to business owners that employees don't get. Even today, tax law is pretty heavily slanted in favor of business. Get yourself a good accountant, they're worth every penny and

... wait for it ...

their services are tax deductible if you own a business.

Edit:

Oh, BTW- that $250k I mentioned? It's most likely going to have to come out of your pocket unless you can convince private investors to go in with you. Banks and Credit Unions typically put gun stores into a "Sufficient data not available" category when deciding they're not interested in lending you money.

This may be true where you live, but here, two friends of mine opened an indoor shooting range in late 2012. Start up costs for the building, bullet trap system (HUGE cost in this alone) were just north of $400k. They got investors for about 1/2 and the bank lent them the other 1/2. Granted, there wasn't a single range in this area where the population is around 500k. They wanted to start a gun shop initially, too, because there is only one other one here in the area, but like you they couldn't get financing. However, they got it for the range and, as it happens, they now also sell guns.

They got creative. After a year, they're paying off investors and the bank and are taking a modest salary. They expect to have everything paid off inside of 4 years.

 

[breakingcontact]

Good discussion. I recently went from a steady OK paying union job to a little better paying DOD world job to a consulting/contracting job for a huge corporation working for variois state governments. The more risk I've been willing to take, the more uncertainty, the less "guaranteed" benefits, the more money I've made (exceeding the cost of the benefits I've given up). In part I started this to try and hear real world examples to relay to my brother. He is intent on making money doing resale of stuff he gets from walmart returns and other places. Im not sure thats the golden ticks but im trying to get him to run it like a business.

The other reason for this thread is im trying to figure out what to do in my career. Ive come a pretty good distance from where I started and to me the next move seems to be going to work for myself. Getting contracts or subcontracting directly would give me more risk and headaches but also more income. Then I suppose the harder part would be scaling things up with a team large enough to handle larger contracts.

 

[deemus]

Additionally, with a SEP or Keogh, you can put away far more tax deferred income than you can with a 401k, 403b, or other traditional IRA. The max 401k/403b contribution for 2014 is $17,500 whereas for SEPS, it's $49K or 25% of your income. One of the reasons I went back and got a part time job was so that I could take advantage of my employer-matched contributions to my retirement. Even as a part time employee, I maxed out my 403b every year and the company contributed 1/2. As both an employee and business owner, I get to contribute to both plans.

There are a number of tax advantages to business owners that employees don't get. Even today, tax law is pretty heavily slanted in favor of business. Get yourself a good accountant, they're worth every penny and

... wait for it ...

their services are tax deductible if you own a business.

Edit:


This may be true where you live, but here, two friends of mine opened an indoor shooting range in late 2012. Start up costs for the building, bullet trap system (HUGE cost in this alone) were just north of $400k. They got investors for about 1/2 and the bank lent them the other 1/2. Granted, there wasn't a single range in this area where the population is around 500k. They wanted to start a gun shop initially, too, because there is only one other one here in the area, but like you they couldn't get financing. However, they got it for the range and, as it happens, they now also sell guns.

They got creative. After a year, they're paying off investors and the bank and are taking a modest salary. They expect to have everything paid off inside of 4 years.

best advice in this thread.

 

[London]

@diveRN- Excellent info!

 

[London]

He is intent on making money doing resale of stuff he gets from walmart returns and other places. Im not sure thats the golden ticks but im trying to get him to run it like a business.

I know a guy who does it an he makes peanuts. Of course this probably has a lot to do with the kind of guy he is, too.

How exactly do you get these kind of deals going on? I went to a couple of Wally-Worlds and asked about buying the display power tools they snip the power cables off of (very easy fix). I was told the tools are thrown in the dumpster when they're done. However, the guy I met above gets these deals all the time. I'd ask him but I'm betting he's not going to tell.

 

[diveRN]

Generally speaking, it's important to do your homework when starting a business. This goes for ANY BUSINESS OF ANY SIZE you plan to start. And unless you have deep pockets to pay a firm to do these things, it takes a significant amount of time and effort. When we started the Internet Business, we spent the better part of 6 months planning and doing behind-the-scenes stuff before we ever powered up any equipment and another three months doing pre-launch sales and glad-handing before we ever opened our doors.

As mentioned above, having a comprehensive business plan increases your chances of success 10 fold because it forces you to really know the financial tool you're about to create. For example, business is a lot like shooting firearms: Just about anyone can go out to the range, load a magazine, chamber a round, and pull the trigger with the pointy end aimed at paper. However, to be truly successful at a competitive level, a shooter needs to know the most proficient stance, grip, sighting techniques, reloading, match rules, best ammo, etc, etc... basically, a top level shooter is going to know the most nitty gritty aspects of his/her craft and often lives and breathes what he/she does. Writing a good, comprehensive business plan forces you to learn the nitty gritty.

And like running a business, people shoot firearms for their own reasons. Some just want to be weekend shooters, others want to shoot top level IDPA matches. There's nothing wrong with either one, but I humbly suggest that you don't try and force a weekend shooter to be an IDPA champion - it'll just frustrate you and likely piss them off.

Firearms are a tool, that's it. Same is said for a business. Many people get emotionally attached to their endeavor and make both strategic and tactical decisions based on that attachment, which is a bad move. Treat it like a tool. If it needs repair, fix it. If it needs replacing, get rid of it and find a new one that gets the job done.

Fini.

 

[breakingcontact]

I am a believer in developing a plan and "working" it.

You mentioned "glad handing", that is both over and underestimated. By that I mean, a lot of people use it as an excuse. They say you can't get ahead without knowing the right people. They underestimate the ability to go out and get to know the right people. See what successful people do and do it.

I'm starting to sound like Dave Ramsey.

 

[deemus]

I am a believer in developing a plan and "working" it.

You mentioned "glad handing", that is both over and underestimated. By that I mean, a lot of people use it as an excuse. They say you can't get ahead without knowing the right people. They underestimate the ability to go out and get to know the right people. See what successful people do and do it.

I'm starting to sound like Dave Ramsey.

Don't underestimate the power of networking. Make friends with people who can send you business, and spend time with them. There are lots of networking groups, and you need to find one that works for your type business. If one does not exist, find ways to network.

For my type business, real estate agents, insurance agents and stock brokers are good referral sources for me. I have a couple of each of those types that I refer business to. They are happy to get referrals from me, and in return they send folks to me.

Find people that have contact with your target demographic, and figure out how to help them get business. With proper networking, they can also help you in return.

 

[diveRN]

I am a believer in developing a plan and "working" it.

You mentioned "glad handing", that is both over and underestimated. By that I mean, a lot of people use it as an excuse. They say you can't get ahead without knowing the right people. They underestimate the ability to go out and get to know the right people. See what successful people do and do it.

I'm starting to sound like Dave Ramsey.

I could think of worse people to sound like!