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Personal Characteristics
Personal Conditions






Name and Legal Structure
Your Business and the Law
Protecting Your Business
Business Premises and Location
Business Records





A. Income Projection Statement
B. Information Resources


Owning a business is the dream of many Americans ... starting that business converts your dream into reality. But there is a gap between your dream and reality that can only be filled with careful planning. As a business owner, you will need a plan to avoid pitfalls, to achieve your goals and to build a profitable business.

The Checklist for Going into Business is a guide to help you prepare a comprehensive business plan and determine if your idea is feasible, to identify questions and problems you will face in converting your idea into reality and to prepare for starting your business.

Operating a successful small business will depend on

!  a practical plan with a solid foundation;

!  dedication and willingness to sacrifice to reach your goal;

!  technical skills; and

!  basic knowledge of management, finance, record keeping and market analysis.

As a new owner, you will need to master these skills and techniques if your business is to be successful.


As a first and often overlooked step, ask yourself why you want to own your own business. Check the reasons that apply to you.

1. Freedom from the 9-5 daily work routine. ______
2. Being your own boss. ______
3. Doing what you want when you want to do it. ______
4. Improving your standard of living. ______
5. Boredom with your present job. ______
6. Having a product or service for which you feel there is a demand. ______

Some reasons are better than others, none are wrong; however, be aware that there are tradeoffs. For example, you can escape the 9-5 daily routine, but you may replace it with a 6 a.m. to 8 p.m. routine.


Going into business requires certain personal characteristics. This portion of the checklist deals with you, the individual. These questions require serious thought. Try to be objective. Remember, it is your future that is at stake!

Personal Characteristics

1. Are you a leader? ______ ______
2. Do you like to make your own decisions? ______ ______
3. Do others turn to you for help in making decisions? ______ ______
4. Do you enjoy competition? ______ ______
5. Do you have will power and self discipline? ______ ______
6. Do you plan ahead? ______ ______
7. Do you like people? ______ ______
8. Do you get along well with others? ______ ______

Personal Conditions

This next group of questions though brief is vitally important to the success of your plan. It covers the physical emotional and financial strains you will encounter in starting a new business.

1. Are you aware that running your own business may require working 12-16 hours a day six days a week and maybe even Sundays and holidays? ______ ______
2. Do you have the physical stamina to handle the workload and schedule? ______ ______
3. Do you have the emotional strength to withstand the strain? ______ ______
4. Are you prepared if needed to temporarily lower your standard of living until your business is firmly established? ______ ______
5. Is your family prepared to go along with the strains they too must bear? ______ ______
6. Are you prepared to lose your savings? ______ ______


Certain skills and experience are critical to the success of a business. Since it is unlikely that you possess all the skills and experience needed you’ll need to hire personnel to supply those you lack. There are some basic and special skills you will need for your particular business.

By answering the following questions you can identify the skills you possess and those you lack (your strengths and weaknesses)

1. Do you know what basic skills you will need in order to have a successful business? ______ ______
2. Do you possess those skills? ______ ______
3. When hiring personnel will you be able to determine if the applicants’ skills meet the requirements for the positions you are filling? ______ ______
4. Have you ever worked in a managerial or supervisory capacity? ______ ______
5. Have you ever worked in a business similar to the one you want to start? ______ ______
6. Have you had any business training in school? ______ ______
7. If you discover you don’t have the basic skills needed for your business will you be willing to delay your plans until you’ve acquired the necessary skills? ______ ______


Small businesses range in size from a manufacturer with many employees and millions of dollars in equipment to the lone window washer with a bucket and a sponge. Obviously the knowledge and skills required for these two extremes are far apart but for success they have one thing in common: each has found a business niche and is filling it.

The most critical problems you will face in your early planning will be to find your niche and determine the feasibility of your idea. Get into the right business at the right time is very good advice but following that advice may be difficult. Many entrepreneurs plunge into a business venture so blinded by the dream that they fail to thoroughly evaluate its potential.

Before you invest time effort and money the following exercise will help you separate sound ideas from those bearing a high potential for failure.


1. Identify and briefly describe the business you plan to start.





2. Identify the product or service you plan to sell.


3. Does your product or service satisfy an unfilled need? YES____ NO____
4. Will your product or service serve an existing market in which demand exceeds supply? YES____ NO____
5. Will your product or service be competitive based on its quality, selection, price or location? YES____ NO____

Answering yes to any of these questions means you are on the right track; a negative answer means the road ahead could be rough.


For a small business to be successful the owner must know the market. To learn the market you must analyze it a process that takes time and effort. You don’t have to be a trained statistician to analyze the marketplace nor does the analysis have to be costly.

Analyzing the market is a way to gather facts about potential customers and to determine the demand for your product or service.

The more information you gather the greater your chances of capturing a segment of the market. Know the market before investing your time and money in any business venture.

These questions will help you collect the information necessary to analyze your market and determine if your product or service will sell.

1. Do you know who your customers will be? ______ ______
2. Do you understand their needs and desires? ______ ______
3. Do you know where they live? ______ ______
4. Will you be offering the kind of products or services that they will buy? ______ ______
5. Will your prices be competitive in quality and value? ______ ______
6. Will your promotional program be effective? ______ ______
7. Do you understand how your business compares with your competitors? ______ ______
8. Will your business be conveniently located for the people you plan to serve? ______ ______
9. Will there be adequate parking facilities for the people you plan to serve? ______ ______

This brief exercise will give you a good idea of the kind of market planning you need to do. An answer of no indicates a weakness in your plan so do your research until you can answer each question with a yes.


So far this checklist has helped you identify questions and problems you will face converting your idea into reality and determining if your idea is feasible. Through self-analysis you have learned of your personal qualifications and deficiencies and through market analysis you have learned if there is a demand for your product or service.

The following questions are grouped according to function. They are designed to help you prepare for "Opening Day."

Name and Legal Structure

1. Have you chosen a name for your business? ______ ______
2. Have you chosen to operate as sole proprietorship, partnership or corporation? ______ ______

Your Business and the Law

A person in business is not expected to be a lawyer but each business owner should have a basic knowledge of laws affecting the business. Here are some of the legal matters you should be acquainted with:

1. Do you know which licenses and permits you may need to operate your business? ______ ______
2. Do you know the business laws you will have to obey? ______ ______
3. Do you have a lawyer who can advise you and help you with legal papers? ______ ______
4. Are you aware of ______ ______

! Occupational Safety and Health Administration (OSHA) requirements?

______ ______

! Regulations covering hazardous material?

______ ______

! Local ordinances covering signs snow removal etc.?

______ ______

! Federal Tax Code provisions pertaining to small business?

______ ______

! Federal regulations on withholding taxes and Social Security?

______ ______

! State Workmen’s Compensation laws?

______ ______

Protecting Your Business

It is becoming increasingly important that attention be given to security and insurance protection for your business. There are several areas that should be covered. Have you examined the following categories of risk protection?


! Fire

______ ______

! Theft

______ ______

! Robbery

______ ______

! Vandalism

______ ______

! Accident liability

______ ______

Discuss the types of coverage you will need and make a careful comparison of the rates and coverage with several insurance agents before making a final decision.

Business Premises and Location

1. Have you found a suitable building in a location convenient for your customers? ______ ______
2. Can the building be modified for your needs at a reasonable cost? ______ ______
3. Have you considered renting or leasing with an option to buy? ______ ______
4. Will you have a lawyer check the zoning regulations and lease? ______ ______


1. Have you decided what items you will sell or produce or what service(s) you will provide? ______ ______
2. Have you made a merchandise plan based upon estimated sales to determine the amount of inventory you will need to control purchases? ______ ______
3. Have you found reliable suppliers who will assist you in the start-up? ______ ______
4. Have you compared the prices quality and credit terms of suppliers? ______ ______

Business Records

1. Are you prepared to maintain complete records of sales income and expenses accounts payable and receivables? ______ ______
2. Have you determined how to handle payroll records tax reports and payments? ______ ______
3. Do you know what financial reports should be prepared and how to prepare them? ______ ______


A large number of small businesses fail each year. There are a number of reasons for these failures but one of the main reasons is insufficient funds. Too many entrepreneurs try to start and operate a business without sufficient capital (money). To avoid this dilemma you can review your situation by analyzing these three questions:

1. How much money do you have?

2. How much money will you need to start your business?

3. How much money will you need to stay in business?

Use the following chart to answer the first question:

personal financial statement

Chart 2 will help you answer the second question: How much money will you need to start your business? The chart is for a retail business; items will vary for service construction and manufacturing firms.

The answer to the third question (How much money will you need to stay in business?) must be divided into two parts: immediate costs and future costs.

start-up cost estimates

From the moment the door to your new business opens a certain amount of income will undoubtedly come in. However this income should not be projected in your operating expenses. You will need enough money available to cover costs for at least the first three months of operation. Chart 3 will help you project your operating expenses on a monthly basis.

expenses for one month

Now multiply the total of Chart 3 by three. This is the amount of cash you will need to cover operating expenses for three months. Deposit this amount in a savings account before opening your business. Use it only for those purposes listed in the above chart because this money will ensure that you will be able to continue in business during the crucial early stages.

By adding the total start-up costs (Chart 2) to the total expenses for three months (three times the total cost on Chart 3) you can learn what the estimated costs will be to start and operate your business for three months. By subtracting the totals of Charts 2 and 3 from the cash available (Chart 1) you can determine the amount of additional financing you may need if any. Now you will need to estimate your operating expenses for the first year after start-up. Use the Income Projection Statement (Appendix A) for this estimate.

The first step in determining your annual expenses is to estimate your sales volume month by month. Be sure to consider seasonal trends that may affect your business. Information on seasonal sales patterns and typical operating ratios can be secured from your trade associations.

NOTE: The relationships among amounts of capital that you invest levels of sales each of the cost categories the number of times that you will sell your inventory (turnover) and many other items form financial ratios. These ratios provide you with extremely valuable checkpoints before it’s too late to make adjustments. In the reference section of your local library are publications such as The Almanac of Business and Industrial Financial Ratios to compare your performance with that of other similar businesses. For thorough explanations of these ratios and how to use them follow up on the sources of help and information mentioned at the end of this publication.)

Next determine the cost of sales. The cost of sales is expressed in dollars. Fill out each month’s column in dollars total them in the annual total column and then divide each item into the total net sales to produce the annual percentages. Examples of operating ratios include cost of sales to sales and rent to sales.


The primary source of revenue in your business will be from sales but your sales will vary from month to month because of seasonal patterns and other factors. It is important to determine if your monthly sales will produce enough income to pay each month’s bills.

An estimated cash flow projection (Chart 4) will show if the monthly cash balance is going to be subject to such factors as

! Failure to recognize seasonal trends;

! Excessive cash taken from the business for living expenses;

! Too rapid expansion; and

! Slow collection of accounts if credit is extended to customers.

Use the following chart to build a worksheet to help you with this problem. In this example all sales are made for cash.

estimated cash flow forecast


Beyond a doubt preparing an adequate business plan is the most important step in starting a new business. A comprehensive business plan will be your guide to managing a successful business. The business plan is paramount to your success. It must contain all the pertinent information about your business; it must be well written factual and organized in a logical sequence.

Moreover it should not contain any statements that cannot be supported.
If you have carefully answered all the questions on this checklist and completed all the worksheets you have seriously thought about your goal. But . . . there may be some things you may feel you need to know more about.

Owning and running a business is a continuous learning process. Research your idea and do as much as you can yourself but don’t hesitate to seek help from people who can tell you what you need to know.


income projection statement

The income projection (profit and loss) statement is valuable as both a planning tool and a key management tool to help control business operations. It enables the owner-manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly levels of sales, costs and expenses.

As monthly projects are developed and entered into the income projection statement, they can serve as definite goals for controlling the business operation. As actual operating results become known each month, they should be recorded for comparison with the monthly projections. A completed income statement allows the owner-manager to compare actual figures with monthly projections and to take steps to correct any problems.

Industry Percentage

In the industry percentage column, enter the percentages of total sales (revenues) that are standard for your industry which are derived by dividing

cost/expense items by total net sales x 100%

These percentages can be obtained from various sources, such as trade associations, accountants or banks. The reference librarian in your nearest public library can refer you to documents that contain the percentage figures, for example, Robert Morris Associates’ Annual Statement Studies (1 Liberty Place, Philadelphia PA 19103)

Industry figures serve as a useful benchmark against which to compare cost and expense estimates that you develop for your firm. Compare the figures in the industry column to those in the annual percentage column

Total Net Sales (Revenues)

Determine the total number of units or products or services you realistically expect to sell each month in each department at the prices you expect to get. Use this step to create the projection to review your pricing practices.

! What returns, allowances and markdowns can be expected?

! Exclude any revenue that is not strictly related to the business.

Cost of Sales

The key to calculating your cost of sales is that you do not overlook any costs that you have incurred. Calculate cost of sales for all products and services used to determine total net sales.

Where inventory is involved, do not overlook transportation costs. Also include any direct labor.

Gross Profit

Subtract the total cost of sales from the total net sales to obtain gross profit.

Gross Profit Margin.

The gross profit margin is expressed as a percentage of total sales (revenues) it is calculated by dividing

gross profits by total net sales

Controllable Expenses

! Salary expenses -- Base pay plus overtime.

! Payroll expenses -- Include paid vacations, sick leave, health insurance unemployment insurance and social security taxes.

! Outside services -- Include costs of subcontracts, overflow work and special or one-time services.

! Supplies -- Services and items purchase for use in the business.

! Repairs and maintenance -- Regular maintenance and repair, including periodic large expenditures such as painting.

! Advertising -- Include desired sales volume and classified directory advertising expenses.

! Car, delivery and travel -- Include charges if personal car is used in business, including parking, tolls, buying trips, etc.

! Accounting and legal -- Outside professional services.

Fixed Expenses

! Rent -- List only real estate used in the business

! Depreciation -- Amortization of capital assets.

! Utilities -- Water, heat, light, etc.

! Insurance -- Fire or liability on property or products. Include workers’ compensation.

! Loan repayments -- Interest on outstanding loans.

! Miscellaneous -- Unspecified; small expenditures without separate accounts.

Net Profit (loss)
(before taxes)
  |   Subtract total expenses from gross profit.
Taxes   |   Include inventory and sales taxes, excise tax, real estate tax, etc.
Net Profit (loss)
(after taxes)
  |   Subtract taxes from net profit (before taxes)
Annual Total   |   For each of the sales and expense items in your income projection statement, add all the monthly figures across the table and put the results in the annual total column.
Annual Percentage   |   Calculate the percentage by dividing annual total by total net sales x 100%
    |   Compare this figure to the industry percentage in the first column


U.S. Small Business Administration (SBA)

The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products.

SBA has offices throughout the country. Consult the U.S. Government section in your telephone directory for the office nearest you. SBA offers a number of programs and services, including training and educational programs, counseling services, financial programs and contract assistance. Ask about

- SCORE: Counselors to America’s Small Business, a national organization sponsored by SBA of over 11,000 volunteer business executives who provide free counseling, workshops and seminars to prospective and existing small business people. Free online counseling and training at

- Small Business Development Centers (SBDCs), sponsored by the SBA in partnership with state governments, the educational community and the private sector. They provide assistance, counseling and training to prospective and existing business people.

- Women’s Business Centers (WBCs), sponsored by the SBA in partnership with local non-government organizations across the nation. Centers are geared specifically to provide training for women in finance, management, marketing, procurement and the Internet.

For more information about SBA business development programs and services call the SBA Small Business Answer Desk at 1-800-U-ASK-SBA (827-5722) or visit our website,

Other U.S. Government Resources

Many publications on business management and other related topics are available from the Government Printing Office (GPO). GPO bookstores are located in 24 major cities and are listed in the Yellow Pages under the bookstore heading. Find a “Catalog of Government Publications at

Many federal agencies offer Websites and publications of interest to small businesses. There is a nominal fee for some, but most are free. Below is a selected list of government agencies that provide publications and other services targeted to small businesses. To get their publications, contact the regional offices listed in the telephone directory or write to the addresses below:

Federal Citizen Information Center (FCIC)
The CIO offers a consumer information catalog of federal publications.

Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
The CPSC offers guidelines for product safety requirements.

U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling to the USDA. Publications and programs on entrepreneurship are also available through county extension offices nationwide.

U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Washington, DC 20230
DOC’s Business Liaison Center provides listings of business opportunities available in the federal government. This service also will refer businesses to different programs and services in the DOC and other federal agencies.

U.S. Department of Health and Human Services (HHS)
Substance Abuse and Mental Health Services Administration
1 Choke Cherry Road
Rockville, MD 20857
Helpline: 1-800-workplace. Provides information on Employee Assistance Programs Drug, Alcohol and other Substance Abuse.

U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor laws.

U.S. Department of Treasury
Internal Revenue Service (IRS)
1500 Pennsylvania Avenue NW
Washington DC 20230
The IRS offers information on tax requirements for small businesses.

U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
1200 Pennsylvania Avenue NW
Washington, DC 20480
Hotline: 1-800-368-5888
The EPA offers more than 100 publications designed to help small businesses understand how they can comply with EPA regulations.

U.S. Food and Drug Administration (FDA)
5600 Fishers Lane
Rockville MD 20857-0001
Hotline: 1-888-463-6332
The FDA offers information on packaging and labeling requirements for food and food-related products.

For More Information

A librarian can help you locate the specific information you need in reference books. Most libraries have a variety of directories, indexes and encyclopedias that cover many business topics. They also have other resources, such as

- Trade association information

Ask the librarian to show you a directory of trade associations. Associations provide a valuable network of resources to their members through publications and services such as newsletters, conferences and seminars.

- Books

Many guidebooks, textbooks and manuals on small business are published annually. To find the names of books not in your local library check Books In Print, a directory of books currently available from publishers.

- Magazine and newspaper articles

Business and professional magazines provide information that is more current than that found in books and textbooks. There are a number of indexes to help you find specific articles in periodicals.

- Internet Search Engines

In addition to books and magazines, many libraries offer free workshops, free access to computers and the Internet, lend skill-building tapes and have catalogues and brochures describing continuing education opportunities.

Published - July 2011

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